In Minnesota, properly organizing your LLC becomes high stakes for majority LLC owners on January 1, 2018. On January 1, 2018, all LLCs are automatically under the New LLC law, which has been implemented in different stages since 2015. As a result, unless your LLC has an operating agreement stating the distribution of profits/losses and the governance of voting rights, as of January 1, 2018, all owners share equally in the profits/losses/voting. This is a big deal.
Hypothetical: All Things Wonderful, LLC has been owned by best friends, Henry and Gabby for the past twenty years. Henry is the majority owner owning 70% of the membership units, and Gabby is the minority owner owning 30% of the membership units. The only document that the LLC completed in organizing itself was to file the Articles of Organization with the Secretary of State. In December 2018, Henry and Gabby have a falling out. Gabby requests and is awarded 50% of the profits and losses because the LLC did not have the proper documents stating the 70/30% ownership split. Henry believed that their K-1’s showing the 70/30% split was enough. He was heartsick to find out that it did not.
If your business is an LLC, it is important to consult with your attorney prior to January 1, 2018 to make certain that your business operations will have the same effect on January 1, 2018 as they do currently.
The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.