In 2021, the Wisconsin Legislature enacted the Wisconsin Uniform Limited Liability Company Law (“WULLCL”). Starting January 1, 2023, the WULLCL applies to all limited liability companies (also known as LLCs) that were formed after the first of the year. LLCs formed before the first of the year will be subject to the WULLCL unless the LLC files an election to opt out of the new law. If an LLC opts out of the WULLCL, it will still be subject to the prior Wisconsin LLC laws or the Revised Uniform Limited Liability Company Act.
So, What are the New Business Entity Laws in Wisconsin?
The WULLCL made critical changes to laws relating to the fiduciary duties of LLC members; LLC members’ access to information; a member’s authority to bind the LLC; and the requirements of operating agreements.
Fiduciary Duties
Under the previous law, members could agree to waive specific fiduciary duties typically owed to other members and the company. The WULLCL now requires that LLC members and managers owe each other and the company the duty of care, the duty of loyalty, and the obligations of good faith and fair dealing. LLC members can no longer waive these obligations if the LLC is formed after January 1, 2023. The new laws will honor operating agreement provisions enforced prior to the new year that waive certain duties if the provisions are enforceable under the prior law.
Access to Information
The WULLCL also provides broader rights to members to access company information. Now, if a member, even if not actively involved with management, reasonably requests information from the LLC, then the member has a right to obtain a copy of and inspect information regarding the LLC’s activities if it relates to the member’s interests and rights. This includes the LLC’s financial records. The WULLCL disallows operating agreements from unreasonably restricting a member’s right to access information.
To review your operating agreement and rights as a member with a Wisconsin O’Flaherty Law Business Attorney, contact us for a consultation.
Apparent Authority
Further, under the WULLCL, an LLC member is not an LLC agent solely because of membership. This law eliminates the idea of “apparent authority” which allows members to bind the company to contracts or other agreements. The Wisconsin Department of Financial Institutions (WDFI) now offers a statement of authority that can be filed with the WDFI, indicating which LLC members have the authority to bind the LLC.
Wisconsin O’Flaherty Law Attorneys are available now to assist you in filing your authorization statement.
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Operating Agreement
Lastly, operating agreements are no longer limited to a written agreements. Verbal, implied, or any combination offers a binding operating agreement. However, certain procedures, such as fiduciary duties, must be in writing.
To draft your operating agreement with a Wisconsin O’Flaherty Law Business Attorney, contact us for a consultation.
How Do I Opt Out of the New Law?
If your LLC was formed prior to January 1, 2023, you would have had to file a Statement of Non applicability with the Wisconsin Department of Financial Institutions by December 31, 2022. If you did, your LLC is subject to the laws that were in effect before January 1, 2023. If you did not file the statement, your LLC rules and regulations must conform to the WULLCL.
For a more in-depth explanation that caters to your personal LLC, contact a Wisconsin O’Flaherty Business Law Attorney for a consultation today!
What Happens If I Do Not File The Statement and My LLC Does Not Conform to the WULLCL?
It is recommended to review your current operating agreement to evaluate if any provisions may be at risk of being invalidated under the WULLCL. If you did not opt out of the WULLCL, we suggest meeting with a Wisconsin O’Flaherty Business Law Attorney to review and discuss your LLC’s operating agreement and functions to ensure that they conform to the new law.
Opting out of the WULLCL doesn’t automatically mean an LLC has to adjust its operating agreement solely as a result of this change in the law, though individual circumstances may vary. LLCs that opt-out of the WULLCL may later “opt in” by filing a Statement of Applicability at any time. O’Flaherty Law Business Lawyers are available to assist your LLC in making the transition; give us a call today.
Contact a Wisconsin O’Flaherty Business Law Attorney to review your operating agreement and ensure it conforms to the new laws.
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