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Y X` hp x (#%'0*,.8135@8:$>$ ׍Sole proprietorship is an individual conducting a business as the sole owner of the business.z(# !7. ` ` ,Statute should cover unfiled partnerships C. `&Matters covered the statute(#  Y !1. ` ` ,FormationV >$>$ ׍Sole proprietorship commences on the opening of business.V` B(#  Y| X!2. ` ` ,Agencyb >$>$ ׍No agency issue for sole proprietorship as proprietor is principal. b(#  Ye X!3.&Liability of owners for obligations of the organizationg >$>$ ׍Absent notice sole proprietor is liable for obligations of proprietorship.g(#  YN !4. ` ` ,Governance8 6>$>$ ׍Sole proprietor is manager.8  Y7 !5. ` ` ,Management  >$>$ ׍Id.   Y  !6. ` ` ,Ownership and Transferability7 V>$>$ ׍Business is transferrable.7  Y  !7. ` ` ,WithdrawalP >$>$ ׍Sole proprietor may liquidate business at any time.P  Y !8. ` ` ,Dissolution  v>$>$ ׍Id.   Y !9. ` ` ,Reorganization  >$>$ ׍Sole proprietorship can be contributed to another organization for an interest in that organization. ! 10. ` ` ,Foreign organizations  Y! ! 11. ` ` ,Liability for contributionsl  ^>$>$ ׍Sole proprietors fully liable for organizational obligations unless registered,l  Y" ! 12. ` ` ,Liability for distributionsl  >$>$ ׍Sole proprietors fully liable for organizational obligations unless registered,l  D. &Other matters !1.`&Sole proprietorships (should they be subject to the rules for "organizations"? Should such inclusion be limited to sole proprietorships that have filed?)(# #'0*((ԌIV. !Treatment of UNICORN (#   A.! General Concepts(# J!1.&Definition An Organization formed under this statute [and an association of two or persons who carry on as coowners a business for profit which has not registered and a sole proprietor who has not registered]" J!&a.` ` ,Partnership?(# J!&b.P` ` ,Limited Partnership?(#` J!&c.P` ` ,Limited Liability Partnership?(#` J!&d.P` ` ,Limited Liability Company?(#` J!&e.P` ` ,Corporation?(#` J!&f.P` ` ,Sole Proprietorship?(#` J!2.&Designation of owners Member/Partners" J!&a.P` ` ,Member/Partner:(#` J!&P` ` ,(1)X 7Limited Partner;(# J!&P` ` ,(2)X 7Shareholder; (# J!&P` ` ,(3)X 7Member (in a managermanaged LLC)(# J!&b.P` ` ,Authorized Member/Partner:(#` J!&P` ` ,(1)X 7General Partner; (# J!&P` ` ,(2)X 7Member (in a membermanaged LLC); (#  Y4 J!&P` ` ,(3)X 7MemberManager (in a managermanaged LLC) ͍ The concept of membermanager owes its origin to Rev. Proc. 9510, and has been included in operating agreements, normally with the proviso that "all managers shall be members." The management rights of a member in a managermanaged LLC originate from the designation of a member (either through election or the operating agreement) as a manager rather from any statutory provision, and the membermanager's authority may be said not to arise from the manager's being a member.(# J!&c.P` ` ,Authorized Liable Member/Partner:(#` J!&P` ` ,(1)X 7General Partner in a partnership that has not registered;(# J!&P` ` ,(2)X 7Assuming member (in a membermanaged LLC); (# J!&P` ` ,(3)X 7Assuming membermanager (in a managermanaged LLC)(# J!3. X` ` ,Managers (persons who manage the business and affairs of the organization subject to the approval of the owners in some cases)"` J!&P` ` ,(1)X 7Authorized Member/Partner;(# J!&P` ` ,(2)X 7Manager (in a managermanaged LLC);(# J!&P` ` ,(3)X 7Director(# J!4.&Persons with authority to bind the organization (persons who have the ability to bind the organization with respect to transactions in the ordinary course of the business of the organization)" J!&P` ` ,(1)X 7Authorized Member/Partner;(# J!&P` ` ,(2)X 7Manager (in a managermanaged LLC);(# J!&P` ` ,(3)X 7Officer(# J!&P` ` ,(4)X 7Authorized agents(# J!5. X` ` ,Governing documents "` J!&a.P` ` ,Filed document (notice document or constitution?) Because the articles of incorporation may not constitute a contract and the bylaws are clearly not a contract, it may be more important in the corporate context to have the articles of incorporation serve as a corporate "constitution" the modification of which is subject to greater scrutiny.(#` J!&b.P` ` ,Agreement among the owners (partnership agreement, operating agreement,#'0*(( shareholder agreement).(#` B.!Formation(# J!1.&Jurisdiction of organization " J!&a.P` ` ,Organizations formed by filing (limited liability partnerships, limited partnerships, limited liability companies, corporations) jurisdiction of organization governs the internal affairs and liability of the owners.(#` J!&b.P` ` ,Organizations not formed by filing (partnerships that have not registered, unincorporated nonprofit associations and sole proprietorships) jurisdiction of organization governs the internal affairs, liability governed by state of incident.(#` J!2. X` ` ,Filed document (see table)"` J!3. X` ` ,Effect of filed document (see table)"` J!4. X` ` ,Name What should the name convey to third parties? (The name should put third parties on notice if there are differences in liability or agency authority)."` C.!Management and Ownership(# J!1. X` ` ,Statutorily designated agent for service of process Rules regarding designated agent and default rules for secretary of state acceptance of service and administrative dissolution should be the same."` J!2. X` ` ,Requirement of filing identifying agents for service of process Any organization filing under the UNICORN Act must have a designated agent for service."` J!3. X` ` ,Voting power of owners:"` J!&a.P` ` ,Votes for extraordinary matters Majority, supermajority, unanimous (should there be a difference between corporate rules [generally majority] and partnership [default is unanimous]?)(#` J!&b.P` ` ,Per capita, by financial contribution or otherwise There does not seem to be a reason for different default rules.(#` J!&c.P` ` ,There may be a use for an organization with institutionally voteless members such as limited partners.(#` J!4. X` ` ,Permissible participation in management Is there any reason to limit some owners' participation in management? Arguably participation in management in an unfiled creates a need for protection of third parties dealing with organization."` J!5.&Ability of owners to transact business with the organization There should be one rule for the ability to transact business with the organization." J!6.&Liability of owners for obligations of the organization This should be the same (limited other than for the torts of the owner, or where the owners have voluntarily undertaken personal liability) for all filed organizations. " J!7. X` ` ,Liability of owners to the organization and other owners The rules with respect to distributions, obligations to contribute and fiduciary should the same. Should the fiduciary duties be greater in an organization like a limited partnership in which passive investors may not remove the general partner?"` #'0*((ԌJ!8. X` ` ,Piercing the corporate veil The rules should be the same."