New LLC Act

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21st Aug 2016

The Minnesota Revised Uniform Liability Company Act (“New LLC Act”) went into effect on August 1, 2015, ushering in a new chapter for LLCs in Minnesota.
 
LLCs have become the entity of choice for entrepreneurs and business owners due to the advantages of limited liability and pass-through taxation. However, until the New LLC Act, Minnesota’s LLC law varied significantly from other states. The New LLC Act seeks to harmonize Minnesota’s LLC statute with other jurisdictions and incorporate best practices in LLC law.
 
The New LLC Act, codified as Minnesota Statutes Chapter 322C, brings important changes and new considerations for Minnesota LLCs. Notably, the New LLC Act moves away from a corporation-based model in favor of a partnership model, and allows for greater flexibility and less formality in the formation and management of LLCs. The New LLC Act also provides for three possible governance structures, allows for the standards of conduct to be modified, and simplifies corporate documentation. For example, the rights and duties previously contained within the articles, bylaws, and member control agreement are now combined into a single Operating Agreement. The law also provides new default rules, including default rules on voting rights and governance structure.
 
The new law affects not only new LLCs organized under this New LLC Act, but also existing LLCs. LLCs already in existence as of July 31, 2015 may elect to be governed by the New Act or will remain governed by the prior LLC Act. Importantly, any LLC organized under the prior LLC Act will automatically become subject to the New LLC Act on January 1, 2018. LLC owners should consider updating their documents prior to January 1, 2018 or transitioning to the New LLC Act early to avoid any unintended consequences.
 
It is important for existing LLC owners and anyone considering organizing as an LLC to understand the changes of the New LLC Act. Whether you are involved with an LLC organized under the old LLC Act and considering an early transition, or are thinking about forming a new LLC, the attorneys at Anderson Larson Saunders & Klaassen can guide you through the important considerations that come with the New LLC Act.  This blog does not create an attorney/client relationship with Anderson Larson.  This is not legal advice, and you should always talk to an attorney concerning your specific legal issues.