Wisconsin’s New Limited Liability Company Statutes: Key Updates and Provisions
Jeff Storch , Robert P. Hameister | 07.19.22
On April 15, 2022, Tony Evers signed Senate Bill 566/Act 258 into law (the “Act”), repealing and recreating Chapter 183 (the Wisconsin Uniform Limited Liability Company Law, or WULLCL), which governs limited liability companies. Among the Act’s various provisions, it generally adopts the Revised Uniform Limited Liability Company Act, subject to certain intentional differences.
This article highlights certain changes in the WULLCL that will be of interest to those doing business in Wisconsin. This article is an overview of the WULLCL and does not substitute reading the WULLCL in its entirety.
More detailed articles on provisions of the WULLCL will follow as part of Boardman Clark’s Wisconsin Uniform Limited Liability Company Law Series. All statutory references are to Wisconsin Chapter 183, unless otherwise noted.
Key considerations the WULLCL impacts include:
Applicability of the new law. The WULLCL applies to limited liability companies (“LLC”) formed on or after January 1, 2023 (the “effective date”). However, any existing LLC:
- May opt in to the WULLCL early by filing a statement of applicability with the Wisconsin Department of Financial Institutions (the “Department”).
- May opt out of the WULLCL and remain subject to the prior law, Ch. 183, 2019 stats., in many material respects, by filing a statement of non-applicability with the Department prior to the effective date.
Formation – Articles of Organization. Under current law, the LLC’s articles of organization must contain a fixed set of information that cannot be edited. The WULLCL will allow customizing an LLC’s Articles of Organization.
What constitutes the LLC’s operating agreement. The WULLCL broadens the current understanding of an operating agreement by stating that an operating agreement need not be referred to as an operating agreement and may be “oral, implied, in a record, or in any combination thereof” but has specific provisions that apply to a “written operating agreement”.
Member authority. Under current law, a member can have “apparent authority” to bind the LLC, even if the member does not have actual authority. The WULLCL rejects the concept of apparent authority but instead provides that an LLC may file a statement of authority with the Department that can either grant or restrict authority to act on behalf of an LLC.
Duties of member or managers. The WULLCL specifies the duty of loyalty and duty of care for LLC in both member-managed and manager-managed LLCs. An operating agreement cannot alter or eliminate the remedies for the breach of the duty of care and loyalty, but it may provide certain factors to consider in determining whether a breach took place. Additionally, the operating agreement may provide how an action that would otherwise violate the duty of loyalty can be authorized or ratified by disinterested persons.
Membership and contributions. The WULLCL specifies when a member becomes a member, sets forth what may be a contribution to the LLC in exchange for a membership interest, and addresses members’ rights to approve various LLC matters.
Dissociation, dissolution, and winding up. The WULLCL creates the new concept of “wrongful” dissociation (leaving the LLC). It also updates the provisions for dissolution of the LLC and its winding up.
Legal actions by members. The WULLCL imposes new provisions on who may maintain an action to enforce the member’s rights or interests, whether arising under the operating agreement or whether such right or interest arises independently of the membership relationship. These new provisions may abrogate the ruling in the Wisconsin Supreme Court case Marx v. Morris 2019 WI 34, 386 Wis. 2d 122, 925 N.W.2d 112. (See our article titled Authority to Sue on Behalf of a Wisconsin LLC After Marx V Morris)
Foreign (non-WI) LLCs. The WULLCL addresses a foreign LLC’s obligations to register in Wisconsin if transacting business in Wisconsin.
Merger, interest exchange, conversion, and domestication. The WULLCL provides the rules for various other types of entities to merge or convert into or otherwise undergo a “combination” with a Wisconsin LLC.
What Wisconsin LLCs Should Do Now
All Wisconsin LLC’s should consult with their members, any managers, and legal and other advisors to determine what, if any, actions to take in light of the upcoming WULLCL changes. Specific actions to consider:
- Whether to opt-out of the WULLCL. Opting out has a deadline of December 31, 2022.
- Whether it makes sense to opt-in early to the WULLCL.
- Whether to amend the LLC’s operating agreement.
- Whether to amend the LLC’s articles of organization, to take advantages of the new customization opportunity.
- Whether to file a statement of authority.
Many LLCs may determine that no changes are necessary. However, it is likely that some will want to amend their operating agreement or articles or take other actions in response to the changes in the law. Because the WULLCL generally is effective January 1, 2023, it important that LLCs start considering now any actions to take.
This article is only a summary of WULLCL. We intend to post additional articles exploring WULLCL’s substantive provisions in greater detail.
Please contact your usual Boardman Clark attorney or any member of our business practice group with any specific questions or concerns you may have.
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.