Beginning in early 2022, Ohio state regulations that govern limited liability companies (LLCs) changed dramatically. The implementation of the Ohio Revised Limited Liability Company Act altered numerous aspects of operating an LLC in the Buckeye State.
For those who are currently members of an LLC or operating an LLC with a partner, the Ohio Revised Limited Liability Company Act can have a substantial impact on dispute resolution in scenarios where members have conflicts with one another. Understanding the changes to the law can facilitate faster and more effective solutions for disputes among members or business partners operating an LLC jointly. What specific changes may have an impact on the outcome of a dispute?
Partners have the ability to waive fiduciary duty
Previously, LLC members had a fiduciary duty to the organization, as well as to other members and managers. Under the revised law, the foundational documents for the LLC and the partnership contracts between individual members can limit or even eliminate the fiduciary duty of certain parties or prevent legal action over conflicts of interest.
The operating agreement takes priority
Previously, statutory standards played a significant role in LLC management and the resolution of disputes. The revised law makes the operating agreement the primary legal consideration when addressing disputes.
Frequently, the agreement itself contains provisions related to dispute resolution, and partners or members may need to review the initial agreement to ensure they adhere to those requirements. Additionally, the law now allows operating agreements to outline specific consequences for breaches of the agreement and other contracts between the members or partners. Penalties could include a loss of ownership interest or a forced buyout.
There are faster dissolution options
When a dispute is impossible to resolve amicably and business partners do not want to pursue a buyout, the law now allows for a much faster LLC dissolution process. The Ohio Revised Limited Liability Company Act helps limit the liability of partners and the availability of creditors to make claims against the people who own and operate the LLC.
Ensuring compliance with state laws and operating agreements is critical for those facing a dispute with a business partner. Having experienced legal guidance can help business leaders evaluate their options.