Utah LLC governance: a uniform act that draws a line the freedom-of-contract states do not, you cannot waive the duties

Utah adopted the revised uniform LLC act, and that choice draws a bright line the freedom-of-contract states do not. In Indiana or Missouri, a written operating agreement can eliminate a manager’s fiduciary duties outright. In Utah it cannot. The statute lets you tailor how the duties apply, and it lets you carve specific activities out of the duty of loyalty, but it flatly forbids eliminating the duties of loyalty and care or waiving the obligation of good faith, and a clause that tries gets struck down. So a drafter who ports a full duty-waiver from a contractarian state into a Utah operating agreement has written an unenforceable provision.

That limit, and a distribution default that splits equally rather than by capital, are the two things to understand about Utah governance, and both cut against the assumptions built up from the states just before it. This page leads with them rather than re-teaching the general mechanics on the site’s default rules and freedom of contract guides. In Utah, freedom of contract is real but bounded, and the boundary is exactly where the contractarian states have none.

The duties you cannot waive

Start with the line, because it is the thing that surprises drafters coming from other states.

A Utah operating agreement may not eliminate the duty of loyalty or the duty of care, and may not waive the obligation of good faith and fair dealing.

Under Utah Code 48-3a-112, the operating agreement may not eliminate the duty of loyalty or the duty of care, may not eliminate the contractual obligation of good faith and fair dealing, and may not relieve a person from liability for bad-faith, willful, or reckless conduct. That is the uniform-act floor, and it is the opposite of the rule in Indiana and Missouri, where a written agreement can zero out fiduciary duties entirely. A clause in a Utah operating agreement that purports to eliminate a manager’s duty of loyalty is not merely risky; it is unenforceable, and a court will disregard it. So the whole strategy of contracting duties away, which works in a freedom-of-contract state, fails in Utah.

What the statute does allow is narrower and more surgical.

The agreement may identify specific activities that do not breach the duty of loyalty and may adjust how the duties apply, so long as it is not unconscionable or against public policy.

The same section lets the operating agreement, if not unconscionable or against public policy, alter or eliminate specific aspects of the duty of loyalty, identify particular types or categories of activities that do not violate it, and adjust the duty of care short of authorizing intentional misconduct or a knowing violation of law. That is a meaningful tool. A member who runs a competing venture, or a manager who wants to pursue outside real estate deals, can be permitted to do so by naming those activities as ones that do not breach loyalty. The difference from elimination is the difference between a scalpel and a switch: Utah lets you carve out defined conduct in advance, but not turn the duty off. The drafting task, then, is to enumerate the specific permissions the members actually want, rather than reaching for a blanket waiver that the statute will not honor.

The default that splits equally, not by capital

On distributions, Utah’s uniform-act default runs opposite to the states just before it.

When a Utah operating agreement is silent, distributions are split in equal shares by headcount, not in proportion to what each member contributed.

Under Utah Code 48-3a-404, distributions made before dissolution must be in equal shares among the members, regardless of how much capital each contributed. That is the reverse of the contribution-weighted default in Indiana, Maryland, and Missouri, and it produces the opposite ambush. In those states, silence rewards the funder; in Utah, silence rewards headcount, so the member who put in most of the capital and another who put in little split distributions fifty-fifty unless the agreement says otherwise. For an LLC where the members contributed unequally, that default is almost never what anyone intended, and a single clause allocating distributions by capital or by an agreed formula fixes it. The distributions guide covers why the split should be set deliberately; the Utah-specific point is that the direction of the default is equal shares, so unequal contributors have to override it in writing on day one.

The defaults that fill the rest

Two more defaults are worth setting rather than inheriting.

A Utah LLC is member-managed by default with equal management rights, and extraordinary acts and amendments require unanimous consent.

Under Utah Code 48-3a-407, management is vested in the members unless the agreement provides for managers, and each member has equal rights in management, with ordinary decisions by majority and extraordinary acts, such as selling substantially all the assets, merging, or dissolving, plus amendments to the agreement, requiring unanimous consent. A manager-managed structure shifts the fiduciary duties primarily to the managers and generally spares a passive, non-manager member from owing them, which is why the manager-managed form suits outside investors. The through-line for Utah governance is that the operating agreement does real work within firm limits: it can allocate distributions, choose the management structure, and carve specific activities out of the duty of loyalty, but it cannot eliminate the duties or waive good faith, and where it is silent the defaults favor equal shares and member management. Draft to the limits, not past them.

The bottom line

Utah’s operating agreement may not eliminate the duty of loyalty or care or waive good faith under 48-3a-112, the opposite of the freedom-of-contract states, so a full duty-waiver clause is unenforceable here.

The agreement may instead carve out specific activities that do not breach loyalty and adjust how the duties apply, so long as it is not unconscionable or against public policy.

The distribution default under 48-3a-404 is equal shares by headcount, not by capital, so unequal contributors must override it in writing.

Management defaults to the members with equal rights under 48-3a-407, and extraordinary acts and amendments require unanimous consent.

The lesson is to draft to Utah’s limits: enumerate specific loyalty carve-outs and set the distribution split deliberately, because the statute will not honor a blanket waiver and its silence favors equal shares.

What this page does not cover

This page is about the rules that run your company from the inside. How outside creditors reach a member’s interest, the foreclosable charging order, and the missing entireties shield are on the protection page. Utah’s flat income tax, the absence of a transfer tax, and the series LLC are on the structure and cost page. The low formation fee and the $18 annual renewal are on the filing page.

Last verified August 2026.