` J!9. X` ` ,Duties of owners There should be an distinction in all organization between the owners who have right to participate and those that do not. Owners who participate in the management should have fiduciary duties to the organization and the other owners. These rules should be applied to all organizations in the same manner."` J! 10. X` ` ,Insurance or Financial Responsibility Requirement The rules should be the same."`  D.X!Doing Business in Foreign Jurisdictions(# J!1.&Foreign organizations Rules should be the same for all filed organizations." J!2. X` ` ,Foreign operations Rules should be the same for all filed organizations."` E.J!Nature and Transferability of Ownership Interests(# J!1. X` ` ,Permissible contribution Rules should be the same in terms of permissable contribution (although some constitutions limit the ability of corporations to accept certain consideration for shares)."` J!2. X` ` ,Types of owners There should be no difference, except that owners who are also managers may be limited to competent adults."` J!3.&Number of owners There should no difference." J!4.&Multiple classes of ownership and default sharing rules there should be no difference." J!5. X` ` ,Transferability of interests There should be no difference except that where interests that management rights, the management rights should not be transferable without consent of the other members."` J!6.&Actions in the name of the organization against other members There should be a distinction between a contractually based organization (direct action) and a corporate organization (derivative action)." F.J!Period of Duration(# J!1. X` ` ,Period of duration There should be no distinction."` G.J!Dissolution(# J!1. X` ` ,Effect of dissociation of an owner on the continuity of the organization for state law purposes No difference among organizations although an argument may be made that the departure a party to a contractual relationship should terminate the relationship."` H.J!Reorganization and Merger(# J!1. X` ` ,Merger and reorganization The merger and reorganization provisions of the statutes should be the same providing a single set of rules for interorganizational merger."` J!2.&Conversion The statute should provide for a "seamless" conversion from one organizational form to another (similar to the registration of a partnership as an LLP).(##'0*(( #L\  Pzu{P##O P7{P# I. A. 1. a.(1)(a) i) a) I. A. 1. a.(1)(a) i) a) c ddx!ddxxLOa\zF c "bH@ @ PbH@ @ PL""Characteristic" `F 66  General  bF 0 Partnership (GP) | 0 Registered Limited 5' Liability  bF 1 Partnership (LLP) " `F K Limited Partner bF NZship (LP) " `F c Limited Liability  bF eCompany (LLC) " `F | Business Trust " `F  Corporation  `F N (C Corp |  `F@ SCorp)  bH@ @ P@@PL   sNV  8UA. General ConceptsŃ @@P@   1.RRDefinitionRU An association of two or more persons to carry on, as coowners, a business for  `Fu profit,yk Y   >$>$ ׍ X!Uniform Partnership Act (1994) ( RUPA )  101(4).y but excluding an association formed under any other  `F  statute.<k !>$>$ ׍ X!RUPA  202(b).< A partnership is an entity distinct from  `F its partners.9k .#>$>$ ׍ X!RUPA  201.9  3____________  `FK An LLP is a GP}k >$>$ ׍ X!For purposes of this chart, GP includes LLP unless a distinction is otherwise noted.} in which the owners may, in certain circumstances, be shielded from personal liability for the errors and omissions of other  `F! coowners.k Y  X>$>$ ׍X!Del. Code Ann.  61506(a), 1515(b). Unless otherwise noted, notes relating to GPs also apply to LLPs.? A partnership formed by two or more persons under the laws of this state and having one or more general partners and one or more limited  `F partners.Ώ Y  >$>$ ׍ X!Revised Uniform Limited Partnership Act, 1985 ( RULPA )  101(7).? A limited liability company organized under the laws of a  `F) particular state.R Y  >$>$ ׍ X!Uniform Limited Liability Company Act (1994) (December 19, 1994 draft) ( ULLCA ). ? An unincorporated association created by a trust instrument under which property is held or business or professional activities are carried on by trustees for the beneficial owners of the trust  `F property.M Y  ` >$>$ ׍ X!Delaware has recently enacted statutory provisions regulating business trusts. See Del.  Y Code Ann.  123801 for definition of such a trust.!? A corporation for profit, which is not a foreign corporation, organized under the laws of a  `Fu particular state. Y  >$>$ ׍ X!Model Business Corporation Act, 1984 ( MBCA ) 1.40(4)."@ L@ " 2.RRDesignation of ownersR Partners. General partners and  `Fm limited partners.E" >$>$ ׍ X!RULPA  101(5) and (6).E  `F Members.DU >$>$ ׍ X!ULLCA 202(a), 401.D Beneficial  `Fm owners._ Y  0>$>$ ׍ X!Del. Code Ann.  123801(b)._  `F Shareholders.= >$>$ ׍ X!MBCA  1.40(22).="L@ L@ ?" 3. RRManagersR1 Partners.1  `F General partners.<" P>$>$ ׍ X!RULPA403(a).<1 Members or  `F managers.wU >$>$ ׍ X!ULLCA 301. Members or managers may be designated with agency authority.w  `F Trustee._ Y  8>$>$ ׍ X!Del. Code Ann.  123801(c)._ Directors and offi `F cers.x >$>$ ׍ X!MBCA  8.01(b) (corporation's powers exercised through board of directors).x"L@ >@ " 4. RRPersons with authority to bind the organizationR!  `F_ Partners.8 >$>$ ׍ X!RUPA  301.8!  `F_ General partners.<  >$>$ ׍ X!RULPA  403(a).<! Members or man `F agers.w!T @>$>$ ׍ X!ULLCA 301. Members or managers may be designated with agency authority.w!  `F_ Trustee."m !>$>$ ׍ X!An affidavit recorded with the clerk and recorder may specify the authority of trustees to bind the trust. C.R.S.38-30-166(2).!  `F_ Officers.9# >$>$ ׍ X!MBCA  8.41.9_0*((">@ |@ " 5. RRGoverning documentsRL GP is governed by the partnership  `F agreement.;$ >$>$ ׍ X!RUPA  103(a).;  4___________ LLP is governed by a partnership agreement and the application filed with the secretary  `F^ of state.% Y  >$>$ ׍X!Del. Code Ann.  61544(a); Paciaroni v. Crane, 408 A. 2d 946 (1979). | Partnership agree `F. ment.<& x>$>$ ׍ X!RULPA  101(9).<| Operating agreement or articles of organi `F zation.'[ Y  >$>$ ׍ X!ULLCA 103 and 203. See also  Ribstein and Keatinge on Limited Liability  Y Companies ,  4.12.| Governing  `F. instrument,_( @ Y  ` >$>$ ׍ X!Del. Code Ann.  123801(f)._ sometimes bylaws.| Articles/certificates of incorporation, bylaws, and shareholder agree `F  ment.C)Y >$>$ ׍ X!MBCA  2.02, 2.06.C 0*$$   |@ @@P   sN 2XB. Formation׃ @@Pd@   1. RRJurisdiction of organizationR A GP need take no formal action to organize, but the laws of the jurisdiction in which the GP has its chief executive office will govern the internal affairs of the part `F nership.8*L >$>$ ׍ X!RUPA  106.8 Under RUPA and in some states a partnership may file a statement of partnership  `FC authority.o+L Y  >$>$ ׍ X!ASSUMED NAME CERTIFICATERUPA  303.o  4__________ A GP may become an LLP by filing an application under the laws of the state  `F' of formation.Y,L Y  >$>$ ׍X!Del. Code Ann.  61544.YE A LP may be organized by filing a certificate of limited partnership under the laws of the  `F domestic state.<- 0>$>$ ׍ X!RULPA 201(a).