Assignment of Interest in a Virginia LLC.
A Limited Liability Company is governed by both a) the laws of the state in which it was incorporated and b) the operating agreement of the LLC. There are some state laws which an operating agreement can circumvent. Plainly speaking, in some instances the members of the LLC can decide the rules which will govern the relationship between them.
If an LLC is formed in Virginia, the laws of the Commonwealth of Virginia would apply. If an LLC is formed in another state, you would look to the rules of that foreign state for guidance.
Assignment of LLC Interest under the Code of Virginia (default rules).
Under the Code of Virginia, membership interest in a limited liability company “is assignable in whole or in part.” Va. Code Ann. § 13.1-1039. This would be the default rule if the members did not previously address the issue in an operating agreement. Under the Code of Virginia, the person to whom the membership rights were assigned would not have the right to a) participate in management or b) exercise any rights of a member (i.e. vote). Instead, they would only be entitled to a share of the profits.
Assignment of LLC Interest in an Operating Agreement in Virginia.
In Virginia, as in many states, the LLC members are given fairly wide discretion to determine the rules between them in an operating agreement. An operating agreement in Virginia can state something entirely different than the default rules of Code of Virginia. For example, an operating agreement in Virginia could state that no LLC interest is transferable. In the alternative, members are even free to state that voting rights may be transferred.
Remember, there are some rules in the Code of Virginia which are mandatory for LLC governance. However, assignment or transfer of membership interest is not one of those mandatory rules. If you have questions about LLC governance or formation, give me a call. I would like to learn more about your business.
Law Office of Ryan C. Young, PLLC | Richmond, Virginia | LLC Law