{"version":"1.0","provider_name":"Arizona LLC Law","provider_url":"https:\/\/www.keytlaw.com\/azllclaw","author_name":"Richard Keyt","author_url":"https:\/\/www.keytlaw.com\/azllclaw\/author\/1llclawyer\/","title":"New LLC Law Warning: Beware of Section 29-3404.A","type":"rich","width":600,"height":338,"html":"<blockquote class=\"wp-embedded-content\" data-secret=\"HqHcpWYQNL\"><a href=\"https:\/\/www.keytlaw.com\/azllclaw\/2018\/05\/act-29-3404\/\">New LLC Law Warning:  Beware of Section 29-3404.A<\/a><\/blockquote><iframe sandbox=\"allow-scripts\" security=\"restricted\" src=\"https:\/\/www.keytlaw.com\/azllclaw\/2018\/05\/act-29-3404\/embed\/#?secret=HqHcpWYQNL\" width=\"600\" height=\"338\" title=\"&#8220;New LLC Law Warning:  Beware of Section 29-3404.A&#8221; &#8212; Arizona LLC Law\" data-secret=\"HqHcpWYQNL\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" class=\"wp-embedded-content\"><\/iframe><script type=\"text\/javascript\">\n\/* <![CDATA[ *\/\n\/*! This file is auto-generated *\/\n!function(d,l){\"use strict\";l.querySelector&&d.addEventListener&&\"undefined\"!=typeof URL&&(d.wp=d.wp||{},d.wp.receiveEmbedMessage||(d.wp.receiveEmbedMessage=function(e){var t=e.data;if((t||t.secret||t.message||t.value)&&!\/[^a-zA-Z0-9]\/.test(t.secret)){for(var s,r,n,a=l.querySelectorAll('iframe[data-secret=\"'+t.secret+'\"]'),o=l.querySelectorAll('blockquote[data-secret=\"'+t.secret+'\"]'),c=new RegExp(\"^https?:$\",\"i\"),i=0;i<o.length;i++)o[i].style.display=\"none\";for(i=0;i<a.length;i++)s=a[i],e.source===s.contentWindow&&(s.removeAttribute(\"style\"),\"height\"===t.message?(1e3<(r=parseInt(t.value,10))?r=1e3:~~r<200&&(r=200),s.height=r):\"link\"===t.message&&(r=new URL(s.getAttribute(\"src\")),n=new URL(t.value),c.test(n.protocol))&&n.host===r.host&&l.activeElement===s&&(d.top.location.href=t.value))}},d.addEventListener(\"message\",d.wp.receiveEmbedMessage,!1),l.addEventListener(\"DOMContentLoaded\",function(){for(var e,t,s=l.querySelectorAll(\"iframe.wp-embedded-content\"),r=0;r<s.length;r++)(t=(e=s[r]).getAttribute(\"data-secret\"))||(t=Math.random().toString(36).substring(2,12),e.src+=\"#?secret=\"+t,e.setAttribute(\"data-secret\",t)),e.contentWindow.postMessage({message:\"ready\",secret:t},\"*\")},!1)))}(window,document);\n\/\/# sourceURL=https:\/\/www.keytlaw.com\/azllclaw\/wp-includes\/js\/wp-embed.min.js\n\/* ]]> *\/\n<\/script>\n","description":"Why LLCs Must Have an ALLCA Compliant Operating Agreement: Reason # 1 Arizona&#8217;s new LLC law called the Arizona Limited Liability Company Act (ALLCA) effective September 1, 2019, contains many traps for members and managers of Arizona LLCs.\u00a0 The only way members and managers of Arizona LLCs can protect themselves against ALLCA traps is by signing an Operating Agreement that eliminates ALLCA&#8217;s problem provisions. One of the most potentially damaging ALLCA provisions is Arizona Revised Statutes\u00a0Section 29-3404.A.\u00a0 This statute states: &#8220;Any distribution made by a limited liability company before its dissolution and winding up must be in equal shares among Members.&#8221; This statute means that an Arizona LLC taxed as a partnership or S corporation with taxable income of $10,000 in 2021 that is owned 90% by Homer Simpson and 10% by Ned Flanders will: Allocate $9,000 of the income to Homer who will pay the tax on that amount. Allocate $1,000 of the income to Ned who will pay the tax on that amount. Distribute $5,000 to Homer. Distribute $5,000 to Ned. ALLCA Section 29-3404.A causes the $10,000 of income to be distributed equally to each member. How to Avoid the\u00a0Section 29-3404.A Problem Homer and Ned should sign an ALLCA compliant Operating Agreement that eliminates the default problems contained in ALLCA.\u00a0 Their Operating Agreement should have language in it that eliminates\u00a0Section 29-3404.A . FYI:\u00a0 All of my Operating Agreements eliminate the\u00a0Section 29-3404.A problem and are 100% ALLCA compliant.\u00a0 ALLCA compliant means my Operating Agreements are drafted to eliminate many of the inherent problems that ALLCA creates such as Section 29-3404.A ."}