California LLC Formations Attorney

How the “new” California LLC law may affect your existing LLC

On January 1, 2014, now more than two years ago, the California Revised Uniform Limited Liability Company Act (RULLCA) went into effect. It’s codified as new Title 2.6 of the California Corporations Code starting with Section 17701.

Many existing businesses have been operating as Limited Liability companies for years, some even for decades, without looking at their company’s operating agreement. You might be running your business with a friend or family member and not have an operating agreement in place. You might not know where your operating agreement is, or what it says. Regardless, the next bit of information applies to you.

When the California legislature wrote the RULLCA, the transition provisions of the new law provided that the old law continued to govern all contracts, including operating agreements, entered into by an LLC, its members or managers prior to January 1, 2014. This gave business owners the impression that the new law would not affect existing operating agreements that existed prior to January 1, 2014. However, the law provides that any actions taken by the LLC, its members or managers after this date would be governed by the new law rather than the prior law. And even less clear is whether the new law applies to operating agreements that existed prior to January 1, 2014 but amended after!

This is a nightmare for business owners, especially if they’re running a business by themselves and want to bring on a partner. Now there are ramifications for bringing the new partner on, things the business owner never had to contemplate before.

The new LLC laws have several important changes, and affect not only your Operating Agreement but Management powers, Member Voting, Fiduciary Duties, Capital Contributions and more. This could result in radical changes to the way your LLC must be operated.

So I suggest that if you are a member or manager of an LLC, consult with your corporate counsel to see how the new LLC laws affect your LLC and its operating agreement.

In my next blog entry, I’ll delve into some of the specific changes that the LLC law might have for your business.

As always, good luck and if you have any questions feel free to give me a call at 844-695-1487 to schedule a consultation to review your LLC’s Operating Agreement or provide general business law advice.

*The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship Kalyan Pokala, Attorney at Law and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. *

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