< An LP formed under the statute of any other jurisdiction may be registered as  `F a foreign LP.O. Y  >$>$ ׍ X!RULPA 901. OE An LLC may be organized by filing articles of organiza `F{ Ԛtion./j[ Y  P>$>$ ׍ X!ULLCA202,  Ribstein and Keatinge on Limited Liability Companies , 4.02. An LLC organized under the laws of any other state may register and the laws of that state will govern the internal affairs and liability of the mem `F bers.:0j[ >$>$ ׍ X!ULLCA 1001.:E A business trust may need to file its governing instrument to qualify to do business under a state's corporation laws. A business trust may organize under most states without taking any formal action.E A corporation is incorporated by filing articles (or certificate) of incorporation with filing officer of a state; a foreign corporation may qualify to do business upon application to a filing officer in most  `FQ states.1r] 8>$>$ ׍ X!MBCA 2.03 (incorporation); 15.05 (qualification of foreign corporation to transact business)."d@  @ " 2. RRFiled documentR None, although some states authorize the filing of statements of authority or limita `F  tion of authority.82· >$>$ ׍ X!RUPA  303.8 Many states also have assumed name statutes that require the filing of a document disclosing the names of the partners.  3____________ An LLP must file  `F- an application.X3· >$>$ ׍X!The application must state (1) the name of the LLP; (2) address of the registered office and name of the registered agent for service of process; (3) number of partners; (4) brief statement of the business in which the LLP engages; (5) that the partnership applies for  Y status as an LLP. Del. Code Ann.  61544(a). The application must be amended to reflect changes in the name of the LLP or changes with respect to the registered agent.  Y Amendments for other changes are optional. Del. Code Ann.  61550. XK Certificate of limited  `Fs partnership.94) >$>$ ׍ X!RULPA 201.9K Articles of organiza `Fs tion.5Y Y  >$>$ ׍ X!ULLCA202, 203,  Ribstein and Keatinge on Limited Liability Companies ,  4.02.K Trust instrument or certificates of trust.K Articles of  `Fs incorporation.96[ >$>$ ׍ X!MBCA 2.02.9s0*$$  " @  @ E" 3. RREffect of filed documentR Statements of authority have a disclosure effect with respect to real estate and others  `F aware of it.;7 x>$>$ ׍ X!RUPA  303(d).;  5_________ Effect for LLP is notice. Filing is effective for one year and must be renewed annually by filing a renewal  `F application.f8 Y  >$>$ ׍X!Del. Code Ann.  61551, 1544(e).f  `F Disclosure.9] Y  >$>$ ׍ X!RULPA 208 (serves as notice only of those matters required to be included). Disclosure and gov `F. ernance.: Z Y  >$>$ ׍ X!ULLCA  203,  Ribstein and Keatinge on Limited Liability Companies ,  4.05. Disclosure and prima facie evidence of those identified as authorized to  `F act.F;o> H >$>$ ׍ X!C.R.S.38-30-166(2)(b).F 9Eu VPrincipal governing  `F. document.[<(\ >$>$ ׍ X!MBCA  2.06(b) (articles prevail over bylaws).[" @ A  " 4. RRNameR No restriction as to  `FB name.t= h>$>$ ׍ X!RUPA  204(a) allows a partnership to acquire property in its own name.t   5________ Name of LLP must contain the words  aE registered limited liability partner aF& ship, the abbrevia aF tion L.L.P., or the  aFt designation LLP as the last words or  `F letters.Y> Y  >$>$ ׍X!Del. Code Ann.  61545.Y Must include without abbreviation  aF the words limited  aF partnership, and may not include the name of a limited partner who is not also a general  `F partner.9?u P>$>$ ׍ X!RULPA 102.9  aF Must include limited  aFC liability company,  aF limited company,  aF L.L.C., LLC, L.C.,  aF8 LC, ltd. liability  aF company, ltd.  aF liability co., limited  aF- liability co., ltd.  aF company, limited  aF{ co., or ltd. co.@8] Y  >$>$ ׍ X!ULLCA105(a),  Ribstein and Keatinge on Limited Liability Companies ,  4.07. No restriction as to name.  aF Must include cor aFC poration, incorpor aF ated, company, or  aF limited or the ab aF8 breviation corp.,  aF inc., co., or ltd. or words or abbreviations of like import in another lang `Fx uage.?A@[ 8>$>$ ׍ X!MBCA 4.01(a)(1).? A  BBR   sN QC. Management and Ownership׃ BBR@   1. RRStatutorily designated agentR  `F Partner.dBj >$>$ ׍ X!RUPA does not (nor did the UPA) specify a statutory agent.d  `F General partner.9Cŕ >$>$ ׍ X!RULPA 403.9 Member or  `F. manager.9DY >$>$ ׍ X!ULLCA301.9 Trustee.  `F Officers.gE[ @>$>$ ׍ X!MBCA 8.01(b) (board of directors); 8.41 (officers).g"@ @ " 2. RRRequirement of filing identifying agents for service of processR| No for GP.  5_________  `Fl Yes for LLP.fFЅ Y  >$>$ ׍X!Del. Code Ann.  61544(a), 1549.f|  `Fz Yes.9G+ `">$>$ ׍ X!RULPA  104.9|  `Fz Yes.9H[ >$>$ ׍ X!ULLCA 108.9| Varies.|  `Fz Yes.IY >$>$ ׍ X!MBCA 2.02(a)(3) (articles of incorporation); C.R.S.15.03(a)(4) (qualification of foreign corporation).z 0*$$  "@  @ " 3. RRVoting power of ownersR Unless otherwise agreed, general partners determine disputes in the ordinary course of business by a majority of the partners and disputes outside the ordinary course of business and amendments of the partnership agreement by un `F animous vote.;J^ >$>$ ׍ X!RUPA  401(j).; Unless otherwise agreed in writing, all partners (including the limited partners) have the right to consent to: admission of new  `F general partners,9K @>$>$ ׍ X!RULPA 401.9 the admission of as `F signees,<L >$>$ ׍ X!RULPA 704(a).< the compromise of a partner's obligation to  `F contribute,M ` >$>$ ׍ X!RULPA 7-62-502(b) (apparently, exception need not be in writing, although consent must be in writing). dissolution of the part `FB nership,<N >$>$ ׍ X!RULPA 801(3).< and continuation after an event of withdraw `F4 al.<O H >$>$ ׍ X!RULPA 801(4).<R  Unless modified by the operating agreement each member of the LLC has an equal vote, and differences are resolved by a majority vote of the members, except for the following items which are decided by unanimous vote: (1) amendment of the operating agreement, (2) ratification of breaches of the duty of loyalty, (3) amendment of the articles of organization, (4) compromise of an obligation to make a contribution, (5) compromise of an obligation to return improper distributions, (6) approval of interim distributions, (7) admission of a new member, (8) use of LLC property to redeem a charging order, (9) dissolution of the LLC, (10) consent to continue the business of the LLC after a member's dissociation, (11) merger of the LLC, (12) disposition of substantially all of the LLC's property out of the ordinary course of the  `F business.9P|Z >$>$ ׍ X!ULLCA  404.9  / Established in the governing instrument. / Absent alternative provisions in the articles of incorporation or in voting trusts or voting agreements, each share is entitled to one  `F vote.<Q\ h>$>$ ׍ X!MBCA 7.21(a).< Hu _________ S corporations may not have more than one class of stock; although a mere difference in voting rights will not constitute a second class of stock for  `F this purpose.?R\ >$>$ ׍X!I.R.C. 1361(c)(4).? 