California’s version of the Revised Uniform Limited Liability Company Act provides that in the case of a member managed limited liability company provides:
Unless the articles of organization indicate the limited liability company is a manager-managed limited liability company, every member is an agent of the limited liability company for the purpose of its business or affairs, and the act of any member, including, but not limited to, the execution in the name of the limited liability company of any instrument, for the apparent purpose of carrying on in the usual way the business or affairs of the limited liability company of which that person is a member, binds the limited liability company in the particular matter, unless the member so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the member is dealing has actual knowledge of the fact that the member has no such authority.
Cal. Corp. Code § 17703.01(a) (emphasis added). What if a member’s act is not for the “apparent purpose of carrying on in the usual way the business or affairs of the limited liability company”? The statute provides no answer, although it might be inferred that the negative implication of the statute is that acts not apparently for carrying on in the usual way the business or affairs of the LLC are not binding, the absence of such a statement is puzzling in light of other similar provisions found in the California Corporations Code.
For example, the California Uniform Partnership Act of 1994 provides:
Subject to the effect of a statement of partnership authority under Section 16303 both of the following apply:
(1) Each partner is an agent of the partnership for the purpose of its business. An act of a partner, including the execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority.
Cal. Corp. Code § 16301 (emphasis added). The UPA, however closes the loop by including the following provision:
(2) An act of a partner that is not apparently for carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership only if the act was authorized by the other partners.
Id. (emphasis added). Similar language can be found in the California Uniform Limited Partnership Act of 2008. Cal. Corp. Code §15904.02.
This post was originally published on here
