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Minnesota is part of a nationwide movement to simplify and unify the regulations that affect the operation of limited liability companies internally and between the states.

The Minnesota Revised Uniform Limited Liability Company Act was signed into law on April 8, 2014 by Governor Mark Dayton. This update has been seen as the most significant change affecting Minnesota LLCs since LLCs were first permitted in Minnesota. With the update, Minnesota became the ninth state (in addition to the District of Columbia) to adopt the Revised LLC Act.


The New Act, which falls under Chapter 322C, will become effective on August 1, 2015, for all LLCs formed on or after that date. LLCs in existence before that date will remain governed by the present Minnesota LLC Act, Chapter 322B, but may elect after that date to be governed by the New Act. Any Chapter 322B LLCs that have not elected to be governed by the New Act will automatically become subject to the New Act on January 1, 2018.


Management Structure

In terms of management structure, Chapter 322B is very similar the Minnesota Business Corporation Act. Its default rules establish a corporate structure, with members, a board of governors, and managers that are analogous to shareholders, a board of directors, and officers. Chapter 322B also requires at least one natural person to exercise the positions of chief manager and treasurer. The New Act defaults to member management, much more like a partnership, and has no such requirement. However, the New Act also permits both manager management and board management, allowing any prior LLC to operate with its management structure pretty much as it did prior to becoming a 322C LLC.

Governing Documents

Under Chapter 322B, LLCs are to have a member control agreement and bylaws. The member control agreement, which is occasionally a separate document, must be in writing and must be executed by all persons who, at the time of execution, are members or have executed contribution agreements with the LLC. The New Act takes a broader approach. It contemplates an “operating agreement” serving as the governing document, addressing the (1) relations among the members as members and between the members and the LLC; (2) the rights and duties of persons acting in the capacity of manager or governor; (3) the activities of the LLC and the conduct of those activities; and (4) the means and conditions for amending the operating agreement. Under the New Act the operating agreement is initially entered into by all the members of the LLC, but is not limited to written agreements, as it also includes oral agreements, agreements implied by conduct, and any combination of these forms.

Standard of Conduct

The New Act also introduces the ability to limit the standard of conduct requirements for members, managers, and governors. Under Chapter 322B, members, managers, and governors are held to a statutory standard of conduct that cannot be modified. The New Act changes this, allowing the operating agreement to modify the duty of care and modify or eliminate the duty of loyalty so long as the modification or elimination is not “manifestly unreasonable.” The courts are to determine if the term is “manifestly unreasonable” by the circumstances existing at the time the term became part of the operating agreement, and may invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that the objective of the term is unreasonable, or the term is an unreasonable means to achieve the provision’s objective. In addition, while the contractual requirement for good faith and fair dealing cannot be eliminated, the operating agreement can specify the standards by which performance will be measured.

In addition to these changes there will be changes in (1) increasing voting rights and structure in the limited liability company; (2) placing limitations on who may legally bind the limited liability company; (3) protection of minority interest holders in cash-outs and be calling for a better system of valuation of the business prior to a conversion; (4) simplification and liberalization of a transfer of interest in a limited liability company; and (5) a procedure for mergers between similar owned entities known as a short-form merger.


Under this new Act, a Minnesota LLC will be permitted to re-incorporate into a foreign corporation in another state.  This process will be simplified and the Minnesota entity will not have to change its internal operation or documents as long as the state, which is being re-established, allows the procedure by law.

There will be a new adoption filing procedure for the filing of Articles to comply with this conversion with the Secretary of State.


This post was drafted by Joseph J. Dudley, Jr. Mr. Dudley has been practicing law in Commercial and Business matters for over 30 years.  If you have any questions, please contact him at 651-291-1717 or  Mr. Dudley is a member of the Minnesota Bar and American Bar Association Business Committee.

The law is continually evolving and Dudley and Smith, P.A.’s blog posts should not be relied upon as legal advice, nor construed as a form of attorney-client relationship. Postings are for informational purposes and are not solicitations, legal advice, or tax advice. A viewer of Dudley and Smith, P.A.’s blog should not rely upon any information in the blog without seeking legal counsel.