0*$$  " @  @ " 4. RRPermissible participation in managementR> Partners have statutory right to participate in manage `Fz ment.;S >$>$ ׍ X!RUPA 401(f).;> General partners may participate in management but limited partners are prohibited from participating in control  `Fl of the business.Ta >$>$ ׍ X!RULPA303. A limited partner who participates in control of the business of the LP is "liable to persons who transact business with the LP reasonably believing (notwithstanding the fact that the limited partner is not designated as a general partner in the certificate of limited partnership), based upon the limited partner's conduct, that the limited partner is a general partner." RULPA303(a). Members or managers may participate in  `Fz management.YU$Z >$>$ ׍ X!ULLCA  404 (management),  301 (agency).Y Generally beneficial owners may direct the trustee. However, under the  aFl control test, applicable in some states, beneficial owners who participate in management may be liable as general partners. Shareholders participate in management by electing representative directors to determine policy and appoint officers as  `F agents.V,\ >$>$ ׍ X!MBCA 7.28(a) (shareholder vote for directors); 8.01(b) (board's management of corporate business and affairs); 8.40(b) (officers appointed by board or in other manner as board provides)." @  @ " 5. RRAbility of owners to transact business with the organizationR A partner may lend money to and transact other business with the partnership subject to other  `F applicable law.;W !>$>$ ׍ X!RUPA  404(f).; On winding up, creditors who are partners share with other creditors to the extent permitted  `F by law.;X (#>$>$ ׍ X!RUPA  807(a).; Partners may transact business with the partnership, and will have the same rights and obligations as  `F third parties.9Y >$>$ ׍ X!RULPA  107.9 On dissolution, creditors who are partners share equally with nonpartner creditors to the extent  `F permitted by law.<Z >$>$ ׍ X!RULPA  804(1).< Members may transact business with the LLC, and subject to other applicable law, have the same rights and duties as persons who are not managers or mem `F bers.<[\ >$>$ ׍ X!ULLCA  409(b).< On dissolution, creditors who are members share equally with nonmember credi `F  Ԛtors.<\\ >$>$ ׍ X!ULLCA  806(a).<) Presumably, rules against fiduciary selfdealing would interfere with transactions between the trustee and the trust.) While there are no prohibitions on transactions between the corporation and the shareholder, directors may only transact business with the corporation after disclosure and approval or if the transaction is fair to the cor `F poration.9]Z @>$>$ ׍ X!MBCA  8.31.9 0*$$  " @ $@  " 6. RRLiability of owners for obligations of the organizationR> Partners are jointly and severally liable for the obligations  `Fz of the GP.^ >$>$ ׍ X!RUPA  306(a). A person admitted to the partnership is not liable for any partnership obligation incurred before the person's admission as a partner. RUPA  306(b). Creditors must attempt to execute against the GP before pursuing a partner unless the partner has agreed  `F to the contrary.;_ >$>$ ׍ X!RUPA  307(d).;  4__________ Under most statutes. partners of an LLP are jointly and severally liable for the obligations of the LLP, except that a partner is not liable, directly or indirectly, by way of indemnification, contribution, assessment or otherwise, for the debts, obligations, or liabilities of or chargeable to the LLP arising from negligence, wrongful acts or misconduct, whether characterized as tort, contract, or otherwise, committed in the course of the partnership business by another partner or an employee, agent, or representative of the LLP. The New York and Minnesota statutes eliminate the partners' individual liabilities for all obligations of the  `F LLP.` >$>$ ׍! Note that Minnesota has enacted an LLP statute that provides: !A partner of a limited liability partnership is not, merely on account of this status, personally liable for anything chargeable to the partnership under sections 323.12 and 323.13, or for any other debts or obligations of the limited liability partnership, if the charge, debt, or obligation arose or accrued while the partnership had a registration in effect under section 323.44. This subdivision does not limit or impair the right of the partnership or its partners to make claims against any particular partner on the grounds that the particular partner:" J!(1) has, in its capacity as a partner, breached a duty to the partnership or to the other partners; or(# X!(2) is obligated to contribute so that partners share losses of capital according to section 323.17 and share the liabilities stated in section 323.39, clause (2), paragraphs (c) and (d).(#  Y !&` ` ,b b 1 7BMinn. Stat.  323.14, Subdivision 2.  Yy See, also N.Y. Partnership Law 26(b) (1994).  A partner in an LLP remains liable for his own negligence,T wrongful acts, or misconduct or that of any person under his direction or control.YTV yO  H "%% ׍  Del. Code Ann.  61515.Y֥$5 General partners are jointly and severally liable for the obliga `Fz tions of the LP.KaQ >$>$ ׍ X!RULPA 403(b); RUPA 306.K Limited partners are not personally liable for the obligations of  `F the LP.<bQ `">$>$ ׍ X!RULPA 303(a).< $5 Unless otherwise agreed, members and managers are not liable for any debt, obligation, or liability of the  `Fl LLC.9cZ >$>$ ׍ X!ULLCA 303.9$5 Beneficial owners are generally not  `Fz liable.dc> Y  >$>$ ׍ X!Del. Code Ann.  123803 (1992). But, under the "control test" applicable in some states, beneficial owners who participate in management are liable as partners.$5 None, except as may arise through piercing the corporate veil (disregarding the corporate entity) and as a shareholder is liable for shareholder's own  `F^ acts.<e\ >$>$ ׍ X!MBCA  6.22(b).<^ 0*$$  "$@ @ " 7. RRLiability of owners to the organization and other ownersR A partner is liable for breaches of fiduciary duties of care and loyalty and to discharge these duties and other duties under the act and the partnership agreement consistently with the obligation of good faith and fair  `FP dealing,B f2 @>$>$ ׍ X!RUPA  404, which provides:(# !(a) The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in subsections (b) and (c)." !(b) A partner's duty of loyalty to the partnership and the other partners is limited to the following:(# J!&(1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use or appropriation by the partner of partnership property, including the appropriation of a partnership opportunity;(# J!&(2) to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and! J!&(3) to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.(# !(c) A partner's duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.(# !(d) A partner shall discharge the duties to the partnership and the other partners under this [Act] or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing.(# !(e) A partner does not violate a duty or obligation under this [Act] or under the partnership agreement merely because the partner's conduct furthers the partner's own interest.(# !(f) A partner may lend money to and transact other business with the partnership, and as to each loan or transaction, the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law.(# !