Business Startup

Changes to the Washington Limited Liability Company Act

Earlier this year, the Washington state legislature unanimously passed and the governor signed legislation making changes to the Washington Limited Liability Company Act—the most sweeping changes to Washington LLC law in recent history.

The Washington State Bar Association requested that the state make changes to the Washington Limited Liability Company Act. The bar association’s goal was to make the law easier to understand and more flexible by modifying provisions that the association described as creating pitfalls and unnecessary problems. The Washington state Senate and House eventually passed legislation making those changes, and Governor Inslee signed the law on May 7, 2015. The new changes will go into effect on January 1, 2016.

Some of the major changes to the Washington Limited Liability Act that will go into effect in January 2016 include:

Oral LLC Operating Agreements Allowed. Before the change, operating agreements needed to be in writing. If an LLC did not have a written operating agreement, then default rules in the statute would apply to the company and its members regardless of whether they had some other non-written agreement. Under the new legislation, operating agreements may be “oral, implied, in a record, or in any combination.”

Limited Liability Company Act

Boards Can Manage the LLC. Under current Washington LLC law, a manager of the LLC needs to be a person. The changes permits a manager to be a “board, committee, or group of persons.”

Default Rules. The new act will list fifteen provisions that cannot be amended by an operating agreement. Currently, non-waivable provisions are scattered throughout the Act.

Certificate of Formation. Under the new law, the LLC does not have to list whether or not it is a manager or member managed LLC in the Certificate of Formation, as was required under the “old” law. The LLC can now indicate its chosen management structure in the operating agreement.

Fiduciary Duties. The new LLC act explicitly states that a LLC’s manager or a member in a member-managed LLC has the duties of loyalty and care to the LLC and its members, and the new Act describes those duties.

Member Voting. The new law will change the default voting rule from voting based on contribution percentage to voting where each member has one vote.

Personal Liability for Improper Distributions. The new law imposes personal liability on a manager or a member in a member-managed LLC who consents to improper distributions for the amount that exceeds what would have been a proper distribution under the law.

Waive Dissenters’ Rights. The new law allows members to waive their dissenters’ rights in the operating agreement.

Access to Records. The new law expands members’ access to company records, including access to accounting records.

If you would like to learn more about these upcoming changes to the Washington Limited Liability Company Act, limited liability companies, or LLC operating agreements, please contact us today.

Photo: Enrico Pighetti | Flickr

        


Charlene Angeles

Charlene makes time to enjoy the outdoors and has explored Washington's Big Four Ice Caves.


146 N Canal Street, Suite 350   |   team@invigorlaw.com