The Revised Uniform Limited Liability Company Act, known as RULLCA, is a model statute drafted by the Uniform Law Commission that supplies a complete set of default rules for forming, governing, and dissolving a limited liability company. It was first published in 2006, amended in 2013, and has been enacted, with state-specific tweaks, in roughly 21 jurisdictions. If your LLC is formed in one of those states, RULLCA fills every gap your operating agreement leaves open, and it also sets a floor of rules that no operating agreement can override.
Where RULLCA Actually Applies
About 21 states and the District of Columbia have adopted some version of the act. The group includes California, Florida, New Jersey, Illinois, Pennsylvania, Washington, Minnesota, Connecticut, Arizona, Wisconsin, and several smaller states, with adoption running from 2008 through 2022. Each state customizes the model before enacting it, so section numbers and some substantive rules differ from one jurisdiction to the next. The section numbers used below refer to the model act itself. Before relying on any specific rule, confirm how your state’s version reads.
Forming the LLC
Under Section 201 of the model act, one or more people form an LLC by filing a certificate of organization with the state’s filing office. The certificate is deliberately bare. It only needs to list three things: the company’s name (which must include “Limited Liability Company” or an abbreviation like “LLC”), the street and mailing address of the principal office, and the name and address of a registered agent in the state of formation.1The Business Divorce Lawyer. Uniform Limited Liability Company Act (2006) (Last Amended 2013)
The LLC comes into legal existence once the certificate becomes effective and at least one person has become a member. Most states allow a delayed effective date, often up to 90 days after filing, which can be useful for lining up the entity’s start with a tax year. Filing fees for an initial certificate run from around $50 to several hundred dollars depending on the state. The certificate can carry additional information, but it cannot override anything the act makes non-waivable.
Operating Agreements and the Non-Waivable Floor
RULLCA defines an operating agreement very broadly. It covers any agreement among the members about how the company is governed, whether that agreement is written, oral, implied by conduct, or some combination.2Uniform Law Commission. Uniform Limited Liability Company Act (2006) A sole member can even have an operating agreement with themselves. The flexibility fits smaller businesses that run informally, but a written document is still the clearest record of what the members actually agreed to. With no agreement at all, the act’s defaults fill every gap.
Section 105 draws hard lines around what the operating agreement cannot change, no matter how unanimously the members sign. It cannot eliminate the obligation of good faith and fair dealing, though it can shape how that obligation applies in particular situations. It cannot unreasonably restrict a member’s right to inspect the company’s books and records. It cannot block a court from dissolving the company when the business can no longer operate consistently with the operating agreement or when those in control are acting oppressively or illegally. And it cannot unreasonably restrict a member’s right to bring direct or derivative suits.
These are guardrails against majority owners using the operating agreement to lock minority members out of their basic protections. A provision that crosses one of these lines is unenforceable even if every member signed it.
Who Runs the Company, and Who Can Bind It
Section 407 gives every LLC a choice between two governance models. The default is member-managed: each member has an equal say, routine decisions pass by majority vote, and anything outside the ordinary course of business, including amending the operating agreement or approving a merger, requires unanimous consent.3Nebraska Legislature. Nebraska Code 21-136 – Management of Limited Liability Company
A manager-managed LLC puts day-to-day authority in the hands of one or more designated managers, who do not have to be members. Managers settle disagreements by majority vote among themselves, but the structural decisions still need every member’s approval. This model suits LLCs with passive investors. To opt into it, the operating agreement must say so expressly.
One of the act’s most important rules sits in Section 301: a person is not an agent of the LLC just because they are a member.1The Business Divorce Lawyer. Uniform Limited Liability Company Act (2006) (Last Amended 2013) That is a sharp break from partnership law. Under RULLCA, the authority to sign contracts, borrow money, or otherwise commit the company turns on the management structure and whatever specific authority the operating agreement grants. Section 302 lets the LLC file a public statement of authority identifying who can act on its behalf, which is especially useful for real estate transactions where third parties need something concrete to rely on.
Fiduciary Duties and Good Faith
Section 409 imposes two fiduciary duties on the people in charge: the members in a member-managed LLC, and the managers in a manager-managed LLC. These are the duty of loyalty and the duty of care.
The duty of loyalty has three parts. A person in a fiduciary role must account to the company for any profit or benefit derived from company activities or property. They cannot deal with the company in a transaction where they have a conflicting personal interest. And they cannot compete with the company before it dissolves.4Nebraska Legislature. Nebraska Code 21-138 – Standards of Conduct for Members and Managers The point is to keep insiders from quietly taking business opportunities that belong to the company or playing both sides of a deal.
The duty of care requires refraining from grossly negligent or reckless conduct, willful misconduct, and knowing violations of law.2Uniform Law Commission. Uniform Limited Liability Company Act (2006) Honest mistakes in judgment do not create liability. What the standard punishes is indifference, recklessness, and deliberate wrongdoing.
Alongside these fiduciary duties, every member owes a contractual obligation of good faith and fair dealing. This is not a third fiduciary duty. It is a standard that governs how members exercise the rights the operating agreement gives them, and courts lean on it heavily when the written agreement is silent or ambiguous. The operating agreement can define how good faith applies in specific situations, but it cannot remove the obligation.