(g) This section applies to a person winding up the partnership business as the personal or legal representative of the last surviving partner as if the person were a partner.B 404 and to contribute to pay partnership obligations on winding  `F up.;g2 >$>$ ׍ X!RUPA  807(b).;  A general partner has the same liability as in a  `Fz GP.<h >$>$ ׍ X!RULPA 403(b).< Limited and general partners are also liable for unmade contribu `F tionsi @>$>$ ׍ X!RULPA 502 (partner liable for any enforceable obligation to contribute, but a creditor may enforce only if the creditor extends credit or otherwise acts in reliance on the obligation). and for  `F certain rightfulAj ( >$>$ ׍ X!RULPA 608(b) (obligation, for one year after return, to restore contribution to the extent necessary to discharge the limited partnership's liability to creditors who extended credit to the limited partnership during the period the contribution was held by the partnership).A  `F^ and wrongfulk >$>$ ׍ X!RULPA608(b) (partners liable for six years for returns of contributions that violate the statute or the partnership agreement). returns of contributions.   Members (in a membermanaged LLC) and managers generally are liable for breaches of  `F fiduciary duties.9lP\ >$>$ ׍ X!ULLCA  409.9 Members are liable to make their agreed  `F contributions.<mP\ >$>$ ׍ X!ULLCA  402(a).< Managers and members assenting to, or knowingly receiving wrongful distributions are liable to restore such  `FB distributions.nP\ Y  >$>$ ׍ X!ULLCA  407, See also  Ribstein and Keatinge on Limited Liability Companies ,  5.07, 6.05.  Beneficial owners have the same liabilities as shareholders in private corpora `Fl tions._o@ Y  p>$>$ ׍ X!Del. Code Ann.  123803(a)._ Except as provided in the governing instrument or trust document, a beneficial owner is obligated to perform any promise to contribute or contribute cash equal to the contribution not made. Shareholders are liable to the corporation and its creditors to pay the consideration for which shares are  `Fl issued.7pXZ >$>$ ׍ X!MBCA  621.7 Directors are liable for wrongful distributions and entitled to contribution from shareholders knowing that the distribution was  `F wrongful.7qXZ >$>$ ׍X!MBCA  8.33.7"@ TA  " 8. RRPiercing the corporate veilR By statute, creditors of the GP may reach the assets of partners directly after attempting to collect their judgment against the GP, so there is no need to pierce  `F the entity veil.r  >$>$ ׍!RUPA  307(d). Under UPA, which is still in effect in most states, a creditor could seek to recover a partnership claim against the personal assets of the partner without first seeking to recover the judgment out of partnership assets.  5_________ Creditors of the LLP may reach the assets of partners except with respect to limitation on liability for errors and omissions of other partners, employees and  `F agents.&s  Y   >$>$ ׍X!Del. Code Ann.  61515. But see Minn. Stat.  323.14 Subdivision 2 (the case law that states the conditions and circumstances under which the corporate veil of a corporation may be pierced under Minnesota law also applies to limited liability partnerships, but the use of informal procedures or arrangements for managing the limited liability partnership or conducting its business is not a ground for piercing the veil of the limited liability partnership.)(# & With respect to limited partners, courts have other means of imposing personal liability on limited partners that participate in manage `F Ԛment.tg >$>$ ׍X!RULPA 303 (although all liability under this section is based on the creditor's not having notice or knowledge that the limited partner is not a general partner).  The doctrine of piercing the corporate veil is not expressly applicable to LLCs. Failure to observe the usual  aF  formalities will not, however, be grounds for imposing personal liability on  `FI members.u*[ Y  >$>$ ׍X!ULLCA  303(b),  Ribstein and Keatinge on Limited Liability Companies ,  12.03. Generally not applied to business trusts. Beneficial owners may be liable if they participate in management. Generally under common law the corporate entity may be disregarded for several  `Fd reasons.tv2] ` >$>$ ׍X!For example, under Colorado law, a corporation's veil may be pierced when a shareholder exercises control over the corporation for an improper purpose to cause harm  Y to a creditor of the corporation. M.A.Sabian, Piercing the Corporate Veil: Limited  Y Liability, 15 Colo. Law. 795 (1986).td 0*$$  "TA   @ " 9. RRDuties of owners RL A partner has the fiduciary duties described  `Fz above,_w· >$>$ ׍X!RUPA  404 discussed above at note  404101 ._ and to render information with respect to the  `Fl partnership.9x· >$>$ ׍X!RUPA  403(c).9  A general partner in an LP has duties similar to those owed by a general  `F  partner in a GP.7y) 0>$>$ ׍X!RULPA 403.7 A limited partner may have a duty not to profit on confidential informa `F^ tion.z) >$>$ ׍X!RULPA 107 permits a partner to transact business with the limited partnership, without addressing the issue of using confidential information in a transaction with the limited partnership.| Members of a membermanaged LLC and managers have duties similar to those of general partners under  `Fl RUPA.{Y Y  >$>$ ׍X!ULLCA 409,  Ribstein and Keatinge on Limited Liability Companies ,  9.02. Members of a managermanaged LLC who are not managers owe no duties except to the extent they participate in  `F management.:|Y >$>$ ׍X!ULLCA  409(h).:  Trustees have fiduciary duties of care, loyalty and candor to the beneficial owners.  Directors and officers are subject to statutory duties of good faith, exercise of care of ordinarily prudent person, and conduct reasonably believed to be in best interests of the  `F corporation.[}[ >$>$ ׍X!MBCA 8.30 (directors) and 8.42 (officers).[ The business judgment rule also establishes standards of conduct, if not fiduciary standards." @ $ A  "  10. RRInsurance or Financial Responsibility Requirement RT None for GP  5_________ Under several of the statutes, LLPs must carry minimum amounts of insurance or provide a bond or segregated amounts to cover the sorts of liabilities to which the LLP  `F statute applies.j~B Y  >$>$ ׍X!See, e.g., Del. Code Ann.  61546.j* None.* None.* None.