For Decades, Arizona Businesses have chosen to be a Limited Liability Company due to it being a preferable legal entity for construction and other industries. Other than some minuscule changes to Arizona law, many Arizona LLC laws remained unchanged since 1992.

However, things have taken a little turn. Effective September 1st of 2020, all LLC’s will be subject to the new law known as “ALLCA”. The Arizona Limited Liability Act imposes an operating agreement on all LLC’S that currently do not have one in place. This operating agreement may not be preferable to one’s current liking and structure of its current members. If your company currently doesn’t have an operating agreement the ALLCA’s default provisions will be imposed on your LLC, creating a “De Facto” operating agreement that may cross lines with how your current LLC is operated.

Default Provisions

The creation of fiduciary duties. The current law does not impose fiduciary duties on LLC members and managers. The new law does, as does a 2019 Arizona Supreme Court ruling, which is in effect now for all Arizona LLCs.

Contributions. Under the ALLCA, a member’s obligation to make a contribution to the LLC is not enforceable unless it is in writing and signed.

Distributions before dissolution. The ALLCA provides a new requirement that all distributions made before an LLC can dissolve and wind up must be “equal in shares among members,” regardless of ownership percentages. Failure to address and correct that provision could have major financial and tax consequences – artificially favorable or unfavorable – for the LLC’s members.

All LLC’s will be impacted.

Whole Multi-Member LLC’s will feel the biggest impact of the ALLCA, single-member LLC’s are not exempt from the changes and default provisions.


All LLC’s should take a look at their current operating agreements. If you have one in place, you should double check to make sure that current operating agreement complies with the new law that goes into effect September 1st, 2020. If you currently don’t have an operating agreement it is time to start taking the necessary steps to put one in place.


BASC Expertise will be scheduling Free 1-hour consultations starting the beginning of the 2020 so that everyone can be properly prepared and protected. Schedule your appointment today!

480-355-1398 or deirdre@bascexpertise.com

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