It is important to note that Iowa's former LLC law (Chapter 490A) is repealed this year and all Iowa LLCs will be subject to Chapter 489 of the Iowa Code effective January 1, 2011.
Prior to this year, Iowa LLCs formed before January 1, 2009 could remain under the old LLC law or opt-in to be covered by the new Iowa statute. I wrote a series of posts back in December of 2008 concerning the new Iowa LLC law. However, one important reminder involves the significant change relating to management. The old Iowa LLC law provides that member voting is based upon capital contributions of the members. Generally, that meant voting is based upon the percentages of the members and a member with 51% or more would control how the company is operated.
However the default provision with the new Iowa LLC law is one member - one vote. This means that even a member with a minority percentage may have the ability to have as much management authority as an member that has a majority of the membership units. Accordingly, if a majority owner wants to maintain management control, the written operating agreement will need to specify such arrangement. Some unsuspecting LLC majority owners may be surprised to learn that they may not be in control of their business unless an operating agreement specifies the majority interest controls.
This issue is just one of reasons I recommend that all Iowa LLC owners seek legal advice from a business attorney when forming an LLC under the new Iowa LLC act. And why every LLC owner formed before January 1, 2009 should seek the advice of their business attorney to see if their current documents apply as intended under the new Iowa LLC law.