* None. 0*$$   $ A  BBR   sN ]I D. Doing Business in Foreign Jurisdictions׃ BBR@   1. RRForeign organizationsR] Unless otherwise stated in the partnership agreement, the laws of the state in which the chief executive office is located govern the relationship of the partners and the relationship between the partners and the  `F GP.60 >$>$ ׍X!RUPA  106.6 As there is no required filing by a GP, there is no limitation on a foreign GP's entering the  `F domestic state.0 @>$>$ ׍X!Note, however, that a general partner that is conducting the partnership's business in another state may have to file quarterly to conduct business if the general partner is a corporation, LLC or LP.  5_________ An LLP organized under the laws of another jurisdiction may do business in the domestic jurisdiction. Some states require registration of  `F  foreign LLPs.w0 Y  (#>$>$ ׍X!See, e.g., Va. Code Ann.  5043.4; 5043.7.w+ An LP organized under the laws of another jurisdiction may do business in the domestic jurisdiction by reg `F} Ԛistering,7 >$>$ ׍X!RULPA 902.7 and the law of the state of organization will govern the organization and internal affairs and the liability of the mem `F bers.P >$>$ ׍X!RULPAINTERNAL AFFAIRSנ901.P+ An LLC organized under the laws of another jurisdiction may do business in the domestic jurisdiction by registering with the secretary of  `F state,8NZ >$>$ ׍X!ULLCA  1002.8 and the law of the state of organization will govern the internal affairs and the liability of the mem `F bers.8NZ >$>$ ׍X!ULLCA  1001.8+ A foreign business trust may transact business if it has a trustee or place of business in the  `F# state.Z> Y  @>$>$ ׍X!Del. Code Ann.  123807.Z+ A foreign corporation may file an application for authority to transact business, with secretary of state, but its internal affairs remain subject to the law of the jurisdiction of or `F Ԛganization.QV\ Y  >$>$ ׍X!MBCA  15.05(c).Q 0*$$  "@  A  " 2. RRForeign operationsR\  aF There is no powers provision in RUPA, and there is no limitation on a GP's engaging in business outside the state of organization.  4___________ Some statutes contain an express policy for the application of internal affairs doctrine and contemplate the right of the LLP to operate internationally and  `F in other states.\އ Y  ` >$>$ ׍X!Del. Code Ann.  61547(b).\  There is no express statement about the extraterritorial effect of the law under which an LP is formed, the statute reflects the intention that the internal affairs and liability of partners in an LP be governed by the law of the state of  `F organization.O9 >$>$ ׍X!See note INTERNAL AFFAIRS130.O  An LLC may conduct its business and exercise its powers within or without the state of  `F organization,:Y >$>$ ׍X!ULLCA  112(8).: and it is expressly the purpose of the legislature to make uniform the laws with respect to  `F LLCs.8Y >$>$ ׍X!ULLCA 1201.8  It is unclear how business trusts will be treated outside of their jurisdiction of organization.  A corporation generally has the power to transact business every `F  Ԛwhere.;\ >$>$ ׍X!MBCA  3.02(10).; 0*$$    A  BBR   sN  DE. Nature and Transferability of Ownership Interests׃ BBRBP   1. RRPermissible contributionR# There is no limitation on the permissible contribution to a GP.o A general or limited partner may contribute cash, property, or services rendered or a promissory note or other obligation to contribute cash or property or to per `F form services.7 0>$>$ ׍X!RULPA501.7   A member may contribute cash, property, promissory notes, services performed, or promises to contribute property or perform services in  `F the future.Z Y  >$>$ ׍X!ULLCA  401,  Ribstein and Keatinge on Limited Liability Companies   5.04.֬  No contributions are required if property is conveyed by grantors. Generally, property or services are permissible.   A shareholder may contribute tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, and other securities of the  `F5 corporation.:\ >$>$ ׍X!MBCA 6.21(b).:"BP |P " 2. RRTypes of ownersR  There are no limitations on the ownership of an interest  `F in a GP.l >$>$ ׍X!Under RUPA101(4) a partnership is the association of one or more "persons." Under RUPA  101(8), "person" means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or other legal or commercial entity.l  There are no limitations on the ownership of interest (general or limited) in an  `Fs LP. >$>$ ׍X!RULPA 101(11) defines "person" as a natural person, partnership, limited partnership (domestic or foreign), trust, estate, association, or corporation. Both general partner and limited partners are defined as "persons". RULPA 101(5) and (6). While LLCs are not included in the definition of "person" in RULPA 101(11), the term "association" should include LLCs. There are no limitations of who may be  `F' a member./[ >$>$ ׍X!ULLCA 101(13) defines "person" to include any individual, corporation, business trust, partnership, limited liability company, association, joint venture, government or governmental subdivision, agency, or instrumentality or other legal or commercial entity./ No limitations. No limitation for a C corporation. &u __________ Nonresident aliens and entities other than certain trusts and estates may not own interests in an  `F S corporation.JY >$>$ ׍X!I.R.C. 1361(b)(1)(B) and (C).J"|P n @ S " 3.RRNumber of ownersR There must be at least two partners  `F in a GP.9h @>$>$ ׍X!RUPA  101(4).9 An LP must have at least two partners, at least one of whom is a general partner and one of whom is a limited part `F; ner.>× >$>$ ׍X!RULPA  101(7).>Y An LLC may have as few as one  `F member.Y Y  ` >$>$ ׍X!ULLCA  202(a). For a discussion of the taxation of oneperson LLCs, see  Ribstein  Y and Keatinge on Limited Liability Companies  at  16.19.Y No limitations.Y There are no limitations on the number of shareholders of a C corporation. u ___________ An S corporation cannot have more than 35 shareholders at any time during the  `F year.Y >$>$ ׍X!I.R.C. 1361(b)(1)(A). For this purpose, husband and wife are counted as one shareholder.0*$$  "n @  @ " 4.RRMultiple classes of ownership and default sharing rulesR The partners in a GP may make any financial arrangements they desire, but, in the absence of an agreement, the general partners  aF will share on a per  aF capita basis.9 >$>$ ׍X!RUPA  401(b).9 The partners in an LP can make any financial arrangement they desire, but, in the absence of an agreement, the partners will share in  aF distributions in proportion to the value  aF of contributions.7 h>$>$ ׍X!RULPA 504.7$ The members can make any financial arrangement they desire. In the absence of an agreement, members share equally in  `F distributions.]\ >$>$ ׍X!ULLCA  406. This provision will be reconsidered.]$ A business trust may have different classes or series with different rights.$ A C corporation may have different classes of stock with different  `F  voting rights.:Z >$>$ ׍X!MBCA 6.01(a).: u ___________ An S corporation is prohibited from having more than one class of  `F stock,9Z >$>$ ׍X!I.R.C.  1361.9 but it may have voting and nonvoting  `F stock.?Z >$>$ ׍X!I.R.C. 1361(c)(4).?" @ @ " 5. RRTransferability of interestsR   aFB A partner's transferrable interest in  aF the partnership may  `F6 be transferred,Ά 8>$>$ ׍X!RUPA  502. The transferrable interest is the partner's share of profits and losses and  Y rights to receive distributions. Id.ľ but the transferee will not become a partner without the consent of the remaining part `F ners.Ά >$>$ ׍X!RUPA  401 (i) (a person may become a partner only with the consent of all the partners).8 The interest of a general or limited partner is transferable, but the assignee may only be admitted as a substituted partner as provided in the partnership agreement or with the consent of all  `Fd partners.) >$>$ ׍X!RULPA 301(1)(a) (admission of limited partners) and 401 (admission of general partners). A membership (distributionial) interest is freely transferrable, but the assignee may not be admitted as a member without the unanimous consent of the other mem `F bers.