{"id":9911,"date":"2018-05-07T05:56:15","date_gmt":"2018-05-07T12:56:15","guid":{"rendered":"https:\/\/www.keytlaw.com\/azllclaw\/?p=9911"},"modified":"2018-05-20T15:12:33","modified_gmt":"2018-05-20T22:12:33","slug":"manager-powers","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2018\/05\/manager-powers\/","title":{"rendered":"New LLC Law Warning: Operating Agreement Should Limit Managers’ Powers"},"content":{"rendered":"

Why LLCs Must Have an ALLCA Compliant Operating Agreement: Reason #6<\/strong><\/p>\n

New Arizona Limited Liability Company Act (ALLCA) Section 29-3407.C.3<\/a> provides:<\/p>\n

\n

“a majority of the managers shall decide . . .<\/p>\n

(a) matters that are outside the ordinary course of the company’s activities and affairs but within the company’s purpose.<\/p>\n

(b) matters on which there exists a known difference among managers.<\/p>\n<\/blockquote>\n

This is a troubling statute that I recommend be amended or deleted in Arizona LLCs’ Operating Agreements.\u00a0 The problem with subsection (a) is ALLCA does not define: (i) the ordinary course of the company’s activities, and (ii) the company’s purpose.<\/p>\n

If the manager managed LLC does not have an Operating Agreement that defines the ordinary course of the company’s activities or the company’s purpose then subsection (a) is meaningless.\u00a0 Few LLC Operating Agreements define the LLC’s purpose.<\/p>\n

The practical significant of Section 29-3407.C.3(a)<\/a> is that an LLC manager cannot exercise any power under this subsection unless the LLC has an Operating Agreement that defines the LLC’s ordinary course of activities and\/or the company’s purpose, but very few LLCs have an Operating Agreement with that kind of language.<\/p>\n

Another problem with Section 29-3407.C.3 is subsection (b), which provides “a majority of the managers shall decide . . . matters on which there exists a known difference among managers.”\u00a0 This provision could be interpreted to mean that any time the managers differ on a proposed action a majority of the managers can decide to adopt or reject the action despite contrary language in the LLC’s Operating Agreement.\u00a0 This provision is too broad and potentially dangerous to some of the members.\u00a0 It should be eliminated by an ALLCA compliant Operating Agreement.<\/p>\n

An Arizona LLC’s Operating Agreement should contain language that expressly states what a manager can do and what the manager cannot do without getting approval from the members.\u00a0 My Operating Agreements contain these types of provisions.<\/p>\n

In addition, my ALLCA compliant Operating Agreement deletes\u00a0Section 29-3407.C.3<\/a> and many other problem provisions contained in Arizona’s new ALLCA.<\/p>\n

<\/p>\n

Subscribe to Our Free ALLCA Email List to Learn about Arizona\u2019s New LLC Law<\/strong><\/p>\r\n

Click on this link to join our free ALLCA email newsletter list<\/a> to learn about Arizona\u2019s new limited liability company law.<\/p>\n

How to Hire Richard Keyt to Prepare a Custom Operating Agreement<\/strong><\/p>\r\n

Option 1: Form a New LLC with a Custom Operating Agreement<\/strong>: When you hire me, Arizona LLC attorney Richard Keyt<\/a> who has formed 10,000+ and has 406 five star Google & Facebook reviews)<\/a>, to form a new LLC I will prepare a custom Operating Agreement.\u00a0 Complete our online LLC formation questionnaire<\/a> or call me at 480-664-7478 and give me your information. We form new LLCs and get them approved by the Arizona Corporation Commission the same day we are paid and you approve the LLC formation questionnaire you submit to us.\u00a0 See the \u201ccontents of the Bronze ($497), Silver ($897) & Gold ($1,397) LLC packages<\/a>.<\/p>\r\n

