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ComplianceJanuary 20, 2022

Ohio enacts a new LLC Act

On February 11, 2022, a new LLC Act goes into effect in Ohio. The Ohio Revised Limited Liability Company Act was enacted by S.B. 276 and governs all LLCs formed or registered to do business in Ohio on or after February 11, 2022, as well as all LLCs formed or registered before that date. Below are some highlights from the Revised Act.

Formation

An Ohio LLC is formed under the Revised Act by filing Articles of Organization with the Secretary of State, which sets forth the LLC’s name, name and street address of the statutory agent for service of process and the agent’s acceptance of the appointment, and any other matters the organizers or members determine to include.

Authority to bind the LLC

The Revised Act provides that a person’s ability to bind the LLC can be authorized: (1) by the operating agreement, (2) by decisions made by members in accordance with the operating agreement, (3) by filing a Statement of Authority with the Secretary of State, or (4) the Revised Act’s default provisions. This represents a different approach from the previous law under which a member or manager had authority to bind the LLC depending upon whether the LLC was structured as member-managed or manager-managed.

Elimination of fiduciary duties

The Revised Act provides that the operating agreement may limit or eliminate any duties, including fiduciary duties, owed by a member, manager, or other person except for the implied covenant of good faith and fair dealing.

Series LLC

Under the Revised Act an operating agreement may establish one or more designated series of assets having separate rights, powers, or duties with respect to specified property or obligations of the LLC or profits or losses associated with specified property or obligations and/or a separate purpose or investment objective. The LLC must have at least one member associated with each series. The debts, obligations, liabilities, and expenses of a series can be enforced against the assets of that series only if certain conditions are met (including separate accounting for the assets of each series, the operating agreement containing a statement concerning the effect of the limitation on liability, and the articles having a statement that the LLC may have series with the limitation of liability).

Foreign LLC registration

In order for a foreign LLC (or any series of a foreign Series LLC) to do business in Ohio, the foreign LLC must register with the Secretary of State. A foreign Series LLC must state that it provides for the establishment of one or more series of assets and include statements regarding the effect of the limitation of liability on the debts, obligations, liabilities, etc. of a series or the foreign LLC in general.

Penalties for doing business without registering

The Revised Act provides that if a foreign LLC or a series thereof conducts business in Ohio without the foreign LLC being registered, in addition to the foreign LLC or series not being able to maintain an action in the state’s courts as under the previous LLC Act, the foreign LLC shall be liable for a fee to be prescribed by the Secretary of State. The amount due may be recovered in an action by the Attorney General. The court, in addition to or in lieu of a civil penalty, may issue an injunction restraining any further activities until all amounts due, including interest and court costs, are paid.

Penalties for non-compliance with statutory agent requirement

Domestic and foreign LLCs are required to appoint and continuously maintain a statutory agent for service of process. The Revised Act provides that upon the failure of a domestic or foreign LLC to continuously maintain a statutory agent or file a change of name or address of the statutory agent, the Secretary of State shall give notice to the LLC and unless the default is cured within 30 days, the articles of a domestic LLC or registration of a foreign LLC shall be canceled. There is also a procedure whereby an LLC may file for reinstatement.

This article has highlighted just a few of the provisions found in the Revised LLC Act. Members, managers, legal advisers, and other persons with an interest in Ohio’s existing domestic or foreign LLCs, or considering forming or registering an LLC in Ohio after February 11 should review the Revised Act in its entirety. They will want to ensure their LLCs are in compliance and determine if any amendments to the governing documents are required or desired. The Revised Act is codified in Chapter 1706 of the Ohio Revised Code. Read SB 276.

Sandra Feldman
Publications Attorney
Sandra (Sandy) Feldman has been with CT Corporation since 1985 and has been the Publications Attorney since 1988. Sandy stays on top of the most pressing and pertinent business entity law issues that impact CT customers of all sizes and segments.
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