\ @>$>$ ׍X!ULLCA 404(c)(9), 502, 503(a). A distributional interest is defined as "all of a member's interest in distributions by the LLC. ULLCA  101(5). Beneficial ownership interests are freely transferable.  Shares are freely transferable, subject to restrictions contained in the articles/certificate of incorporation, bylaws, or a shareholder agree `Fr ment.7Z `">$>$ ׍X!MBCA  6.27.7"@  @  " 6.RRActions in the name of the organization against other membersR  A GP may bring an action against a partner for breach of the partnership agreement or violation of a duty to the  `F partnership. >$>$ ׍X!RUPA  405(a). Presumably under RUPA  401(j) (differences in the ordinary course of business) such a suit would have to be authorized by a majority of the partners. A partner may bring an action, with or without an accounting, against the partnership or another  `F partner.9 >$>$ ׍X!RUPA  405(b).9< A general partner in an LP has the same rights as a general  `F partner in a GP.: >$>$ ׍X!RULPA 403(a).: A limited partner has the right to an  `F accounting: @>$>$ ׍X!RULPA 305(2).: and to a derivative ac `F: tion.8 >$>$ ׍X!RULPA1001.8< An LLC may bring an action against a member for breach of the operating agreement or violation of a duty to the LLC. A member may bring an action, with or without an accounting, against the LLC or another  `F member.;\ ` >$>$ ׍X!ULLCA  410(a). ;< A beneficiary may bring an action against a trustee for violation of duty or breach of agreement. A trustee may bring an action against a beneficiary for breach of agreement.< A shareholder may enforce a corporation's rights through a derivative  `FH action.HZ >$>$ ׍X!MBCA  7.40 through 7.47.H  @ @@P   sN TF. Period of Duration׃0*$$   @@Pu @ <  1. RRPeriod of durationRl A GP is not required to have a term. It may be organized  aF as either an atwill  aFA GP or a GP for a definite term or particular under aF4 taking.E >$>$ ׍X!RUPA  101(6), 801(2).E  5_________ Provided that renewal applications are filed annually, an LLP continues until dissolved by the partners or by operation of  `FW law.j Y  >$>$ ׍X!See, e.g., Del. Code Ann.  61531.ju  An LP must set forth the latest date on which the LP is  `F to dissolve.> >$>$ ׍X!RULPA  103(a)(4).> A limited partner can  aF only be locked in if there is specified, in writing in the partnership agreement, a definite time or event upon which the limited partner  `Fq may withdraw.7 0>$>$ ׍X!RULPA 603.7u  An LLC is not required to have a term. It may be organized as either  aF@ an atwill or a  aF specified term  `F LLC.R[ Y  >$>$ ׍!See ULLCA  203(d).Ru  Business trusts have perpetual duration unless a shorter period provided.u  A corporation has perpetual duration unless limited in the articles/certificate of incorpora `F tion.7Y P>$>$ ׍X!MBCA 3.02.70*$$   u @ @@P   sN  WG. Dissolution׃ @@P@   1. RREffect of dissociation of an owner on the continuity of the organization for state law purposes.R Under RUPA a  aE partnership at will will dissolve upon the express will of any partner, or the expulsion, bankruptcy, or death of  `F any partner.9 >$>$ ׍X!RUPA  801(1).9 A  aE partnership for a definite term or particular undertak aF ing will dissolve 90 days after a dissociation unless a majority in interest of the remaining partners choose to continue the  `F partnership,< p>$>$ ׍X!RUPA  801(2)(i).< or on the express will of all the partners or the expiration of the term or the completion of the  `F undertaking.G >$>$ ׍X!RUPA  801(2)(ii) and (iii).G The dissolution can be retroactively waived by agreement of all the partners, including the dissociated partner, at any time before the liquidation is  `Fv completed.7 >$>$ ׍!RUPA  802(b).7  5_________ To the extent LLPs are based on the Uniform Partnership Act, the causes of dissolution may  `FL differ.j Y  >$>$ ׍X!See, e.g., Del. Code Ann.  61530.jj+ An LP will dissolve on the withdrawal of a general partner, unless there is at least one remaining general partner who continues the business under a written provision of the partnership agreement or unless all  `F partners agree.WW >$>$ ׍X!RULPA 801(4). If there is no remaining general partner who so continues the business, then, if the partnership is not to dissolve, all partners must agree in writing, within ninety days after the triggering withdrawal, to continue the business and to the admission of one or more general partners.Wj+ An LLC will dissolve upon the  aE dissociation of a member of an atwill LLC, or the dissociation of a member by death, bankruptcy, or dissolution of a mem aE? ber of a term LLC unless within 90 days of after the dissociation a majority in interest of all the remaining members agree to continue the business or there is an alternative right to do so contained in the operating agree `F ment.:\ `">$>$ ׍X!ULLCA  801(3).: The dissolution can be retroactively waived by agreement of all the members, including the dissociated partner, at any time before the liquidation is  `F completed.8\ >$>$ ׍!ULLCA  802(b).8j+ The dissociation of a beneficial owner (through redemption or otherwise) will not affect the continuity of the trust.j+ Shares may be freely traded, redeemed or issued without effecting a dissolution of the  `F corporation."Z >$>$ ׍X!Under MBCA 14.02, voluntary dissolution after issuance of shares requires approval by a majority of the shares entitled to vote on the dissolution. A corporation may also be dissolved administratively for failure to comply with filing and other administrative rules (MBCA 14.21) or judicially dissolved for deadlock or abuse of authority, etc. (MBCA 14.31). @ @@P   sN PH. Reorganization and Merger׃ 0*$$   @@P B  j  1. RRMerger and reorganizationRB Under RUPA a GP can convert into an  `F LP6t >$>$ ׍X!RUPA  902.6 and can merge with a GP or  `F@ LP.6t ` >$>$ ׍X!RUPA  905.6   5________ A GP can become an LLP by filing an  `F~ application.Yt Y  >$>$ ׍X!Del. Code Ann.  61544.Y An LP can become an LLP by complying with the applicable provisions of the  `Fb statute.Yt Y  >$>$ ׍X!Del. Code Ann.  61553.Y  There are no provisions for the merger of an LP in RULPA, but RUPA permits an LP to  `F merge with,6Ϙ >$>$ ׍X!RUPA  905.6 and  `F convert into,6Ϙ >$>$ ׍X!RUPA  903.6 a GP.  LLCs may merge with other LLCs or other business organizations and partnerships may convert into  `F LLCs.G\ 0>$>$ ׍X!ULLCA  901 through 907.G  The ability of business trusts to merge is unclear. Delaware's statute makes clear, and other statutes suggest, that business trusts may  `F$ merge.@ Y  >$>$ ׍X!Del. Code Ann.  123815; Tex. Bus. Corp. Act art. 1.02(13), 5.01.