Washington Limited Liability Company Act
Washington Limited Liability Company Act is a piece of legislation regulating the creation of LLCs in Washington state that was implemented in 1995.3 min read
2. Operating Agreements
3. Management Structure
4. Voting Rights
5. Access to Information
Washington Limited Liability Company Act is a piece of legislation regulating the creation of limited liability companies (LLCs) in Washington state that was implemented in 1995. Several changes were made to an updated version of the act, which came into force on January 1, 2016.
How the Act Works
Legislators who redrafted the state's LLC act wanted to get rid of parts of the act that were unclear and adopt laws that apply to businesses in Washington in the same way.
Enforcement of LLC laws is overseen by the secretary of state's office. As well as the LLC act, the secretary of state's office also relies on the Washington Administrative Code, which includes procedures for dealing with LLCs.
To do business in Washington with the secretary of state's office, your LLC has to have a unified business identifier (UBI). You'll need this to file documents and contact the corporate division of the secretary of state's office. The corporate division will issue you with a UBI when you establish your LLC.
The new act includes procedures for operating agreements that are likely to have a significant effect on many LLCs. One of the most important changes is that your company no longer needs to adopt an operating agreement in writing. Instead, you can now reach an implied or oral company agreement.
As a result, LLCs can start their operations with an informal agreement between their owners. Even so, you would be well advised to file a written agreement to guard against potential disputes at a later date, particularly since an oral agreement can easily be interpreted differently by different people. If serious disagreements between LLC members arise, the lack of a written agreement could lead to costly court action to resolve the matter.
Your LLC's operating agreement can change some of the default procedures in the law. However, the agreement cannot:
- Choose another state's laws to govern an LLC
- Alter the LLC's ability to be sued or sue under its name
- Modify the requirements imposed by the secretary of state's office for filing documents
- Unreasonably prevent the members from examining the LLC's records
- Adopt new requirements for winding up the operations of an LLC
Under the new act, you have the option of running your LLC with a board of directors. Lawmakers made this change by creating a new definition of manager in the act. While the previous act stipulated that a manager had to be a person, the revised version states that manager can also mean a committee or group.
In a related change, the new law no longer requires you to say whether your LLC is member-managed or manager-managed in its certificate of formation. Instead, you can record this decision in your LLC's operating agreement, which means you have more flexibility.
Under the act's default regulations, voting within an LLC takes place according to a system of one member, one vote. In practice, this means that if one member owns 90 percent of a five-member LLC, they could be outvoted if the other four members united against them.
Part of the thinking behind this provision is that it allows people who invest their time instead of their money in the LLC to have a say. However, LLC members can decide to use a voting system in line with ownership share by making this preference clear in their operational agreement.
Access to Information
The Washington Limited Liability Company Act gives LLC members strong rights to access company records. As a result of recent changes, LLC members have roughly the same rights to access company records as shareholders do for corporate records.
A list of the records members can inspect is provided. It includes:
- The certificate of formation, including all amendments
- A version of the operating agreement and any amendments
- The company's three latest state, federal, and local tax filings
- The three most recent annual reports
Further documents can be requested by LLC members, but the LLC has the power to accept or reject such requests. These records include:
- LLC accounting records
- Records of any LLC meetings involving managers or members
- A list of the names and mailing addresses of members and managers
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