Limited liability companies (LLCs) in Ohio are facing significant changes with a new law, the Ohio Revised Limited Liability Company Act (the Act). The Act becomes effective soon on February 11, 2022. By replacing existing Ohio Revised Code Chapter 1705 with a new Chapter 1706, the Act fully modernizes LLC law in Ohio and provides new mandatory and default rules for LLCs. Ohio business owners who currently have, or may have, an LLC in Ohio should ensure that the operating agreement for their LLC is reviewed by an attorney for compliance with the new Act.
The Act contains several important new provisions, including the following:
- The Act imposes new fiduciary duties on members and managers of LLCs. These changes may alter the ability of the company or its members to recover for breached duties.
- The Act provides default rules enforcing equal per capita distributions among members and equal per capita votes by members on ordinary business matters.
- The Act lists certain specific statutory requirements that cannot be changed by the provisions in an operating agreement.
- The Act allows for the formation of “series” LLCs within one LLC, which operates similarly to a corporate parent-subsidiary structure.
- The Act permits the management of an LLC to be structured in ways other than only member-managed or manager-managed.
- The Act provides a framework by which a dissolved LLC may bar creditors’ claims after a certain period of time if certain statutory requirements are followed.
- The Act enables an operating agreement to provide penalties that will apply if a member violates certain provisions in the operating agreement.
Ohio business owners should ensure that their LLC operating agreements and related documents comply with requirements in the new law and that they have taken advantage of protective options in the new law by the time the Act goes into effect.
