Arizona Laws 29-3401. Becoming a member; transferable interest; ownership of interest in limited liability company
A. At the time of formation, a limited liability company must have at least one member. If a company is to have only one member on formation, the person becomes a member by agreeing to be a member and by being identified as the member in the articles of organization. The member and the organizer may be, but are not required to be, different persons. If the member and organizer are different persons, the organizer acts on behalf of the initial member.
Terms Used In Arizona Laws 29-3401
- Action: includes any matter or proceeding in a court, civil or criminal. See Arizona Laws 1-215
- Affidavit: A written statement of facts confirmed by the oath of the party making it, before a notary or officer having authority to administer oaths.
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Articles of organization: means the articles required by section 29-3201. See Arizona Laws 29-3102
- Contribution: means property or a benefit described in section 29-3402 that is provided by a person to a limited liability company to become a member or in the person's capacity as a member. See Arizona Laws 29-3102
- Decedent: A deceased person.
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Joint tenancy: A form of property ownership in which two or more parties hold an undivided interest in the same property that was conveyed under the same instrument at the same time. A joint tenant can sell his (her) interest but not dispose of it by will. Upon the death of a joint tenant, his (her) undivided interest is distributed among the surviving joint tenants.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Member: means a person that both:
(a) Has become a member of a limited liability company under section 29-3401 or was a member in a company when the company became subject to this chapter under section 29-3110. See Arizona Laws 29-3102
- Operating agreement: means the agreement, whether or not referred to as an operating agreement and whether oral, implied, in a record or in any combination thereof, of all the members of a limited liability company, including a sole member, concerning the matters described in section 29-3105, subsection A. See Arizona Laws 29-3102
- Organizer: means a person that acts under section 29-3201 to form a limited liability company. See Arizona Laws 29-3102
- Person: means an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, general cooperative association, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common-law business trust, estate, trust, association, joint venture, public corporation or government or governmental subdivision, agency or instrumentality or any other legal or commercial entity. See Arizona Laws 29-3102
- Principal address: means the mailing address of a limited liability company or foreign limited liability company, whether or not located in this state. See Arizona Laws 29-3102
- Property: means all property, whether real, personal or mixed or tangible or intangible, or any right or interest therein. See Arizona Laws 29-3102
- Right of survivorship: The ownership rights that result in the acquisition of title to property by reason of having survived other co-owners.
- Tenancy in common: A type of property ownership in which two or more individuals have an undivided interest in property. At the death of one tenant in common, his (her) fractional percentage of ownership in the property passes to the decedent
- Transfer: includes :
(a) An assignment. See Arizona Laws 29-3102
- Transferable interest: means the right, as initially owned by a person in the person's capacity as a member, to receive distributions from a limited liability company, whether or not the person remains a member or continues to own any part of the right, and applies to any fraction of the interest, by whomever owned. See Arizona Laws 29-3102
B. If a limited liability company is to have more than one member on formation, those persons become members as agreed by the persons before the formation of the company. The organizer acts on behalf of the persons in forming the company and may be, but is not required to be, one of the persons.
C. After formation of a limited liability company, a person becomes a member by any of the following:
1. As provided in the operating agreement.
2. As the result of a transaction effective under article 10 of this chapter.
3. By agreeing to become a member, with the affirmative vote or consent of all the members.
4. As provided in section 29-3701, subsection A, paragraph 3.
D. A person may become a member without either:
1. Acquiring a transferable interest.
2. Making or being obligated to make a contribution to the limited liability company.
E. A transferable interest may be held by two or more natural persons as joint tenants with right of survivorship or by a married couple as community property with right of survivorship. Except as otherwise provided in this section, an assignment or issuance of a transferable interest to two or more natural persons creates a tenancy in common, except an assignment or issuance to a married couple.
F. A joint tenancy with right of survivorship is created when a written operating agreement expressly declares that two or more natural persons hold a transferable interest as joint tenants with right of survivorship or in joint tenancy with right of survivorship. A joint tenancy with right of survivorship may also be created by a written assignment of a transferable interest to two or more natural persons, who may include one or more assignors, or by the articles of organization, if the written assignment or the articles have been signed by each joint tenant and contain the express written declaration that the joint tenants hold the assigned transferable interest as joint tenants with right of survivorship or in joint tenancy with right of survivorship.
