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Which Law Applies to Foreign
LLCs?
The Law
of the State of Formation Travels with an LLC!
Unlike the rules pertaining to corporations that
do business in states outside of their places of formation, the
rules for LLC's are crystal clear.
A state-by-state review of
all 50 state statutory schemes reveals that each has a statute
that applies the law of the state of formation to all issues involving "organization" and "internal affairs." As
regards issues of "liability" for members, 49 out of
50 also will use the law of the state of formation. The only exception
is Montana.Because of the above, it can truly be said that
the law of the state of formation travels with an LLC.
This can
be advantageous, depending on the particular issue involved.While these statutes are very clear on their face,
no case has yet arisen in any state wherein a court has had occasion
to interpret the language and decide whether the issue at hand
falls within "internal affairs" or one of the other
two categories. This is not surprising, given the fact that LLC's
are a relatively new form of business entity.
For comparison purposes,
we checked California's Limited Partnership Act. It includes a
statute, Cal. Corps. Code § 15691, which applies formation
state law to foreign limited partnerships doing business in California,
on all issues of "organization," "internal affairs,"
and "liability." Although this statute is older than
any of the LLC statutes under discussion, it has never been used
by an appellate court in a published opinion. Obviously, it would be difficult to find a fact
pattern wherein a California court would have to rule on an "internal
affair" matter of a foreign limited partnership doing business
in that state.
While such issues have arisen in cases involving
corporations, they are relatively rare. See, e.g., Wilson v.
Louisiana-Pacific Resources, Inc., 138 Cal. App.3d 216, 187
Cal. Rptr. 852 (1982); Valtz v. Penta Investment Corp.,
139 Cal. App-3d 803, 188 Cal. Rptr. 922 (1983).Given the clear language of the LLC statutes in
all 50 states, if such cases do arise, the law of the state of
formation will be applied. The following chart shows the LLC laws
of all 50 states regarding their coverage of foreign LLC's.
O= Organization
IA= Internal Affairs
L= Liability
| L1 |
Alabama |
§ 10-12-46 |
O |
IA |
L |
| 2 |
Alaska |
§ 10.50.265, .600 |
O |
IA |
L |
| 3 |
Arizona |
§ 29-801 |
O |
IA |
L |
| 4 |
Arkansas |
§ 4-32-1001 |
O |
IA |
L |
| 5 |
California |
§ 17450, Cal. Corps. |
O |
IA |
L |
| 6 |
Colorado |
§ 7-80-901 |
O |
IA |
L |
| 7 |
Connecticut |
§ 34-222 |
O |
IA |
L |
| 8 |
Delaware |
§ 18-901, Tit. 6 |
O |
IA |
L |
| 9 |
Florida |
§ 608.505 |
O |
IA |
L |
| 10 |
Georgia |
§ 14-11-701 |
O |
IA |
L |
| 11 |
Hawaii |
§ 428-1001 |
O |
IA |
L |
| 12 |
Idaho |
§ 53-650 |
O |
IA |
L |
| 13 |
Illinois |
805 ILCS, 180/45-1 |
O |
IA |
L |
| 14 |
Indiana |
§ 23-18-11-1 |
O |
IA |
L |
| 15 |
Iowa |
§ 490A.1401 |
O |
IA |
L |
| 16 |
Kansas |
§ 17-7636 |
O |
IA |
L |
| 17 |
Kentucky |
§ 275.380 |
O |
IA |
L |
| 18 |
Louisiana |
§ 12:1342 |
O |
IA |
L |
| 19 |
Maine |
§ 711, Tit. 31 |
O |
IA |
L |
| 20 |
Maryland |
§ 4A-1001 |
O |
IA |
L |
| 21 |
Massachusetts |
§ 47, ch. 156C |
O |
IA |
L |
| 22 |
Michigan |
§ 450.5001 |
O |
IA |
L |
| 23 |
Minnesota |
§ 322B.90 |
O |
IA |
L |
| 24 |
Mississippi |
§ 79-29-1001 |
O |
IA |
L |
| 25 |
Missouri |
§ 347.151 |
O |
IA |
L |
| 26 |
Montana |
§ 35-8-1008 |
O |
IA |
|
| 27 |
Nebraska |
§ 21-2637 |
O |
IA |
L |
| 28 |
Nevada |
§ 86.543 |
O |
IA |
L |
| 29 |
New Hampshire |
§ 304-C:62 |
O |
IA |
L |
| 30 |
New Jersey |
§ 42:2B-52 |
O |
IA |
L |
| 31 |
New Mexico |
§ 53-19-47 |
O |
IA |
L |
| 32 |
New York |
§ 801 LLC |
O |
IA |
L |
| 33 |
North Carolina |
§ 57C-7-O1 |
O |
IA |
L |
| 34 |
North Dakota |
§ 10-32-135 |
O |
IA |
L |
| 35 |
Ohio |
§ 1705.53 |
O |
IA |
L |
| 36 |
Oklahoma |
§ 2042, Tit. 18 |
O |
IA |
L |
| 37 |
Oregon |
§ 63.714 |
O |
IA |
L |
| 38 |
Pennsylvania |
§ 8981, ch. 89 |
O |
IA |
L |
| 39 |
Rhode Island |
§ 7-16-48 |
O |
IA |
L |
| 40 |
South Carolina |
§ 33-44-1001 |
O |
IA |
L |
| 41 |
South Dakota |
§ 47-34A-1001 |
O |
IA |
L |
| 42 |
Tennessee |
§ 48-246-101 |
O |
IA |
L |
| 43 |
Texas |
§ 7.02, art. 1528n |
O |
IA |
L |
| 44 |
Utah |
§ 48-2C-1601 |
O |
IA |
L |
| 45 |
Vermont |
§ 3131, Tit. 11 |
O |
IA |
L |
| 46 |
Virginia |
§ 13.1.1051 |
O |
IA |
L |
| 47 |
Washington |
§ 25.15.310 |
O |
IA |
L |
| 48 |
West Virginia |
§ 31B-10-1001 |
O |
IA |
L |
| 49 |
Wisconsin |
§ 183.1001 |
O |
IA |
L |
| 50 |
Wyoming |
§ 17-14-1001 |
O |
IA |
L |
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