Ohio’s new LLC Act took effect on February 11, 2022. It makes several important changes that impact existing Ohio LLCs and those looking to form an Ohio LLC. It is now in force and applies to all limited liability companies that do business in Ohio. Failure to comply with the new law’s provisions could result in penalties and difficulties operating your business.
Law Intended to Modernize Ohio LLCs
LLCs are by far the state’s business entity of choice. More than 1 million Ohio LLCs were formed from 1994 to 2021, including more than 130,000 in 2021 alone. Ohio’s new LLC law was written to be “the most modern limited liability act in the country,” according to the Ohio State Bar Association. It makes a number of changes that increase flexibility and reduce administrative burdens for Ohio companies, including the following:
- Maintaining a statutory agent: The updated LLC law requires businesses to continually maintain a statutory agent (i.e., a registered agent) and keep the agent’s information up to date (if, for example, a new agent is appointed). Failure to meet these standards can result in the Secretary of State canceling the LLC’s registration, which will then require filing a reinstatement.
- Mandatory state registration: LLCs that are organized under the laws of a different state but do business in Ohio must now properly register with the Secretary of State. Those that don’t could face a fine, injunctions, and court costs. The old LLC law permitted foreign LLCs to conduct business in Ohio without registration, but they couldn’t maintain a lawsuit in the state.
- Forming Series LLCs: Ohio now allows for the formation of series LLCs, which serve a similar function to parent/subsidiary corporations but for LLCs. The operating agreement can specify the establishment of one or more “series” entities within the same LLC. Each series can enter contracts, hold assets, and grant liens and security interests in series assets, but the assets of each series are insulated from each other.
- Governance structure: Prior to the new law, Ohio LLCs had to be organized as either member-managed or manager-managed companies. The new law eliminates this distinction and permits LLCs to organize their governance structure as they see fit. They can even implement a governance structure similar to those used by corporations (e.g., a board of directors). A Statement of Authority can also now be filed with the Ohio Secretary State to show who has authority to bind the LLC.
- Operating agreement clarification: The revised LLC law specifies what can—and can’t—be modified in the operating agreement, eliminating the ambiguity of the old law. Any provision of the operating agreement can be modified except those expressly listed in Section 1706.08. This includes a prohibition on eliminating the implied covenant of good faith and fair dealing.
- Dissolution and legal claims: Under the old LLC statute, companies could not prevent creditors and other parties from bringing claims after the company was dissolved. This is no longer the case. Ohio’s new LLC Act sets certain timelines for claims to be made against a dissolved company.
- Changes to filing forms: Ohio no longer accepts the old LLC filing forms, such as 533A, 533B, and 543A. Domestic and foreign LLC filings must be made with the new filing forms. These forms can be found on the Secretary of State website.
Zanesville Business Lawyers Helping Southeast Ohio Businesses Succeed
If you need assistance understanding how these and other aspects of Ohio’s new LLC law affect your company, the business law lawyers at Graham & Graham are here to help. During a consultation we can go over ways to revise your operating agreement that take full advantage of the law, mitigate legal risks, and meet the needs of your business.
Whether you’ve been operating in Ohio for years or are looking to expand into the state, compliance with the LLC Act is a must. Stay compliant and stay successful: contact us to schedule an appointment.