January 12, 2021
The Ohio legislature has completely rewritten the law regarding limited liability companies. The new law is called the Ohio Revised Limited Liability Company Act and replaces the existing Chapter 1705 with a new chapter 1706.
Effective Date – The new law applies to all LLCs as of January 1, 2022.
Some important changes are:
1. Series LLC
The new law provides for what are called “Series LLCs”. An LLC can be used to protect yourself from holding an asset with a high exposure to liability such as real estate. For example, if you have multiple pieces of real estate typically, you might form multiple LLCs to protect each piece of real estate from a liability caused by the other. With a Series LLC you can set up one LLC and identify each asset in a separate series in the one LLC, which for lability purposes will not be subject to claims and liabilities of the assets held in other series in the same LLC. Section 1706.76 of the Ohio Revised Code. There are potential complicated tax issues with a series LLC and some commentators feel this is a solution looking for a problem. Before you use this new tool meet with your tax and legal advisor and see if it really makes sense for you.
2. Statement of Authority
Typically, the operating agreement of the LLC decides how decisions are made. However, third parties are not necessarily bound by the operating agreement. In fact, an unauthorized decision made by a member or manager of the LLC might bind the business if that member or manager appears to have the authority to make that decision. The new law allows an LLC to file a Statement of Authority with the Secretary of State naming a person and/or position in the LLC setting forth the authority to take actions on behalf of the LLC. Section 1706.19 of the Ohio Revised Code.
3. Amendment of LLC Operating Agreement
An LLC may provide that it cannot be amended without the approval of a third party who is not a member of the LLC. This might be an effective tool for succession planning of business owners in the transfer of businesses to the next generation. Section 1706.082 of the Ohio Revised Code.
If you have any questions or comments about this article, please contact Michael L. Solomon, Esq., [email protected] or at (216) 765-0123.
This newsletter is intended to provide general and practical information to assist the public in understanding legal issues. Legal advice should only be given when the lawyer and client have an opportunity to explore fully the factual circumstances related to the client’s situation as explained by the lawyer to the client.