by Richard Keyt, an Arizona LLC attorney who has formed 9,300+ Arizona LLCs

Most of us know that if it is not broken we don’t need to fix it.  Unfortunately a few Arizona lawyers want to “fix” Arizona’s LLC law even though it is not broken.  These lawyers have spent seven years writing and rewriting a uniform law called the Revised Uniform Limited Liability Company Act (RULLCA).  They intend to ask the Arizona legislature to adopt their revised version of RULLCA during the next legislative session.

I was a member of this Arizona State Bar subcommittee for three years, but quit after the subcommittee voted 11 – 3 to eliminate the charging order as the sole remedy of a creditor who gets a judgment against a member of an Arizona LLC.  The charging order sole remedy is one of the reasons Arizona’s current LLC law causes Arizona to be included in the small list of states that have what I call “good” LLC law.  I told the group that instead of replacing Arizona’s good LLC law we should seek to modify it to make it better.  They disagreed.

The Uniform Law Commission adopted a 2013 version of RULLCA, but the subcommittee based its rewrite on the out of date 2011 version of RULLCA instead of the latest version.  The American Bar Association also has a model LLC law, but the subcommittee ignored it.

Since RULLCA was first proposed in 2006, eighteen states have adopted it.  These states are Alabama, California, Connecticut, District of Columbia, Florida, Idaho, Illinois, Iowa, Minnesota, Nebraska, New Jersey, North Dakota, Pennsylvania, South Dakota, Utah, Vermont, Washington, Wyoming.  Note:  The fact California adopted RULLCA tells me Arizona should not make that mistake.

For scholarly articles that explain in detail why RULLCA sucks read “An Analysis of the Revised Uniform Limited Liability Company Act.”  Law Professor Larry Ribstein said the following about RULLCA in his article called “An Analysis of the Revised Uniform Limited Liability Company Act:”

“In general, these provisions raise significant questions and threaten to impose substantial risks and costs on limited liability companies. The article concludes that there is little reason for states to adopt the Act, and that practitioners should be wary about advising clients to form under it”

I have not yet studied the subcommittee’s revised version of the 2011 RULLCA.  I intend to do so in the next few weeks and write my analysis.  If you want to stay up to date on this total rewrite of Arizona’s LLC law then enter your email address in the right column under the text “Subscribe to LLC Law Blog.”  If you know other people that are members of an Arizona LLC send them a link to this article. If I conclude that the proposed LLC law should be trashed then I will be organizing a campaign to notify our legislators that they should not adopt it and I will need your help.

Below are two versions of the subcommittee’s seven year masterpiece.  The first document is the clean version of the new law proposed by the subcommittee.  The second document is a redlined version of the same law that shows the additions and deletions the subcommittee made to the 2011 version of RULLCA.

Clean Version of the Subcommittee’s Revised 2011 RULLCA

Redlined Version of the Subcommittee’s Revised 2011 RULLCA