Arizona law is clear on how a person or entity becomes a member of a limited liability company (LLC). If the legal requirements are not followed, litigation may be necessary to obtain a court order that affirms the ownership of the membership interest in the LLC.
Arizona Revised Statutes section 29-731 outlines how a person becomes an LLC member under the following circumstances:
At the time the LLC is formed, a person may become a member of an LLC by either:
- Being identified as a member in the LLC’s articles of organization; or
- Being identified as a member in the LLC’s operating agreement if that operating agreement is in existence at the same time the articles of organization are filed, or being identified as a member by each of the managers identified in the LLC’s articles of incorporation by certified written statement.
After the LLC is formed and the articles of organization have been filed, a person may be added as a member in the following ways:
- Acquiring an interest directly from the LLC. Admission must meet the applicable provisions of the operating agreement. If the operating agreement is silent on the issue, all members must consent.
- Acquiring an interest as an assignee of a member’s interest. Admission must meet the applicable provisions of the operating agreement. If the operating agreement is silent on the issue, all members must consent.
- Acquiring an interest via an existing member’s power to grant membership. If a member has the power under the LLC’s operating agreement to grant admission, that power may be exercised in compliance with all conditions limiting the member’s exercise of the power.
- Acquiring an interest in the absence of members. If the LLC has no members, all assignees must consent to the admission of a new member in writing unless the LLC’s operating agreement provides otherwise.
If the LLC has admitted members in a way that is not in compliance with Arizona law, those members are not legally LLC members. Arizona LLCs must document all membership changes, including each members’ percentage of ownership interest in the LLC. Without this documentation, a dispute over ownership can easily arise and can lead to costly litigation.
Williams Commercial Law Group, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Commercial Law Group, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.