In 1993, Minnesota businesses were given a new structure to use when forming a business – limited liability companies (LLCs). Since then, LLCs have largely become the business structure of choice, although Minnesota law has been viewed as less favorable than laws of other states. The Minnesota legislature adopted new laws in 2014 that may require LLCs to restructure and rewrite some of their corporate documents. If you have not already reviewed the law and its effect on your company, it’s time to find out what Minnesota Chapter 322C means for your LLC.
What Is Minnesota Chapter 322C?
Before 2014, Minnesota LLCs were governed by Chapter 322B.
Chapter 322C was developed to comply with laws like the Revised Uniform LLC Act of 2006, which was drafted by the Uniform Law Commission. Implementation of the new law was laid out in three steps:
- Starting on August 1, 2015, the new Act governed all newly formed Minnesota LLCs.
- Between August 1, 2015 and January 1, 2018, Minnesota LLCs could opt-in to the revised Act.
- As of January 1, 2018, the new Act applies to all Minnesota LLCs, no matter when they were formed.
As you can see, we are coming up against a firm deadline.
Why Was 322C adopted?
Chapter 322C brings Minnesota law more in line with LLC law adopted by other states. It also clarifies the way businesses are structured and managed. This change “makes Minnesota a more competitive venue…” for businesses.
How Will Businesses Change?
LLCs can have three types of governance: member-managed, board-managed, or manager-managed. The company’s operating docs need to reflect the changes dictated by Chapter 322C. Any needed transitions should use the method provided in the company’s operating agreement or bylaws.
Do You Need to Act?
The Office of the Secretary of State of Minnesota recommends that business owners confer with their attorneys about this change and noted that there may be “significant changes to governance and management, operating agreements, and other aspects of your business.”
If your corporate documents were written to comply with former Minnesota law (Chapter 322B), you need to review them. After January 1, 2018, they will be interpreted by 322C standards and this could cause some problems. You may not know your LLC doesn’t comply with the new law until something happens. There may be conflicts between how a situation is handled under 322B or 322C.
Even if your company is not affected by 322C, you may take this opportunity to review your corporate documents in case other modifications are needed.
Is Your Business Affected?
Talk to a qualified Minnesota attorney about Minnesota Chapter 322C and learn how it may affect your business. Call Virtus Law at 612.888.1000 or send us an email at email@example.com. Our main office is in Minneapolis, Minnesota. Other offices: Edina, Mendota Heights, and Red Wing.