The Wisconsin Legislature recently passed a new law governing limited liability companies in Wisconsin (the “Act”). The Act is primarily based on the most recent version of the Revised Uniform Limited Liability Company Act, albeit with certain Wisconsin specific modifications. The Act applies to all LLCs that are formed on or after January 1, 2023. Additionally, as of January 1, 2023, the Act will also apply to pre-existing LLCs unless they filed an election to be governed by the existing law by December 31, 2022. The following is a summary of some of the key differences between the previous law and the Act.
The Act has redefined the term “Operating Agreement” to include any agreement that is oral, implied, written, or any combination thereof that is between all members of the LLC, including a sole member, and pertains to the internal affairs of the company. The legislature also added a new definition for a “Written Operating Agreement” and the Act distinguishes what things may only be done via a written operating agreement.
Another difference is that the Act has altered the requirements for filing the Articles of Organization. The Act will now allow organizers to file their own form of the Articles of Organization with terms addressing more matters than previously allowed to be addressed. Moreover, the Articles of Organization will no longer be required to state the type of management style of the LLC. This will allow more flexibility for the LLCs to change their management style without having to amend their Articles of Organization.
Additionally, the Act has eliminated the idea of apparent authority and has clearly established that members of an LLC do not have authority as a result of simply being a member. In order to clarify the authority of a certain position, a certain individual, or to clarify certain limitations of authority for a position or person, the LLC may file a Statement of Authority, which will be effective for five years. Because this document is only effective for five years, LLCs will need to be cognizant of renewing, amending, and or cancelling the Statement of Authority as changes are made within the company.
Some other differences are that non-economic members will now be allowed under the Act. This means that an individual may become a member without being required to make a contribution or acquire a transferable interest. Furthermore, the Act alters how LLCs that are taxed as partnerships are to handle distributions and voting power. In addition to the aforementioned changes, the Act goes on to address and modify various other items, such as wrongful dissociation, priority of distributions of assets in the dissolution of the LLC, mergers, interest exchanges, conversions, and domestication.
While there are some important differences between existing law and the new Act, most of these changes will not materially affect existing LLCs that have a well drafted written Operating Agreement. That being said, we still recommend that all LLC owners seek the advice of a business law attorney to determine whether the Act will impact your LLC and to periodically review your Operating Agreement to ensure it is still appropriate for your situation.
If you have questions about the new Act or how it may affect your LLC, do not hesitate to reach out to one of our experienced business law attorneys.