Another Nice Review of My LLC Formation Services and more...

Another Nice Review of My LLC Formation Services

Today I got my 93rd 5 star review on Google and Facebook.  I appreciate all of the five star reviews for my Arizona LLC creation services, but I especially like the review Jim J left today.  He said:

“Setting up the LLC was extremely easy. The information they provide in daily emails of things to do and Arizona law to be aware of sets Keyt apart from others I’ve used that provide similar services. The comprehensive LLC manual they have on-line has everything you need to know about starting and operating your LLC. The automation they have is truly impressive. And the price is right. The value for the money is definitely there! If you are shopping around and are skeptical about what you see on-line, ask Mr Keyt for my phone number. I would be happy to discuss the great experience I had with KEYTLaw.”

See the contents of my Bronze ($397), Silver ($597) and Gold ($997) LLC formation packages.  To buy your LLC complete my online LLC formation questionnaire or call me.

If you have questions about forming an Arizona LLC call me, Richard Keyt, at 480-664-7478.  I don’t charge to answer questions about LLCs.

The post Another Nice Review of My LLC Formation Services appeared first on Arizona LLC Law.


Home Conveyed to LLC Caused Loss of the Homestead Exemption

Arizona Revised Statutes Sections 33-1101 – 33-1105 contain Arizona’s homestead exemption that protects up to $150,00 of equity in a person’s Arizona home.  Section 33-1101 provides:

“A. Any person the age of eighteen or over, married or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding one hundred fifty thousand dollars in value, any one of the following:

1. The person’s interest in real property in one compact body upon which exists a dwelling house in which the person resides.
2. The person’s interest in one condominium or cooperative in which the person resides.
3. A mobile home in which the person resides.
4. A mobile home in which the person resides plus the land upon which that mobile home is located.

B. Only one homestead exemption may be held by a married couple or a single person under this section. The value as specified in this section refers to the equity of a single person or married couple. If a married couple lived together in a dwelling house, a condominium or cooperative, a mobile home or a mobile home plus land on which the mobile home is located and are then divorced, the total exemption allowed for that residence to either or both persons shall not exceed one hundred fifty thousand dollars in value.

C. The homestead exemption, not exceeding the value provided for in subsection A, automatically attaches to the person’s interest in identifiable cash proceeds from the voluntary or involuntary sale of the property. The homestead exemption in identifiable cash proceeds continues for eighteen months after the date of the sale of the property or until the person establishes a new homestead with the proceeds, whichever period is shorter. Only one homestead exemption at a time may be held by a person under this section.”

People sometimes ask me if they should transfer title to the home in which they live to an LLC for asset protection.  My answer is no because:

  1. There is no business purpose so a court would probably disregard the LLC.
  2. It could cause a loss of the Arizona homestead exemption that protects $150,000 of equity in a personal residence.

An August 3, 2017, decision of the Court of Appeals of Utah called “Dean White vs. Julie Dawn White” ruled that the transfer of a home into a limited liability company caused the owner of the home to lose the Utah homestead exemption.   Although the case is not an Arizona case it causes me to believe more strongly that a person who transfers his or her Arizona home into an LLC will lose the Arizona homestead exemption.


The post Home Conveyed to LLC Caused Loss of the Homestead Exemption appeared first on Arizona LLC Law.


My First Impression of the Proposed New Arizona LLC Law

This article is the second of what will become many articles I write about the proposed Arizona Revised Limited Liability Company Act (RULLCA) that some Arizona lawyers intend to ask the Arizona legislature to adopt.  If the Arizona RULLCA were to become law it would replace Arizona’s 25 year old LLC law in its entirety. See After 7 Years of Drafting a Small Group of Lawyers Wants to Replace Arizona’s LLC Law for the complete text of the proposed LLC law.

On July 11, 2017, I sent the following email to 39 lawyers on an Arizona State Bar business law section email list:

“I am writing an article about the RULLCA as revised by the committee. I would like to include the names and backgrounds of the people who are willing to admit they are responsible for the proposed law. If you are one of the authors of the law please send me an email with the following information:

1. Your name
2. Name of your law firm
3. Your primary area(s) of practice
4. Your experience forming and administering Arizona LLCs.
5. How many LLCs did you form in the last year?
6. How many LLCs have you formed since 1992?
7. Why you think Arizona should replace its current LLC law with RULLCA as revised by you.
8. Whether or not you authorize me to include your email address in the article.

I sent the people on the email list the message above because I knew that all of the people who were responsible for drafting the proposed Arizona RULLCA were on the email list.  The purpose of my email message was to identify the people who were involved in drafting the Arizona RULLCA and learn about their experience with LLCs.  I also invited the drafters to tell me why Arizona should adopt the drafter’s Arizona RULLCA.  The public should know this information about the drafters of the proposed law. Sadly only one person admitted to me that he worked on the committee. I hope that the people who drafted the proposed Arizona RULLCA are not afraid to tell the public their names.  If a drafter of the proposed Arizona RULLCA sends me information or text for an article about the proposed law I will be happy to publish it on this website.

