Arizona LLC governance: the same uniform act as Pennsylvania, and the opposite answer on the duties you can delete

Arizona and Pennsylvania adopted the same national uniform LLC act, a few years apart. On the single most important governance question, whether an operating agreement can eliminate a manager’s fiduciary duties, they gave opposite answers. Pennsylvania says no: the duty of loyalty and the duty of care survive any waiver. Arizona says yes: you can delete them entirely, keeping only good faith and a bar on willful misconduct. Same statute of origin, opposite default posture, and the difference decides who is protected inside the company.

That is the governance fact worth knowing about Arizona, and this page leads with it rather than re-teaching the uniform-act mechanics that the site’s default rules and freedom of contract guides already cover. Arizona’s answer puts it near the Delaware end of the spectrum, which is unusual for a uniform-act state and consequential for anyone drafting or signing an Arizona operating agreement.

The duties you can delete

Here is the provision that sets Arizona apart from most of its uniform-act peers.

An Arizona operating agreement may eliminate the duty of loyalty and the duty of care entirely, not merely reshape them.

A.R.S. § 29-3105 says an operating agreement may expand, limit, or eliminate the duty of care, the duty of loyalty, and any other fiduciary duty a member or manager owes, and may limit or eliminate liability for breaching those duties. This is Delaware-style freedom of contract, and it is a real departure from how Pennsylvania handles the identical uniform-act language. Pennsylvania forbids eliminating loyalty or care and puts every permitted modification under a judge’s “manifestly unreasonable” veto. Arizona has neither restriction. A manager in an Arizona LLC can be released, by agreement, from the duty not to compete with the company, the duty to avoid self-dealing, and the duty of care in running it.

There is a floor, and it is narrow.

The two things an Arizona operating agreement can never eliminate are the obligation of good faith and fair dealing and liability for willful or intentional misconduct.

Section 29-3105 stops at good faith and fair dealing, which cannot be waived away, and it does not let the agreement excuse willful or intentional misconduct or a knowing violation of law. Information rights survive too; the agreement may not unreasonably restrict a member’s right to the company’s records. Everything else in the fiduciary framework is on the table. So the Arizona floor is thin: act in subjective good faith, do not deceive, do not commit intentional wrongdoing, and honor the records request. Below the willful line and outside good faith, an Arizona agreement can lower the duties a member or manager owes close to nothing.

The seam: who is protected inside an Arizona LLC

Set Arizona and Pennsylvania side by side and the structuring consequence is concrete.

A sponsor putting together a deal wants the freedom to run competing ventures, to stand on both sides of a transaction, to owe passive investors as little as the law allows. In Pennsylvania that sponsor cannot get those waivers; the statute caps them and a judge can revisit them, which is why sponsor-favorable deals so often form in Delaware. In Arizona the sponsor can get them at home, because § 29-3105 permits exactly the eliminations Delaware permits. Arizona is a uniform-act state that drafts like a freedom-of-contract state.

Now the investor’s seat, and this is the part a passive member needs to hear. In a Pennsylvania LLC a passive investor keeps a non-waivable floor of loyalty and care plus a judicial reasonableness check. In an Arizona LLC that floor can be drafted away, leaving the investor with good faith, the willful-misconduct bar, and information rights, and not much else. An operating agreement that eliminates fiduciary duties is doing real work, and an Arizona investor who signs one without reading the duty-waiver section is giving up protections that a Pennsylvania investor could not sign away even if they wanted to. The freedom of contract guide covers the general spectrum; the point for Arizona is that the state sits near the permissive end, so the operating agreement, not the statute, is where an investor’s protection lives or dies.

The defaults that fill the gaps

For everything the operating agreement does not address, Arizona’s defaults control, and one of them surprises people the same way it does in every uniform-act state.

Stay silent and Arizona splits distributions equally by headcount, not by the capital each member contributed.

Under A.R.S. § 29-3404, distributions before dissolution are shared in equal shares among the members, regardless of who contributed what. The member who funded the venture and the member who contributed effort split evenly unless the agreement says otherwise. Arizona also recognizes an oral or implied operating agreement, so unlike Michigan, a handshake can count, but that flexibility is a trap rather than a convenience: an unwritten deal is reconstructed from conduct and testimony, and the loser of that reconstruction usually wishes it had been written down. The default fiduciary duties in A.R.S. § 29-3409 apply only until the agreement changes them, which, given § 29-3105, it often does. The lesson is the uniform-act lesson everywhere, sharper in Arizona because the agreement can move so much: the document is where your real deal, and your real duties, get set.

The bottom line

Arizona and Pennsylvania run the same uniform act and reach opposite answers on fiduciary waivers, so the governance rules on those two pages do not track each other.

An Arizona operating agreement may eliminate the duty of loyalty and the duty of care entirely under A.R.S. § 29-3105, which is Delaware-style freedom of contract inside a uniform-act state.

The only floor is good faith and fair dealing, a bar on willful or intentional misconduct, and information rights, all of which survive any waiver.

That posture lets a sponsor draft broad waivers in Arizona without leaving for Delaware, and it leaves a passive investor far less protected than an investor in a Pennsylvania LLC.

The distribution default splits cash equally by headcount under § 29-3404, and an oral agreement counts, so the written document carries the deal and the duties both.

What this page does not cover

This page is about the rules that run your company from the inside and the duties you can waive. How outside creditors reach a member’s interest, the exclusive-remedy charging order, and the community-property shield are on the protection page. Where the entity lives, the missing series LLC, and the absence of any transfer tax are on the structure and cost page. Fees, the publication requirement, and why there is no annual report are on the filing page.

Last verified August 2026.