Option 2: Purchase a Custom Operating Agreement<\/strong>:\u00a0 If your Arizona LLC's Operating Agreement was drafted for the obsolete Arizona LLC law or if it doesn't have an Operating Agreement its members should hire us to draft a custom Operating Agreement by submitting our online Operating Agreement questionnaire<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Why LLCs Must Have an ALLCA Compliant Operating Agreement: Reason #6 New Arizona Limited Liability Company Act (ALLCA) Section 29-3407.C.3 provides: “a majority of the managers shall decide . . . (a) matters that are outside the ordinary course of the company’s activities and affairs but within the company’s purpose. (b) matters on which there exists a known difference among managers. This is a troubling statute that I recommend be amended or deleted in Arizona LLCs’ Operating Agreements.\u00a0 The problem with subsection (a) is ALLCA does not define: (i) the ordinary course of the company’s activities, and (ii) the company’s purpose. If the manager managed LLC does not have an Operating Agreement that defines the ordinary course of the company’s activities or the company’s purpose then subsection (a) is meaningless.\u00a0 Few LLC Operating Agreements define the LLC’s purpose. The practical significant of Section 29-3407.C.3(a) is that an LLC manager cannot exercise any power under this subsection unless the LLC has an Operating Agreement that defines the LLC’s ordinary course of activities and\/or the company’s purpose, but very few LLCs have an Operating Agreement with that kind of language. Another problem with Section 29-3407.C.3 is subsection (b), which provides “a majority of the managers shall decide . . . matters on which there exists a known difference among managers.”\u00a0 This provision could be interpreted to mean that any time the managers differ on a proposed action a majority of the managers can decide to adopt or reject the action despite contrary language in the LLC’s Operating Agreement.\u00a0 This provision is too broad and potentially dangerous to some of the members.\u00a0 It should be eliminated by an ALLCA compliant Operating Agreement. An Arizona LLC’s Operating Agreement should […]<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[830],"tags":[],"class_list":["post-9911","post","type-post","status-publish","format-standard","hentry","category-new-arizona-llc-act"],"yoast_head":"\nNew LLC Law Warning: Operating Agreement Should Limit Managers' Powers - Arizona LLC Law %<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.keytlaw.com\/azllclaw\/2018\/05\/manager-powers\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New LLC Law Warning: Operating Agreement Should Limit Managers' Powers\" \/>\n<meta property=\"og:description\" content=\"Why LLCs Must Have an ALLCA Compliant Operating Agreement: Reason #6 New Arizona Limited Liability Company Act (ALLCA) Section 29-3407.C.3 provides: “a majority of the managers shall decide . . . (a) matters that are outside the ordinary course of the company’s activities and affairs but within the company’s purpose. (b) matters on which there exists a known difference among managers. This is a troubling statute that I recommend be amended or deleted in Arizona LLCs’ Operating Agreements.\u00a0 The problem with subsection (a) is ALLCA does not define: (i) the ordinary course of the company’s activities, and (ii) the company’s purpose. If the manager managed LLC does not have an Operating Agreement that defines the ordinary course of the company’s activities or the company’s purpose then subsection (a) is meaningless.\u00a0 Few LLC Operating Agreements define the LLC’s purpose. The practical significant of Section 29-3407.C.3(a) is that an LLC manager cannot exercise any power under this subsection unless the LLC has an Operating Agreement that defines the LLC’s ordinary course of activities and\/or the company’s purpose, but very few LLCs have an Operating Agreement with that kind of language. Another problem with Section 29-3407.C.3 is subsection (b), which provides “a majority of the managers shall decide . . . matters on which there exists a known difference among managers.”\u00a0 This provision could be interpreted to mean that any time the managers differ on a proposed action a majority of the managers can decide to adopt or reject the action despite contrary language in the LLC’s Operating Agreement.\u00a0 This provision is too broad and potentially dangerous to some of the members.\u00a0 It should be eliminated by an ALLCA compliant Operating Agreement. An Arizona LLC’s Operating Agreement should [...]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.keytlaw.com\/azllclaw\/2018\/05\/manager-powers\/\" \/>\n<meta property=\"og:site_name\" content=\"Arizona LLC Law\" \/>\n<meta property=\"article:publisher\" content=\"http:\/\/www.facebook.com\/keytlaw\" \/>\n<meta property=\"article:author\" content=\"http:\/\/www.facebook.com\/keytlaw\" \/>\n<meta property=\"article:published_time\" content=\"2018-05-07T12:56:15+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-05-20T22:12:33+00:00\" \/>\n<meta name=\"author\" content=\"Richard Keyt\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Richard Keyt\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/\"},\"author\":{\"name\":\"Richard Keyt\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#\\\/schema\\\/person\\\/9d6c74d30296559f95e238fa25182391\"},\"headline\":\"New LLC Law Warning: Operating Agreement Should Limit Managers’ Powers\",\"datePublished\":\"2018-05-07T12:56:15+00:00\",\"dateModified\":\"2018-05-20T22:12:33+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/\"},\"wordCount\":364,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#organization\"},\"articleSection\":[\"New Arizona LLC Act\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/\",\"url\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/\",\"name\":\"New LLC Law Warning: Operating Agreement Should Limit Managers' Powers - Arizona LLC Law %\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#website\"},\"datePublished\":\"2018-05-07T12:56:15+00:00\",\"dateModified\":\"2018-05-20T22:12:33+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2018\\\/05\\\/manager-powers\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"New LLC Law Warning: Operating Agreement Should Limit Managers’ Powers\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#website\",\"url\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/\",\"name\":\"Arizona LLC Law\",\"description\":\"Information about Forming & Operating Arizona LLCs\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#organization\",\"name\":\"KEYTLaw, LLC\",\"url\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/wp-content\\\/uploads\\\/logo.png\",\"contentUrl\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/wp-content\\\/uploads\\\/logo.png\",\"width\":500,\"height\":500,\"caption\":\"KEYTLaw, LLC\"},\"image\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"http:\\\/\\\/www.facebook.com\\\/keytlaw\",\"https:\\\/\\\/x.com\\\/azestateplanner\",\"http:\\\/\\\/www.linkedin.com\\\/pub\\\/richard-keyt\\\/5\\\/a88\\\/a30\\\/\",\"https:\\\/\\\/www.youtube.com\\\/user\\\/keytlaw\"],\"description\":\"We are Arizona attorneys who have formed 9,000+ Arizona LLCs. 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