I have not decided if I will support or oppose the Arizona RULLCA. I’m still reading and studying the proposed law and making notes. When I am done I will publish my analysis and whether I support or oppose the proposed Arizona RULLCA.  If adopted the proposed law would replace Arizona’s existing LLC law in its entirety.  To get updates of the blog posts I will be making over the next year or so enter your email address in the right column of this page under the text “Subscribe to LLC Law Blog.”

My initial impression of the Arizona RULLCA is that the proposed law needs to be tweaked.  Here are some problems I found just in the Section 102, Definitions, which is the second section of the new law:

Section 102(12)

This subsection states “’Majority in interest of the members’ means, at any particular time, one or more members that hold in the aggregate a majority of the interests in the limited liability company’s profits held at that time by all members, disregarding any profit interests held by persons who are not members. The members’ respective interests in the company’s profits shall be in proportion to their rights to share in distributions that exceed the repayment of their contributions.”

Problem 1: The term “profits” is not defined in the new law.

Problem 2: What does the last sentence mean?

Problem 3: If the members want to define Majority in interest to be a majority of the members (2 of 3 members or 3 of 4 members) regardless of their share of the profits, can they do it?

Section 102(13)

This subsection states “’Manager’ means a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in Section 407(c).”

Problem 4: This means that despite the Articles of Organization stating the LLC is manager managed and naming all the managers, nobody is actually a manager unless the LLC has an Operating Agreement that names the manager(s). Requiring all manager managed LLC to have an Operating Agreement would be a major change to existing LLC law.

Section 102(19)

This subsection defines Person as “an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, general cooperative association, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common-law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.”

Problem 5: How does the group of business lawyers who worked on the proposed law for seven years fail to include in the definition of Person the following types of entities recognized by Arizona law: benefit corporations, general partnerships, real estate investment trusts, limited liability partnerships and limited liability limited partnerships?  The drafters might say that they didn’t need to mention GPs, LLPs and LLLPs because the definition includes the word partnership.  If that is the answer then why doesn’t the definition mention corporation and eliminate the words business corporation, nonprofit corporation and public corporation and why does it list limited partnership if that type of entity is included in partnership?

How to Stay Informed of the Status of the Proposed Arizona RULLCA

To get updates of the blog posts I will be making over the next year or so enter your email address in the right column of this page under the text “Subscribe to LLC Law Blog.”

The post My First Impression of the Proposed New Arizona LLC Law appeared first on Arizona LLC Law.


Changes to Arizona LLC Law Effective August 9, 2017

The Arizona legislature passed SB1272, which was signed into law by the Governor or Arizona.  This new law makes minor changes to Arizona’s LLC and corporate laws.  These new laws are effective on August 9, 2017.  A summary of the changes is below.


SB1272 was passed this last session. It was a corporation omnibus bill, and it affects several filing requirements for both corporations and LLCs. The changes are summarized below in the order in which they appear in the bill. To read the entire bill, click on the bill number.

MOD accounts:

The bill grants the Commission the discretion to allow the use of MOD (money-on-deposit) accounts. Previously, the statute did not give the Commission any discretion. (See changes to A.R.S. § 10-122(K).) For the foreseeable future, the ACC will continue current procedure with MOD accounts.

Approval of documents:

The Commission is no longer obligated to return a copy of an approved document to the customer; the obligation now is to provide notice of the approval. (See changes to A.R.S. § 10-125.) Effective August 9, 2017, the Commission will no longer send out a copy of the document with the approval letter; only the approval letter will be returned to the submitter. Approved documents are available on our website.

Rejection of documents:

The Commission will continue to return a copy of a rejected document along with the letter explaining the rejection. (See changes to A.R.S. § 10-125.)

Electronic transmission and Notice:

Definitional changes were made, and other references throughout the corporation and LLC statutes have been modified to refer to “electronic transmission” where appropriate, and that definition links back to the definition of “electronic record” found in the electronic transactions statutes, A.R.S. § 44-7001, et seq. This is an attempt to codify the use of email as an allowable means of communication and for giving Notice between the Commission and entities. (See, e.g., A.R.S. §§ 10-140(21), 10-141, and 10-504.) The Commission now can send official notices, such as a Notice of Pending Administrative Dissolution, via email. Please note that this will NOT be implemented until the new computer system is up and running. When the new system is in use, the Commission will ask for the entity to consent to receive such notices by email. If the entity does not consent, notices will be sent via the U.S. Post Office.

Change documents:

The requirements for Statements of Change have been simplified. Only the new information for address and agent will be required. We are revising our forms to reflect the minimal requirements and will have those available as of August 9.

