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Washington State’s New Limited Liability Company Act Summary


A new Washington Limited Liability Company Act will take effect on January 1, 2016. This new Act fully replaces the previous act and is expected to affect current and future Washington LLCs in addition to entities doing business with them. Below is a brief summary of some of the relevant changes, however consult your legal advisor for specifics on how they apply to your business.
Under the new Act, LLC agreements can be oral, implied or in a record in addition to a formal agreement. Previously, LLC agreements were required to be in writing. Consider whether this expansion is desirable for your business or whether it would be best to have language that all LLC agreements and amendments be in writing to avoid confusion and misunderstandings.
The new Act also establishes a set of default fiduciary duties owed by managers of LLCs where these were previously unspecified. Managers will now owe a duty of loyalty and a duty of care to the LLC and these terms are defined in the Act. The Act, however, does allow the managers’ actual duties be expanded or narrowed to some degree if the business wishes to define these differently.
The LLC Act also provides additional flexibility in defining the management structure of the LLC via the language in the LLC agreement. This may reduce filings with the Secretary of State when shifts are made between member-managed and manager-managed status. In addition, the new Act permits management of the LLC by a board, which can have subtle differences from management by multiple members who are each acting as agents.
Other changes include additional record retention and request rights of the members, changes to the members’ default voting rights to be on a per-capita basis (rather than based on relative ownership) and expansion of the LLC form to not-for-profit businesses.
This summary is not all inclusive of the changes outlined in the new LLC Act. In order to ensure that any current and future LLCs are structured in an appropriate fashion, we recommend contacting your legal counsel to review your LLC agreement.