If you have a business formed as an LLC and have not yet updated your operating agreement, please read on for some very important information.
The State of Arizona legislature passed new laws regarding the management of LLCs formed in the state. As of August 1, 2019, your existing operating agreement is no longer compliant with Arizona law and you MUST adopt an operating agreement that is compliant with this new legislation to protect yourself. Any LLC without an agreement in place that complies with the new laws MAY BE DEEMED INVALID if challenged, potentially rendering your LLC legal protection null, void, and rendering you personally liable to the claims of another party. While in the past it was reasonable for an LLC without an agreement would default to the State of Arizona statutes, the new statutes make doing so a risk-filled and potentially costly proposition as these statues can be construed as quite unfavorable to you.
While it would be difficult for us to demonstrate at any length what changes occurred, here are a few key areas that are impacted by this new legislation that apply to our Single Member or Married Multi Member clients:
- Payment of services to members (this includes wages earned by each member)
- Joint ownership vs. sole and separate property (defaults to community property rules)
- Right of Survivorship and avoiding probate in case of member’s death
- Disclosure of Managers of Manager-Managed LLCs
- Inheritance issues for heirs
We worked with our in-house legal counsel Mick McGirr to develop an agreement for our clients that are either Single Member or Married business partners that we can implement for you to comply with the new legislative requirements as painlessly as possible. With this relationship, we will be able to provide you with a reduced price for the new operating agreement. For $475, you will receive the updated agreement for execution that is prepared by our team and reviewed by Mick to ensure that all required items are addressed and that you are protected properly in your business entity.
If you would like to proceed with this agreement update for your business, please email Lisa (Lisa@phocuscompanies.com) and we will be happy to email you an engagement package for this service. Once you receive the agreement, complete, sign, date and return the completed transmittal to us for processing to authorize us to begin this work on your behalf.
For our Multi Member LLC clients (where the members are not married to each other) here are the key areas of concern for you:
- Distributions by ownership percentage versus equally shared
- Profits allocated by ownership percentage versus equally shared
- Payment of services to members (this includes wages earned by each member)
- Joint ownership vs. sole and separate property (defaults to community property rules)
- Discloser of potential conflicts of interest
- Right of Survivorship and avoiding probate in case of member’s death
- Transfers of membership interest
- Disclosure of Managers of Manager-Managed LLCs
- Inheritance issues for heirs
Should you have a Multi Member entity where the partners are not married to each other, we strongly recommend that you contact Mick directly to work with him to have your operating agreement properly written. Such agreements require much more diligence with many more variables, and it is in your best interest to ensure that all facets of the arrangement are properly accounted for within the new legislation. He can be reached at Mick@phocuscompanies.com.
Thank you so much and have a fantastic weekend!