Review Your LLC Documents Now
Starting in 2015, Minnesota completely changed the LLC laws. For companies that were organized prior to the change, it is essential that you review your LLC documents now. You should review your LLC documents in consultation with an experienced business attorney. You want to make certain that your documents under the old LLC law will not have unexpected consequences under the new LLC law.
As of January 1, 2018, all LLCs were automatically transferred to the new law. One of the huge changes under the new law is that 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 for majority owners who do not have an operating agreement.
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 2019, 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.
Spangler and de Stefano, PLLP assists LLCs in making certain that their organizational documents do not have unintended consequences under the new LLC law.
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.