When you decide to form a business, there are many decisions you have to make which require business counseling and advice. One of those decisions is the decision regarding what sort of business entity you will form. Different laws, regulations, and responsibilities apply to each type of business, whether it is a partnership, an LLC, or a corporation. Even if you have experience with one or more of these types of business, the regulations change over time so it is important to get advice regarding how your rights and responsibilities may change over time. One recently changed law is the Revised Uniform Limited Liability Company Act (RULLCA), and a California appellate court recently decided what the operative date of the new law is.
Effective Dates versus Operative Dates
Usually when legislative bodies pass laws, one of two things happens. In some cases the law specifically says when it goes into effect right there in its language. Some other laws that do not contain this language are presumed to go into effect on a certain date by default, often January 1 of the year following the law’s passage. However, the “effective” date and the “operative” date of a statute may not be the same. The “effective” date of a statute is when it becomes the law of the land. The “operative” date is the date upon which the directives of the statute can actually be implemented. Often these two dates are the same. Imagine that the legislature passes a statute that says it is a felony to steal an ice cream truck, and that the statute goes into effect on January 1, 2016. For that sort of statute, the effective date and the operative date would be the same because as soon as January 1, 2016 roles around anyone who were to steal an ice cream truck could be arrested and prosecuted for the crime. Sometimes, however, the effective date and the operative date are not the same.
When the Effective Date and the Operative Date are not the Same
In the case of Kennedy v. Kennedy, the California Court of Appeal had to determine what RULLCA’s operative date was. A portion of RULLCA says, “This title does not affect an action commenced, proceeding brought, or right accrued or accruing before this title takes effect.” So imagine the case where a person has filed a suit that would be affected by RULLCA, but he or she commenced the action prior to RULLCA’s effective date. This would mean that once that effective date comes, RULLCA would be “effective,” in that it would be the law of the land, but its directives could not yet be implemented against that plaintiff because he or she commenced the action prior to RULLCA’s taking effect. The court relied on the plain language of the statute and the legislative history of RULLCA in making its decision.