G. An estate in community property with right of survivorship is created when a written operating agreement expressly declares that a married couple holds a transferable interest as community property with right of survivorship. An estate in community property with right of survivorship may also be created by a written assignment of a transferable interest to a married couple, who may include one or both assignor spouses, or by the articles of organization, if the written assignment or the articles have been signed by each spouse and contain the express written declaration that the married couple holds the assigned transferable interest as community property with right of survivorship.
H. All co-owners of a transferable interest held as joint tenants with right of survivorship, as community property or as community property with right of survivorship own an equal undivided interest in the transferable interest. Each co-owner of a transferable interest, whether the transferable interest is held as tenants in common, joint tenants with right of survivorship, community property or community property with right of survivorship, shall have only the rights of a transferee with respect to the interest, both during the lifetime and following the death of any other co-owner, unless and until the co-owner becomes a member in accordance with subsection C of this section.
I. If a transferable interest is held by two or more persons in joint tenancy with right of survivorship or by a married couple as community property with right of survivorship, after the death of a co-owner of the transferable interest all of the following apply:
1. The surviving co-owner or co-owners of the transferable interest shall succeed to the ownership of the decedent‘s interest in the transferable interest without further action by the limited liability company or the other members and shall have only the rights of a transferee with respect to the interest, unless and until the co-owner or co-owners are admitted as a member or members in accordance with subsection C of this section.
2. The decedent’s interest in the hands of the surviving co-owner or co-owners shall continue to be subject to all obligations and liabilities to which that interest was subject immediately before the death under the terms of the operating agreement or other agreement among one or more members or third parties.
3. If there is more than one surviving co-owner of a transferable interest held in joint tenancy with right of survivorship, after the death of a co-owner the surviving co-owners shall continue to own the transferable interest in equal shares as joint tenants with right of survivorship.
J. The distribution, voting, approval and other management rights with respect to a transferable interest that is co-owned by two or more persons, whether the transferable interest is held as tenants in common, joint tenants with right of survivorship, community property or community property with right of survivorship, shall be the same as if the interest were held by only one person.
K. Each co-owner of a transferable interest who becomes a member may exercise all voting, approval and other management rights of a member, including the right to approve an amendment to the operating agreement, with respect to an interest held as tenancy in common, joint tenancy with right of survivorship, community property or community property with right of survivorship.
L. The limited liability company is entitled to rely in good faith on the act of a member that purports to be taken in the exercise of any voting, approval or other management right, including the right to approve an amendment to the operating agreement relating to a transferable interest that is co-owned by the member with one or more other persons, whether the transferable interest is held as tenants in common, joint tenants with right of survivorship, community property or community property with right of survivorship.
M. If a co-owner of a transferable interest held as joint tenants with right of survivorship or community property with right of survivorship transfers part or all of the co-owner’s share of the transferable interest, the right of survivorship is extinguished and the co-owners of the transferable interest after the transfer hold their shares of the transferable interest as tenants in common. In the case of community property with right of survivorship, the right of survivorship is also extinguished as provided in section 14-2803 or 14-2804 or on the delivery to the limited liability company, at its principal address, of an affidavit entitled "affidavit terminating right of survivorship" that is executed by either spouse under oath stating the spouse’s intent to terminate the right of survivorship and describing the affected transferable interest. The delivery of the affidavit does not extinguish the community property interest of either spouse.
N. A limited liability company is not required to give effect to any creation or extinguishment of a right of survivorship until the company has received written notice of the change in the form of ownership or of the creation or the extinguishment of a right of survivorship at its principal address.
O. With respect to a transferable interest owned in joint tenancy with right of survivorship, tenancy in common or community property with or without right of survivorship, if a charging order from a court of competent jurisdiction is obtained against a co-owner’s share of the transferable interest, it shall attach only to that co-owner’s share or portion of the transferable interest and not to the share or portion of the other co-owner or co-owners.