In 2018, the State of Arizona adopted important new laws regarding the operation of Arizona limited liability companies (“LLCs”). The new Arizona Limited Liability Company Act (“ALLCA”) affects all Arizona LLCs, and includes sweeping changes to the rights and obligations of an LLC's members and managers.
The ALLCA will apply to any new LLC formed on or after August 31, 2019, and will apply to all existing Arizona LLCs as of August 31, 2020. Fortunately, the delayed effective dates give business owners an opportunity to educate themselves about the new law and take appropriate actions to update their Operating Agreements before the changes go into effect.
Among other things, the ALLCA gives members and managers much broader rights and obligations regarding contribution of additional capital, access to Company records, and fiduciary duties. The ALLCA also imposes personal liability on members and managers in certain situations, and creates a private right of action for third parties who rely on incorrect information contained in the public records of the Arizona Corporation Commission (“ACC”).
While these changes are significant and will affect a huge percentage of Arizona businesses, LLCs can mitigate these risks with a robust Operating Agreement and by remaining vigilant about updating ACC records. Look for more information from Farhang & Medcoff in early 2019 about what the ALLCA may mean for your business, and how to ensure your LLC is in compliance.
If you have any questions in the interim about the ALLCA or how to better protect your LLC, please email Meredith Marder, Esq., at [email protected].