Utah Has A New LLC Act Effective January 2014 – Dec 2013
Terry Jessop & Bitner Newsletter
Issue 4, December 2013
At this time of year we are thinking about that old Charles Dickens’ story . . . A Tale of Two Cities. Only here in Utah the title would be A Tale of Two LLCs. Utah has a new LLC law next year. All Limited Liability Companies formed after December 31, 2013, will be subject to the new Utah Revised Uniform Limited Liability Company Act (the “New Act”). Current LLCs will still be subject to the “Old Act.” However, all LLCs, whenever formed, will become subject to the New Act beginning on January 1, 2016. An existing LLC may “opt in” early to the New Act by amendment or resolution, but unless it does so, it will still operate under the Old Act. Therefore, Utah will have two LLC statutes in effect simultaneously for two years. Because this is likely to create confusion, we will review some nuances of the New Act in this and upcoming newsletters.
LLCs Don’t Have To Initially Disclose Who Is In Charge
The New Act is the most comprehensive change to Utah’s LLC statute in many years. Although there are many important changes to LLC law, one key change is the New Act’s replacement of articles of organization with a certificate of organization. Under the Old Act, an LLC is formed when articles of organization are filed. In the articles an LLC states its name, purpose, type of LLC (low-profit, series or professional), management structure (manager-managed or member-managed), and registered agent along with the address of its members or managers. However, under the New Act, all that is required is a certificate of organization which includes the LLC’s name, address, type and registered agent.
Under the Old Act, anyone dealing with an LLC could look up the LLC’s public record and, for a small fee, see who managed the LLC, i.e., members or managers. Anyone could also see who the members or managers were to help them know if the individual with whom they were dealing had authority. With the New Act, LLC members are not required to publicly disclose who is in charge when they first form the LLC.
You Can Find Out Who Is In Charge . . . In a Year
Similar to the Old Act, the New Act allows an organizer, who is not a member of the company, to sign a certificate of organization on behalf of the LLC. However, the New Act’s certificate does not need to include the name or address of any other person except the registered agent until the annual report is filed, which could be up to a year later. When the annual report is filed, the New Act requires the LLC to list a “governing person” who has authority to exercise the powers of the company. The governing person can be a natural person or entity acting alone or in concert with others. In short, at least one member (in a member-managed LLC) or manger (in a manager-managed LLC) must be named as the governing person in the annual report. Up until that time, you will have to check some source other than the certificate of organization to figure out who is in charge.
Less (Public Information) is More (Work for You)
Because the New Act does not require the names and addresses of the members and managers, you will no longer be able to rely on the public record to verify that you are dealing with the right person. You will need to review the LLC’s operating agreement or get a copy of a resolution signed by all members to be assured that the individual signing a document has authority to sign it on behalf of the company. We would be happy to answer your questions about the New Act or assist you with the review of an operating agreement or resolution. Feel free to contact us.
©Terry Jessop & Bitner December 2013