Annual Reports:

The dissolution and withdrawal statutes have been revised to allow for a six-month suspension of the annual report requirement for corporations that file for a voluntary dissolution/withdrawal. (See, e.g., changes to A.R.S. § 10-1403.) Corporations have six months after submission in which to complete a dissolution or withdrawal. Often, corporations will try to complete the dissolution/withdrawal but find that they now owe their annual report and/or owe penalties for not filing it on time. This bill provides that the annual report requirement is suspended for six months from the date the dissolution/withdrawal is submitted. Note: once the six months passes, the annual report is due and so are penalties, if enough time has passed since the due date. TIP – obtain the tax clearance certificate before submitting the dissolution. That way, you will never run into a penalty situation with the annual report. This change is being programmed into the current system and should be implemented by August 9. The new law applies only to dissolutions or withdrawals delivered to the ACC on or after August 9, 2017.

Foreign nonprofit corporations:

The gap left by last year’s SB1356 is now closed – foreign nonprofit corporations no longer have to file applications for new authority when they amend their articles. A foreign nonprofit corporation that amends its name, duration, or state of jurisdiction will now file Articles of Amendment to Application for Authority (along with a certified copy of the amendment) – a significant cost savings ($25 fee instead of $175). This change is already in effect for foreign for-profit corporations, from last year’s SB1356. The ACC’s form will apply to both for-profit and nonprofit corporations as of August 9, 2017.

Nonprofit corporations:

Another gap was closed – nonprofit corporations can sue for false filings. For-profit corporations and LLCs were granted this right of action in last year’s SB1356. Note – this is a private right of action and is not something the ACC will do for the corporation.

LLC administrative dissolution:

LLCs whose latest date to dissolve has passed will now be administratively dissolved. (See changes to A.R.S. § 29-786.) The LLC does have an option of amending its articles, or, if it is administratively dissolved, of reinstating and then amending its articles. There are several thousand LLCs that will be administratively dissolved pursuant to this provision, beginning on or after August 9, 2017.

The post Changes to Arizona LLC Law Effective August 9, 2017 appeared first on Arizona LLC Law.


After 7 Years of Drafting a Small Group of Lawyers Wants to Replace Arizona’s LLC Law

by Richard Keyt, an Arizona LLC attorney who has formed 5,700+ Arizona LLCs

Most of us know that if it is not broken we don’t need to fix it.  Unfortunately a few Arizona lawyers want to “fix” Arizona’s LLC law even though it is not broken.  These lawyers have spent seven years writing and rewriting a uniform law called the Revised Uniform Limited Liability Company Act (RULLCA).  They intend to ask the Arizona legislature to adopt their revised version of RULLCA during the next legislative session.

I was a member of this Arizona State Bar subcommittee for three years, but quit after the subcommittee voted 11 – 3 to eliminate the charging order as the sole remedy of a creditor who gets a judgment against a member of an Arizona LLC.  The charging order sole remedy is one of the reasons Arizona’s current LLC law causes Arizona to be included in the small list of states that have what I call “good” LLC law.  I told the group that instead of replacing Arizona’s good LLC law we should seek to modify it to make it better.  They disagreed.

The Uniform Law Commission adopted a 2013 version of RULLCA, but the subcommittee based its rewrite on the out of date 2011 version of RULLCA instead of the latest version.  The American Bar Association also has a model LLC law, but the subcommittee ignored it.

Since RULLCA was first proposed in 2006, eighteen states have adopted it.  These states are Alabama, California, Connecticut, District of Columbia, Florida, Idaho, Illinois, Iowa, Minnesota, Nebraska, New Jersey, North Dakota, Pennsylvania, South Dakota, Utah, Vermont, Washington, Wyoming.  Note:  The fact California adopted RULLCA tells me Arizona should not make that mistake.

If you are a member of an Arizona LLC I urge you to read my article called “The Threat” in which I explain why RULLCA is bad law and must be rejected.  For scholarly articles that explain in detail why RULLCA sucks read “An Analysis of the Revised Uniform Limited Liability Company Act” and “40 Year Idaho Business Law Attorney Rips Idaho’s RULLCA.”  Law Professor Larry Ribstein said the following about RULLCA in his article called “An Analysis of the Revised Uniform Limited Liability Company Act:”

“In general, these provisions raise significant questions and threaten to impose substantial risks and costs on limited liability companies. The article concludes that there is little reason for states to adopt the Act, and that practitioners should be wary about advising clients to form under it”

I have not yet studied the subcommittee’s revised version of the 2011 RULLCA.  I intend to do so in the next few weeks and write my analysis.  If you want to stay up to date on this total rewrite of Arizona’s LLC law then enter your email address in the right column under the text “Subscribe to LLC Law Blog.”  If you know other people that are members of an Arizona LLC send them a link to this article. If I conclude that the proposed LLC law should be trashed then I will be organizing a campaign to notify our legislators that they should not adopt it and I will need your help.

Below are two versions of the subcommittee’s seven year masterpiece.  The first document is the clean version of the new law proposed by the subcommittee.  The second document is a redlined version of the same law that shows the additions and deletions the subcommittee made to the 2011 version of RULLCA.

Clean Version of the Subcommittee’s Revised 2011 RULLCA


Redlined Version of the Subcommittee’s Revised 2011 RULLCA




The post After 7 Years of Drafting a Small Group of Lawyers Wants to Replace Arizona’s LLC Law appeared first on Arizona LLC Law.


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