06th Feb 2009
Limited Liability Companies - Update on Changes
There are some changes coming for limited liability companies. Two states (Iowa and Idaho) have already adopted these changes, and in the coming months more states may also follow suit.
The changes affect both the filing documents and the operating documents.
Formerly, you filed “Articles of Organization” for your LLC with the state. Now, in Iowa and Idaho, you must file a “Certificate of Organization.” The filing process is the same, it’s just the document that’s a little bit different.
After your LLC has been approved, you should prepare an Operating Agreement. Even if you setting up as a single-member LLC, you still need to have this document. And with the changes, it becomes very important to have an agreement for multi-member LLCs. Among the changes is a “one person-one vote” rule which states that, unless the Operating Agreement says otherwise, each member of the LLC gets one vote. So a member with a 10% share of the membership gets the same number of votes as a member with a 90% share of the membership. To prevent this “minority rule,” you can specifically state in your Operating Agreement how members will vote (according to percentage, for example).
There are some other similar changes to distributions. I’ll keep you advised if I hear of other states that are making changes.
Before you set up an LLC in either Iowa or Idaho, check on the state secretary of state’s website or talk with an attorney.
By the way, in some states (like Nebraska), you can file for an LLC online.
There are some changes coming for limited liability companies. Two states (Iowa and Idaho) have already adopted these changes, and in the coming months more states may also follow suit.
The changes affect both the filing documents and the operating documents.
Formerly, you filed “Articles of Organization” for your LLC with the state. Now, in Iowa and Idaho, you must file a “Certificate of Organization.” The filing process is the same, it’s just the document that’s a little bit different.
After your LLC has been approved, you should prepare an Operating Agreement. Even if you setting up as a single-member LLC, you still need to have this document. And with the changes, it becomes very important to have an agreement for multi-member LLCs. Among the changes is a “one person-one vote” rule which states that, unless the Operating Agreement says otherwise, each member of the LLC gets one vote. So a member with a 10% share of the membership gets the same number of votes as a member with a 90% share of the membership. To prevent this “minority rule,” you can specifically state in your Operating Agreement how members will vote (according to percentage, for example).
There are some other similar changes to distributions. I’ll keep you advised if I hear of other states that are making changes.
Before you set up an LLC in either Iowa or Idaho, check on the state secretary of state’s website or talk with an attorney.
By the way, in some states (like Nebraska), you can file for an LLC online.
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