New 2014 California LLC Rules May Impact You

New 2014 California LLC Rules May Impact You

Effective January 1, 2014, if you conduct business through a California limited liability company(“LLC”), the LLC will be subject to a new set of laws called the California Revised Uniform
Limited Liability Company Act, or RULLCA.

This new law will completely replace current law and will apply to all LLCs formed in California, including those formed prior to January 1, 2014.

While much of the new law is similar to current law, significant changes include:

• Clarifying fiduciary duties and identifying when those duties may be altered or eliminated in an operating agreement;

• Defining conditions for dissociation of a member from an LLC, including when a member may withdraw from an LLC and the resulting impact on the member and the LLC;

• Enacting new provisions governing LLC capitalization;

• Changing the priority between the operating agreement and the LLC’s articles of organization when a conflict exists between the documents;

• Establishing limitations and restrictions with regard to the indemnification of members and managers from liability for money damages arising from a breach of duty; and

• Providing a more detailed set of default rules that will go into effect when an operating agreement is silent.

What Should You Do?

To avoid unwanted consequences, the operating agreements of existing California LLCs should be reviewed as soon as practicable and, ideally, before January 2014, to identify any provisions that may (i) not be in compliance with the new law; (ii) need to be clarified or changed to eliminate ambiguity as a result of the new law taking effect; or(iii) raise issues wherein alternatives to the new law should be considered.

Further, any inconsistencies between the operating agreement and the LLC’s articles of organization should be assessed and resolved.

Give our office a call if you have any questions or concerns regarding your LLC.

Law Offices of Daniel H. Alexander, PLC / www.dalexander.com / (800) 530-4529

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