Heads up!  Whether you already own a limited liability company for real estate or other purposes or have plans to start a company in the near future, Arizona has a new set of laws that will change how limited liability companies operate. These new laws likely require an amendment to your existing documents.

More specifically, the Arizona Limited Liability Company Act (the “Act”) completely replaces the existing set of limited liability company statutes that have been in place in Arizona since 1992. Now, any new LLC created on or after September 1, 2019, must comply with the Act.  And, on September 1, 2020, the Act will apply to all existing limited liability companies. 

Patrick R. MacQueen is a founder of MacQueen & Gottlieb, PLC.

Fortunately, many of the changes are “default” changes that can be easily addressed in a new operating agreement or an amendment to your existing documents. If your operating agreement does not specifically address these “default” terms, then your company may be “stuck” with less than ideal terms and conditions due to the new Act.

Below are four changes that are most likely to affect your limited liability company:

1. Fiduciary and Other Duties of Managers and Members: The Act codifies several duties that affect members and manager alike. These duties create a legal standard that could easily result in claims of negligence and personal liability. To address this potential, you should consider language in your documents whereby the obligations are waived or limited.\

2. Personal Liability: Typically, a limited liability company is a great way to limit personal liability, however, the Act contains provisions which may actually increase the potential for personal liability.   If this is a concern, you should address this risk in an amendment to your existing operating agreement or a new operating agreement.

3. Equal Distribution Requirement: Unless specifically stated in an operating agreement, your limited liability company is legally required to make distributions in equal shares upon dissolution. This is a new “default” requirement under the Act.  This can have a significant impact among members and lead to some unwanted surprises. 

4. Community Property Rights: A limited liability company can be a great tool for married couples and joint tenants to share ownership interests.  The Act now specifically lists new procedural steps for how these interests need to be addressed.

Of course, these are not the only changes to the limited liability company laws and this is not intended to be an exhaustive list. Although the Act intends to bring more clarity and a pro-business approach to Arizona limited liability company laws, these new provisions may create a situation that is not ideal for you or your company.

If you are interested in learning how the new laws will affect you, please feel free to contact me to discuss the required amendments.  Call 602-533-2840, email patrick@mandglawgroup.com or complete the following link: http://bit.ly/MandGNCIS.


Patrick R. MacQueen is a founder of MacQueen & Gottlieb, PLC.