New Hampshire’s LLC Act: an introduction

If you are a New Hampshire LLC member or manager or if you plan to form a New Hampshire LLC, you and your business advisers need to have a solid basic knowledge of LLC law and tax in order for your LLC to succeed. This is the third in a series of columns in this journal that will give you this knowledge.

The basics

The official name of the New Hampshire LLC Act is the Revised New Hampshire Limited Liability Company Act, which became effective on Jan. 1, 2013. I was privileged to chair the Business & Industry Association committee that drafted it, and I wrote many of its provisions. It is 93 pages long and contains 210 sections. Here are the most basic things that, in my view, you need to know about it:

The act contains three main types of provisions — definitional provisions; mandatory provisions (which LLC members can’t validly amend in their operating agreements); and default provisions (which the act allows members to amend).

(As many readers will know, operating agreements are the agreements between the members of single-member LLCs and their LLCs and between the members of multi-member LLCs. Operating agreements determine the structure of LLCs and the members’ rights and duties).

In drafting the act, our committee had two main purposes:

• Off-the-shelf operating agreements. First, we knew that most New Hampshire individuals forming LLCs would not know they needed operating agreements and might be unable to afford lawyers who could draft them. So our committee drafted the act in such a way that its default provisions would provide these individuals with a free “off-the-shelf” operating agreement that would identify in the act itself all of the legal issues likely to be important to them and that would resolve these issues in a way members would want to resolve them.

For example, a key default rule in the act — namely, Section 90, II — provides that the members of a multi-member LLC must share the LLC’s profits in proportion to their respective contributions of cash and property to the LLC. The committee believed that this rule would work for a substantial majority of multi-member LLCs.

• Flexibility: We also provided sophisticated LLC founders in Section 2 with virtually unlimited flexibility to alter any or all of the act’s default provisions in written operating agreements to meet their needs and interests, and we provided in effect that any provisions they set forth in these agreements would be valid even if they were unfair to one or more members. The key ability of competent LLC lawyers is the ability to take advantage of this flexibility for their LLC formation clients.

Finally, for the benefit of LLC members and others who are not lawyers, we did our best to draft the act in plain English that these individuals could understand on even a careful first reading.

In the next few columns in this series, I’ll identify and briefly discuss the 25 key provisions of the act.

John Cunningham is an attorney of counsel to the law firm of McLane Middleton whose practice is focused on LLC law and tax. He can be contacted at lawjmc@comcast.net, 603-856-7172 or