In 2014, the Minnesota Legislature adopted a new LLC statute which goes into effect on August 1st. The new set of laws “Minn. Stat. §332C.01 et seq.” will cover all LLCs formed after August 1st. There are many changes that impact LLCs under the new law that are likely welcome to lawyers who work in this arena.
Possibly to make Minnesota more attractive as compared to other states, namely Delaware, the new law simplifies the default organizational structure LLCs and gives greater weight to agreements among members regarding their duties to each other and the company. Moving forward, controlling members of LLCs in Minnesota should have less concern that they or the company could be forced to buy a disgruntled member out for “fair value” where the company operating agreement otherwise offers a mechanism to deal with the issue.
Additionally, the new law makes business formation a little easier by defaulting to a “member-managed” structure and combining the member control agreement into the operating agreement. The member-managed structure allows the members to directly operate the company rather than through a board of governors.
Finally, the new law enables LLCs to use special litigation committees just as with corporations. This enables companies to deal with potential derivative claims through an impartial committee appointed by the company as a possible means of avoiding litigation.
LLCs have proven to be a good structure for protecting against liability (among other things) over the years and they have become the next popular choice of entity by far for new businesses. The new LLC act will most certainly make this entity an even more popular choice.