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Lawyer-to-Lawyer: Beware of the Limited Liability Defaults

Author: admin Date: 11/21/2012

Categories: Corporate and Business Law

Effective October 1, 2012, amendments to the Maryland Limited Liability Act require that attorneys review and evaluate the impact of the LLC Act’s default rules on their clients. If the following topics are not addressed in the Operating Agreement then the LLC will require unanimous consent of its Members to take any of the following actions:

  • alter the allocation of profits or losses among the members;
  • alter the allocation or the manner of computing distributions to members;
  • amend the Operating Agreement;
  • institute a voluntary proceeding under the Bankruptcy Code;
  • assign the property of the limited liability company in trust for creditors or on the assignee’s promise to pay the debts of the limited liability company;
  • do any other act that would make it impossible to carry on the ordinary business of the limited liability company;
  • admit an assignee as a member; and
  • approve the dissolution of the LLC.

When advising clients make certain that they understand these issues. You can then draft the Operating Agreement to reflect how the clients want to operate their entity, rather than have the State decide.