As part of the 2014 legislative session, Minnesota adopted a Revised Uniform Limited Liability Company Act. This is the most significant change affecting Minnesota limited liability companies (LLCs) law since LLCs were first permitted in Minnesota in 1993.
The new law will apply to new LLCs formed on and after August 1, 2015 and to existing LLCs that “opt-in” to the provisions of the new law. However, beginning on January 1, 2018, the statute will apply to all LLCs and the old law will be repealed.
One of the major changes of the new law is that it shifts the default governance of Minnesota LLCs from a corporation-based model to a partnership-based model used by most other states. Companies can choose one of three governance structures:
1. Member-managed. A member-managed LLC is the default governance structure under the new LLC statute. In this structure all of the members (owners) share responsibility for the day-to-day running of the business and each has the authority to execute loan documents and borrow funds (unless limited by the operating agreement).
2. Manager-managed. In some situations, a manager-management structure may be preferable. In order to be a manager-managed LLC, a company’s operating agreement must contain language indicating that it will be manager-managed. The most common reason to elect manager-managed structure is when some members will simply be passive investors in the business and the management responsibilities are to be delegated to one or more managers (which may, but need not be, members).
3. Board-managed. A board-managed LLC is the default governance structure in the current LLC statute. Under this structure a board consisting of one or more governors oversees the management of the company, but the day-to-day operations are carried out by its officers/managers. Like with the manager-managed structure, under the new LLC statute, in order to elect this structure a company must affirmatively make such management election in its operating agreement.