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Critical Changes to the Washington LLC Act
Jan 19, 2016

     Washington's new Limited Liability Company Act is now effective. It is important that LLC Members, Managers, and those doing business with LLCs understand the way the new Act changes the legal landscape for Washington LLCs.  See below for a table of major changes.  If you would like to discuss these changes and how they may affect you or your business, please contact us today.  

Topic

Old Act

New Act

Consider

Oral LLC Agreement

Agreements generally had to be in writing.

May now be oral, implied, in a record, or in any combination thereof. 

Including language in your LLC Agreement preventing amendment or other agreements without written, signed consent.

Duties of Members and Managers

Limited duties in LLC Act.  Courts filled in with partnership law.

Duties of members and managers set forth in LLC Act.  Only certain duties may be limited by LLC Agreement.

Understand what duties managers and members have.

Member Access to Records

More limited.

More expansive.

Having a policy in place for satisfying valid requests. 

Having a policy in place for ensuring that all records are properly maintained.

Member Voting

Based on contributions of members.

Default rule is one vote per member.

Including in LLC Agreement what type of voting structure you want, otherwise default will apply (under new Act, if one member had 99% and one had 1% interest their voting power would be equal). 

Member Voting – Unanimity Rule

None.

Default is that certain actions require a unanimous vote.

Avoiding default rule by setting forth other voting requirements in LLC Agreement.

Board (group of people) as a Manager

Silent.

Explicitly permits.

Including a board or committee as a manager. 

Mergers and Dissenters Rights

Dissenters’ right to be paid could not be modified by LLC Agreement.

Dissenters’ right to be paid may be modified in LLC Agreement.

Whether and to what extent you may want to modify dissenters’ rights.

Profits and Losses

Under the current Act, profits and losses are allocated to the members in proportion to the agreed value of contributions by each member.

The revised Act provides a default rule for distributions, based on the agreed value of contributions, but provides no default rule for allocating profits and losses.

Identifying how profits and losses will be allocated within the LLC Operating Agreement.

Certificate of Formation designates whether LLC is Member-Managed

Whether an LLC was member-managed was identified within the Certificate of Formation.

No designation of “member-managed” within Certificate of Formation.

When dealing with a LLC you may need to use other methods of determining whether someone has the authority to bind the LLC.  Also, LLCs should be prepared to show others where their management status is stated within their LLC Operating Agreement.

 

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Pacific Northwest Law Group
16141 Cleveland Street,
Suite C109
Redmond, WA 98052

Phone: (425)867-0512
Fax: (425)883-4616
Email:info@pnwlg.com