A limited liability company is a form of corporate entity that the attorneys at Traverse Legal assist clients with on a daily basis. Under the Michigan Corporations Act, there are options for creating your company as a corporate entity, and the most popular corporate entity is the Michigan Limited Liability Company. It is essentially a partnership that is treated like a corporation and that insulates the individuals from personal liability.
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Matt: Hi. It is Matt Plessner for Limited Liability Company Radio. Today we are speaking with Mark Clark from the Traverse Legal Office in Traverse City, Michigan. Mark, how are you?
Mark: I am doing well Matt, thanks. How are you?
Matt: I am doing very well. Let's talk a little about the Michigan Limited Liability Act. Can you please tell us what that is?
Mark: Sure Matt. A limited liability company is a form of corporate entity that the attorneys at Traverse Legal assist clients with on a daily basis. Under the Michigan Corporations Act, there are options for creating your company as a corporate entity, and the most popular corporate entity is the Michigan Limited Liability Company. It is essentially a partnership that is treated like a corporation and that insulates the individuals from personal liability.
Matt: Alrighty, and have there been any recent changes to the Act?
Mark: Well, in fact Matt, there have been recent changes to the Michigan Limited Liability Act. Last year there were a number of changes that were implemented by the Michigan Legislature in the Michigan Limited Liability Act, and several of them are significant.
Matt: And what would you say are some of the highlights of the Michigan Limited Liability Act?
Mark: Matt, I'll take you through three of what I believe to be the highlights of the amendments in the Michigan Limited Liability Act. One of the changes that I find most significant is a change that clarified the confusion over whether a creditor of one of the members of the Michigan Limited Liability Company had anything to worry about in terms of a creditor assuming ownership of that membership interest. The Act was changed so that, in the event that one of the limited liability members has a money judgment against them, that a creditor can no longer claim that they are assuming ownership of the member's share in the limited liability company. The change has clarified that a judgment creditor of one of the members is only entitled to the distributions from that membership interest and is not entitled to any other privileges of the members, such as voting and other important privileges that membership in the limited liability company would have.
The second change Matt, that I find significant, is a change that creates some latitude in members or limited liability managers doing business with their own limited liability company. Formerly the Act created a presumption that self-dealing with the limited liability company or in other words doing business say on an individual level or with another business entity that you may own with your limited liability company necessarily provided that that was a ipso facto conflict of interest. The amendment to the Michigan Limited Liability Act indicates that a transaction that may be a conflict of interest will not necessarily be void if the transaction was fair to the company. So there is a fairness component that would save a potential conflict of interest dealing with the company.
The final highlight of the Act that I think is more important than some of the others is the amendment in the Michigan Limited Liability Act in minority member oppression cases, where one of the members claims that they are being mistreated by the majority of members. The Act was amended to provide that a minority member who is willfully subjected to unfair and oppressive conduct can now claim that the termination of employment with the LLC or limitations on employment benefits can constitute willfully unfair and oppressive conduct. This allows a minority member a little bit more leverage in making minority oppression claims against the majority limited liability members.
Those are some significant developments in the Michigan Limited Liability Law. Traverse Legal attorneys are practiced in drafting operating agreements for Michigan limited liability companies and can assist the clients in avoiding some of these pitfalls and make them aware that they need to address some of these issues as they create their limited liability operating agreement.
Matt: Well, Mark, thank you very much for helping us understand the Michigan Limited Liability Act better and also thank you very much for your time.
Mark: Thank you very much Matt. It's always a pleasure.
Matt: And this is Matt Plessner for Limited Liability Company Radio.
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