What New Hampshire's new LLC Act means for business
On Monday, June 18, Gov. John Lynch signed into law a radical revision of the New Hampshire Limited Liability Company Act. The new act is arguably the best LLC act in the United States. It will be effective on Jan. 1, 2013, for LLCs formed on and after that date; and it will be effective on Jan. 1, 2014, for LLCs formed under the current LLC Act.
However, these existing LLCs may elect to be subject to the new act on Jan. 1, 2013, and as I will discuss here in a couple of weeks, many of them, if they're smart, will do just that.
I am a New Hampshire lawyer and an LLC junkie. I was honored to be appointed by the New Hampshire Business and Industry Association as the chair of the BIA ad hoc committee that, starting in February 2011, drafted the new act. I was also the principal architect of that act, and I worked closely with Dave Juvet, BIA's senior vice president, in shepherding it through the New Hampshire Legislature.
This is the first in a series of articles I will publish in this newspaper and elsewhere in coming weeks about the practical significance of the new act. The primary audience for which I'm writing is, as the title of this article indicates, the businesspeople of this state.
As of now, there are about 40,000 New Hampshire LLCs in good standing. Thus, since the average New Hampshire LLC has about three members, roughly 120,000 New Hampshire people who are members of existing LLCs will be directly affected by the new act. In addition, each year, New Hampshire businesspeople form roughly 6,000 new LLCs. These businesspeople, who also include many Sunday News readers, will be even more deeply affected by the new act.
I hope my articles in the coming weeks will provide these many thousands of New Hampshire businesspeople with useful advice on what to do in response to the new act.
In the meantime, it may be useful if I summarize two of the most important changes in the new act as compared with the current one. These changes will give you the flavor of the new act.
User-friendliness for small New Hampshire businesses: The preamble of the new act states that the act's primary intent is to be as useful as possible to small New Hampshire businesses. This intent is reflected in many dozens of specific provisions of the new act. One of them provides that agreements among LLC members about their LLC don't have to be in writing; oral and implied agreements will also be legally binding.
This means that as of Jan. 1, 2013, members of New Hampshire LLCs won't need to hire lawyers just to validate their LLC deals (although, to avoid ambiguity, written LLC operating agreements will still be a good idea for LLCs that can afford lawyers).
Comprehensive fiduciary provisions: The team spirit and ethical tone of New Hampshire LLCs are set by the fiduciary provisions of the New Hampshire Limited Liability Company Act and above all by the provisions of the act imposing the fiduciary duties of care and loyalty. These provisions can be invaluable in resolving disputes among LLC members that might otherwise destroy their LLC.
The current act has no fiduciary provisions. The provisions in the new act are comprehensive. Furthermore, because they, like the other provisions of the act, are written in plain English rather than legalese, they should be intelligible to any New Hampshire businessperson. I field-tested the fiduciary provisions of the new act with my clients before my committee included them in the new act. My clients understood them - and they liked them!