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Since Jan. 1, people filing with the state to operate a new limited liability company (LLC) have come under a new set of statutes that change how business is conducted. The differences range from the form filed with the secretary of state to how the LLC can be dissolved. Yet, the effects of the changes have not been as dramatic as they could be in 2011, when all existing LLCs fall under the new law.

David Walker, a Drake University law professor, chaired the National Conference of Commissioners on Uniform State Laws committee that drafted the model LLC statute upon which Iowa’s new law is based. He said the revised act “takes advantage of 15 to 20 years of legislative experimentation in different states, judicial interpretation and practice by lawyers.”

“It’s a modern statute focusing even more on expanding contractual freedom while at the same time saying clearly what things you can’t do,” he said. “So I think people will see it as a user-friendly piece of legislation that allows them to form and operate LLCs even more conveniently and effectively.”

The revised statute updates Iowa’s first LLC law, drafted in 1992.

“We felt it was time to … basically modernize and improve upon the existing statute,” said J. Marc Ward, a shareholder at Dickinson, Mackaman, Tyler & Hagen P.C. Ward was an observer on the Uniform State Laws committee, which passed the Revised Uniform Limited Liability Company Act in 2006. Ward then chaired the committee that wrote the Iowa law that was approved by the Iowa chapter of the American Bar Association in 2007 and passed by the Legislature in 2008.

Updating the LLC law was especially important given the growing popularity of this type of company, Walker said. More Iowans have formed LLCs than traditional corporations during the past few years.

An LLC is essentially a contractual relationship among members and exposes its owners to limited personal liability for debts and actions of the business. Some of the major changes to Iowa’s law are:

• Instead of filing “Articles of Organization,” people forming an LLC will now file a “Certificate of Organization,” which will require only the name of the LLC, the registered agent and the agent’s address.

• Though an operating agreement is not required to be in writing, the LLC could fall under default statutes if it fails to spell out management rights, how profits will be distributed, and other details.

• The new law allows statements of authority to be filed with the secretary of state and county recorder. Such statements specify who has the authority to act for the LLC.

• Provisions for what happens when a member leaves are more clearly explained in the new law.

Spelling out how the LLC will operate in writing is especially important under the new law, said Rush Nigut, a business attorney with Brick Gentry P.C, because otherwise, the LLC could fall under default statutes. For example, the new law says that all members of an LLC have an equal vote; if someone puts more capital into the LLC and expects a majority vote in the group, this agreement needs to be specified in the operating agreement.

Situations like this make it even more important to understand the entire implications of the law, lawyers say, and to seek legal advice.

“The work that we’re going to need to do to make sure that our clients comply with the new law is an issue for us.,” Nigut said.

Walker said the new law helps minimize questions that may arisewith default provisions and facilitates better planning by placing greater importance on contracts. He added that it better spells out the fiduciary responsibilities of the members compared with other states. “We think it’s a better approach to include those fiduciary duties and allow people to narrow them, tailor them or eliminate aspects of them in operating agreements than to say nothing at all,” he said.