The new statute does not change the rules concerning single member LLCs. A creditor has a variety of collection tools against a debtor’s interest in a single member LLC, but the creditor is limited to a charging lien against multi-member LLCs.
Under the prior law, each member had to have had an economic interest in the LLC. Most individual business owners were reluctant to either give away or sell an economic stake in their LLC business in order to create a multi-member LLC. In addition, the transfer of an economic interest in an existing business required payment of fair value in order to minimize fraudulent conveyance issues.
The new law in Section 605.0401 provides a different definition of the term “member.” A member under the new law is not required to have any economic interest in the LLC, and a member may not be obligated to may any capital contributions. A person may vote, manage, or otherwise participate in the LLC as a member without an economic interest.
The more liberal definition of LLC member makes it easier starting next year to create multi-member LLCs which are subject only to charging lien remedies against a debtor-member.