By Thomas C. Grella

On June 19, 2013, Chapter 57D of the North Carolina General Statutes was formally adopted by the NC Legislature and Governor, in effect completely replacing the current law applicable to the formation and regulation of limited liability companies. This new law goes into effect on January 1, 2014, with the existing statute, Chapter 57C being repealed as of that same date. You can review the whole new set of statutes at the following link: http://tinyurl.com/mg7tvep

Since the statute is a complete overhaul, it is not really possible to go into detail on every effective change to existing law. We do believe, however, that it is important that you are generally aware of the following broad points about the new law:

First, the law was apparently not changed to simply adjust new entity filing fees upward. The statute still indicates that the cost of organization of a new LLC is $125.

Second, there is a new distinction between the owner of a membership interest in an LLC, and the holder of an economic interest. This seems to follow what other states have adopted. A person will now be able to have an economic interest in an LLC, without necessarily rising to the level of member (and having the non-economic rights that go along with membership).

Third, the new statute spells out in detail that an “operating agreement” is to govern the internal affairs of an LLC. The new statute permits the terms of an operating agreement to supplant much of what is required of an LLC in new Chapter 57D, however, the LLC statute lists numerous specifics that cannot be nullified by the operating agreement.

Fourth, the new statute more clearly spells out the priority of terms between a written operating agreement, filed articles of organization, terms of the new statute and oral agreements between the parties. Generally, the terms of the written operating agreement are going to control subject to those specific areas where the statutory requirements cannot be modified.

Fifth, the new statute recognizes that some LLC’s appoint other “officials” to manage the business, such as officers (president, Vice President, etc.) typically used in other forms of entities. This may have been going on for years, and the new law now gives recognition to this preference by some businesses.

 The new Act will apply to all LLC’s regardless of whether they were formed before or after January 1, 2014.

 As noted, this is just a brief overview of a few of the changes in the new law. Certainly as to those changes mentioned above, we have not given enough detail to constitute legal advice. If you need further information, or have specific questions about how the new law might affect your entity, or planning for organization of future entities, please give any one of the members of our Corporate Team a call.