Watch Out: Here Comes Wisconsin’s New Limited Liability Company Law
Jeff Storch , Robert P. Hameister | 11.11.22
On April 15, 2022, Gov. Evers signed Senate Bill 566/Act 258 into law (the “Act”), repealing and recreating Chapter 183(the Wisconsin Uniform Limited Liability Company Law, which in this article will be referred to as the “New Law”), which governs limited liability companies (“LLC”). Among the Act’s various provisions, it generally adopts the Revised Uniform Limited Liability Company Act, subject to certain intentional differences. All statutory references are to Wisconsin Chapter 183, unless otherwise noted.
When does it apply to your LLC?
The New Law’s provisions will apply to all LLCs starting January 1, 2023 (the “effective date”) including LLCs that were formed prior to the effective date. If you do nothing, the New Law will govern your LLC beginning on the effective date.
Can you opt out of the New Law?
An existing LLC may choose to continue being subject to the prior law, Ch. 183, 2019 stats., in many material respects (the “opt-out”) by filing a statement of non-applicability with the Wisconsin Department of Financial Institutions (the “Department”) prior to the effective date. A statement of non-applicability can be accessed here. Any existing Wisconsin LLC should review the New Law as soon as possible to determine whether to make an opt-out election.
Why should you opt out?
If you haven’t already had a chance to review the New Law and your LLC’s governing documents to determine any impact the New Law may have for your LLC, opting out will provide you with time to do so. For example, the Third Article in our series highlighting the New Law discusses changes to the common understanding of an operating agreement. After determining the impact the New Law may have on your LLC, you can always file a statement of applicability and opt-in to the New Law.
Some existing LLCs, particularly those with a thorough, well-considered, operating agreement, may find that there is little difference for them under the New Law versus the prior law. However, after December 31, 2022, there will no longer be the ability to opt-out of the New Law, so if in doubt, opting-out now may be the most conservative route.
Can you opt-in early to the New Law?
If you have reviewed the New Law and understand its provisions, an existing LLC may opt-in to the New Law prior to the effective date by filing a statement of applicability with the Department. Any LLC opting-in to the New Law before the effective date should do so only after fully understanding its provisions, because the election is irrevocable upon filing. However, this issue becomes moot on January 1, 2023, if an LLC does not opt-out because the New Law will automatically apply to LLCs that did not opt-out.
What does this mean for you?
Prior to January 1, 2023, take time to review the New Law and your LLC’s governing documents to determine the impacts, if any, there may be for your LLC. If you are not sure what the impact may be for your LLC, or you are unable to complete such a review by the effective date, consider whether you should opt-out to provide yourself time to better understand the New Law. Once you understand the New Law you can choose to opt-in and have it apply if you think appropriate. As always, we invite you to reach out to your usual Boardman Clark attorney or any member of our business practice group with questions.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.