Wednesday, October 22, 2008

LLC Member Voting

The default rule under Uniform Limited Liability Company Act Section 404 is that each member gets an equal vote. Not every state follows the uniform act on this point. California, for example, mandates that members "shall vote in proportion to their interests in current profits of the limited liability company" unless otherwise stated in the articles of organization or operating agreement. See California Corporations Code Section 17103. Florida and New York (NY LLC Act §402) also have proportional member voting. Those state I randomly checked which followed the uniform act by defaulting to per capita voting (i.e., one vote for each member) are Colorado, Illinois, and Missouri. If your state was not mentioned and wish me to look it up for you, please leave a comment.

The member voting rules given above can be modified by the LLC operating agreement. In a multi-member LLC where the member own disproportionate shares of the LLC, I have yet to find a situation where the member holding a larger share is OK with per capita voting (i.e., one person, one vote). I recommend as the best course of action to lay out the manner and power of each member in the LLC voting process. For an example, see Section 3.5 of this sample LLC operating agreement.

A final issue: Do the members have to actually meet to vote? No according to the Uniform LLC Act. See Section 401(d). However, at least one state requires unanimous written consent of the members to take action without a meeting. See Missouri Stat. Section 347.083. I suggest you check the LLC rules for your state to see what requirements there are for member voting on the issue of member action without a meeting.

1 comment:

Anonymous said...

Can you have non-voting members in a Florida LLC? If so, do the non-voting members still have to be given the right to vote on amendments to the Articles of Organization, dissolution and mergers?