When these standards are breached, affected members can seek injunctions or damages, the company can recover profits from self-dealing or losses from grossly negligent management, and a member can bring a derivative action if the company itself refuses to sue. The 2006 revision added rules for a special litigation committee to evaluate those derivative claims.
Distributions and the Personal Liability Trap
LLC members usually enjoy the limited liability their entity’s name promises. Section 405 and Section 406 carve out a notable exception around distributions. An LLC cannot distribute money or property to members if doing so would leave the company insolvent under either of two tests, and failing just one of them blocks the distribution.
The cash-flow test asks whether, after the distribution, the company can still pay its debts as they come due in the ordinary course of business. The balance-sheet test asks whether total assets still exceed total liabilities plus any amount needed to satisfy members with preferential liquidation rights.2Uniform Law Commission. Uniform Limited Liability Company Act (2006)
When a distribution violates these limits, Section 406 makes the people who approved it personally liable for the excess. In a member-managed LLC, every member who consented is on the hook. In a manager-managed LLC, that falls on the managers. A member who receives a distribution knowing it was improper is personally liable for the amount they got.1The Business Divorce Lawyer. Uniform Limited Liability Company Act (2006) (Last Amended 2013) Claims must be brought within two years of the distribution. Running the solvency analysis before approving a payout is one of the few places where getting the paperwork right directly affects whether members keep their liability shield.
Section 408 also creates a default right to indemnification: a member in a member-managed LLC, or a manager in a manager-managed one, who incurs expenses or liability while acting on the company’s behalf and in compliance with their duties, must be reimbursed by the company.5Revised Uniform Limited Liability Company Act. Revised Uniform Limited Liability Company Act – Section 408 The company can also buy insurance to cover those risks.
Transferring Interests and Charging Orders
LLC membership interests under RULLCA do not work like corporate stock. Section 502 splits a membership interest into two pieces: economic rights and governance rights. A member can transfer their right to receive distributions, which the act calls the “transferable interest,” but the transferee does not become a member. They get the distributions and, if the company dissolves, limited financial information from that date forward. They get no voting rights, no access to the books, and no role in management.2Uniform Law Commission. Uniform Limited Liability Company Act (2006)
Admitting someone as a full member takes unanimous consent of the existing members unless the operating agreement provides otherwise. That rule keeps unwanted business partners from slipping in through a back-door transfer.
The same split matters for personal creditors of a member. Under Section 503, a charging order is the exclusive remedy. A creditor who wins a judgment against a member can get an order directing the LLC to pay that member’s distributions to the creditor instead. The creditor does not become a member, cannot vote, and cannot force the LLC to make a distribution. Some adopting states allow a court to go further and foreclose the membership interest in a single-member LLC when distributions alone will not satisfy the judgment within a reasonable time. Multi-member LLCs generally get stronger protection against foreclosure.
Leaving the Company and Winding It Up
Article 6 governs dissociation, the process of a member separating from the LLC without necessarily ending the company. A member dissociates by giving notice of withdrawal, by hitting a trigger set out in the operating agreement, by being expelled by the other members or by court order, or on death, incapacity, or certain bankruptcy events.6California Legislative Information. California Code Corp 17706.02 – Members Dissociation
Dissociation is wrongful if it breaks the operating agreement or, in some circumstances, if it happens before a stated term ends. A member who dissociates wrongfully is liable to the company for the damages their exit causes, which usually comes out of their payout. After dissociation, the person’s governance rights end, but their economic interest continues as a transferable interest until it is bought out or the operating agreement resolves it otherwise.
Section 701 lists the events that trigger full dissolution: an event the operating agreement identifies as causing dissolution, unanimous member consent, 90 consecutive days without any members (unless transferees admit a new member in that window), judicial dissolution, or administrative dissolution by the Secretary of State.1The Business Divorce Lawyer. Uniform Limited Liability Company Act (2006) (Last Amended 2013) A court can order dissolution when the company’s activities are unlawful, when carrying on in accordance with the operating agreement is no longer practicable, or when those in control have acted in an oppressive manner directly harmful to the applicant.
That oppression remedy is one of RULLCA’s signature additions over the original 1996 act. It gives a minority member a real exit when majority owners are harming them, even if the conduct does not rise to fraud or illegality. Courts can also order remedies short of dissolution, including a forced buyout of the oppressed member’s interest.
Once dissolution is triggered, the company winds up in a set order. Outside creditors are paid first. Members who are also creditors come next. Only the remainder is distributed among the members according to their interests.
Operating Across State Lines
An LLC formed in one state that wants to do business in another RULLCA state must register as a foreign LLC under Article 9, filing a certificate of authority that gives its name, jurisdiction of formation, registered agent, and principal office.
Skipping registration carries a targeted penalty rather than a devastating one. An unregistered foreign LLC cannot maintain a lawsuit in the state’s courts, so it cannot sue to enforce a contract or collect a debt until it registers.2Uniform Law Commission. Uniform Limited Liability Company Act (2006) It can still defend itself if sued, its contracts remain valid, and its members do not lose their limited liability shield just because the company failed to register. Register, and the courthouse doors open again.