For owners of Minnesota LLCs that were formed prior to August 1, 2015 and have not yet checked in regarding whether law changes could impact their LLC beginning January 1st – stop procrastinating! Beginning January 1, 2018, some owners of Minnesota LLCs could wake up feeling a little rough around the edges due to more than how they spent their New Year’s Eve.
Recent changes to Minnesota’s LLC Act – a complete overhaul from Chapter 322B to 322C – are effective for all Minnesota LLCs starting January 1st, regardless of whether or not governing documents have been updated to reflect the statutory changes. It is the perfect time for LLC owners in Minnesota to dust off their existing LLC governing documents (bylaws, member control agreements/operating agreements, buy-sell agreements) and have them reviewed and updated.
The Revised LLC Act has been in effect since August 1, 2015 and has governed all LLCs created since then. Read about how the Revised Act applies to new LLCs here. Starting January 1, 2018, the Revised Act will generally apply to all other LLCs, except the provisions in the Revised Act that don’t apply to existing LLCs. Some of the provisions of the old Act will still apply, while others are replaced by the Revised Act. Make sense? Thought so.
For LLCs created before August 1, 2015, the rules will change and could produce results that are very different than what was intended when the company was created. The new rules include different fiduciary duties, a broader prohibition on competing against your own LLC, different triggers on what may dissolve your LLC, and more. Because of the types of changes that occurred, multi-member LLCs are strongly encouraged to seek out a review of their governing documents before year-end. Single-member LLCs are less likely to be impacted negatively, but could take the opportunity to opt into provisions now available.
Even if your LLC isn’t affected by the new Act, your operations may have changed in such a way as to necessitate an update. This is a great opportunity to ensure that your documents match your practices, and that everyone involved in your company actually know and understand the rules governing your LLC. While you are talking to us you should also talk to your tax advisor(s) to make sure you also understand any impact of the new partnership audit rules that go into effect on January 1st.