Under California’s new Revised Uniform Limited Liability Act, an LLC is formed when the California Secretary of State’s Office files the articles of organization. Cal. Corp. Code § 17702.01(d). Only five items of information are required to be disclosed in the articles. Cal. Corp. Code § 17702.01(b) These five items are included on the Secretary of State’s form of articles of organization, known as Form LLC-1.
One of these disclosures is whether one manager, more than one manager or the member(s) manage the LLC. On the Form LLC-1, this is disclosed simply by checking the appropriate box. One would expect to be able to determine whether an LLC is manager-managed or member-managed simply by looking at which box is checked. However, simply checking the box will not be sufficient to make an LLC manager-managed. Corporations Code Section 17704.07(a) provides that an LLC is a member-managed LLC unless the articles of organization and the operating agreement do either of the following:
- Expressly provide that:
- The LLC is or will be “manager-managed”;
- The LLC is or will be “managed by managers”; or
- Management of the LLC is or will be “vested in managers.”
- Include words of similar import.
It was much simpler under the former Beverly-Killea Act because box on the Form LLC-1 alone determined whether the LLC was manager-managed or member-managed.