ĕ  A corporation may merge with another domestic or a foreign cor `F@ poration.Z P>$>$ ׍X!MBCA  11.01 (merger with domestic corporation); MBCA  11.02 (share exchange); MBCA11.17 (merger with foreign corporation). B  &b V V 0*$$    Y #Xw P7[hXP#bZAppendix sPDiscussions regarding UNICORN    From: Martin I. Lubaroff -- Richards Layton - Wil Date: Tue May 30 14:30:39 1995 Subject: Universal Unincorp. Entity George Coleman, Bob Keatinge and others have raised questions concerning the possibility of a "universal unincorporated entity" statute. While the topic has been raised in a number of transmissions, I am not certain that it is within the scope of the current program. I do, however, want to make the following observations. I find myself wondering whether it is advisable to rush into creating (or trying to create) such a statute. Would we all be better off getting some experience under our belts with the host of new entities (LLCs, LLPs and even LLLPs) that have been created and new statutes (RUPA) before we charge off and try to put them all together (it sounds like humpty dumpty)? Aren't we more likely to do it right (indeed, even know if we should try to do it) if we first have a better understanding of what we've done to this point, make certain it works and, if necessary, do some fine tuning, before trying to deal with a universal statute? As many of the panelists know, being leading edge is not something of which I'm afraid. I do, however, get concerned when an idea to do something (in this case, having a universal unincorporated entity statute) becomes voguish and develops a life of its own before an in-depth discussion has taken place concerning the wisdom of doing it. This may be one of those things that cannot be turned off, but I believe that the wisdom of doing such a statute now is something that deserves discussion. Let me take a few minutes to look, from another perspective, at the substantive question that I am raising. I believe that it is probable that were a universal statute to be proposed, it would adopt what we can call a "hub and spokes" approach. The hub would be provisions common to all unincorporated entities covered by the statute, and the spokes would be provisions relating only to a certain type of entity. At the risk of oversimplifying, I believe that a (if not the) principal facet of the hub would basically be administrative matters (e.g., matters relating to life cycle events (e.g., formation, amendments, merger, cancellation, foreign qualification, etc.)). To this point, in Delaware, and my guess is in other states, we have not had any real difficulty in standardizing those areas as we move from statute to statute. Thus, if you take a look at the Delaware Revised Uniform Limited Partnership Act and Limited Liability Company Act you will find that we have intentionally used procedures that are similar to each other. As we move forward with RUPA, I suspect that we shall be doing the same thing in the general partnership (and, as a result, LLP) area. The key point is, however, that we have been able to standardize certain areas right in the separate statute involved in those areas. #'0*((ԌLooking at the foregoing more closely, however, you very quickly become aware of the fact that there are real, substantial limitations on what can be done in the hub. Thus, for example, each different type of entity is defined separately, thereby necessitating an immediate spoke. Further, there tends to be something unique even at the formation stage for each different type of entity which some states have felt appropriate to have reflected in a formation document (e.g., who the general partner of a limited partnership is, what the management structure of an LLC is, fundamental information concerning the makeup or activities of an entity, etc.). Again, the foregoing, even at the hub stage, necessitates spokes. In light of the foregoing, one could ask what is really being achieved within the hub, beyond the uniformity already achieved to date within separate statutes. The second phase of my hypothetical universal statute would be the spokes. By definition, the spokes are customized to specific types of entities. As a result, by definition, in the spokes, a draftsperson would have to deal with all of the questions which are dealt with today in each of the separate entity statutes. As a result, it is not clear to me what would be achieved by having to redraft (and probably rehash) a lot of matters which are already in existing separate entity statutes (some of which, as noted above, are still relatively new and at the incubator stage). When all is said and done, I am not certain what would have been achieved through a universal statute (other than having created something that may be quite complex), that cannot be dealt with, at this point, through working with the individual entity statutes. In raising the foregoing questions and making the foregoing comments, I do not intend to indicate that I am opposed or even predisposed to object to a universal statute. What I want to do is to make certain that the topic is discussed before I find myself confronted with a train coming down a track. Comments are invited. ============ Appended by: Paul Hood -- Deutsch Kerrigan - New Orleans Date: Tue May 30 18:54:31 1995 Subject: whither federalism-model acts redux It seems to me that uniformity in entity has a lot of appeal, not only from a tax perspective but also from a policy/economic standpoint. However, I don't think that one will ever see this as long as these matters are governed by state law. And while the spectre of a federal property law continues to rise, slowly but surely, I don't think that we'll see a federal corporate or enity law anytime soon. And wasn't one of the desired benefits of the uniform acts that of uniformity? Yet this has never deterred significant departures from, and modifications of, the uniform acts. ============ Appended by: Robert R. Keatinge -- Holland & Hart - Denver Date: Wed May 31 20:58:29 1995 Subject: Universal Unincorp. Entity Marty, I am not sure that we are talking about something terribly different. What I, and I believe George, are talking about is an attempt to toroughly go through the acts, standardize(0*0*0* what needs to be standardized and the vary what needs to be varied. This started with the discussion of a "junction box" merger statute for interentity mergers. Such a statute would avoid the confusion that arises, for example, in RUPA where the general partnership statute describes what a limited partnership must do to merge. While we are all trying to conform the various statutes with which we deal, it seems the safer route to have a single statute (a "hub" if you will) with provisions that should be consistent. The question that needs attention in any case, it seems to me, is what provisions would be in the hub and what in the spokes. The problem can be seen especially well if one looks at the uniform acts. Each generation (or different act) approaches questions with more experience that the previous one. Thus, there are inconsistent provisions dealing with the same issue. Once the appropriate treatment of an issue is determined, does it make sense to set it down in three or four places? I anticipate we will deal with this not only in Chicago at the ABA meeting, but in future meetings of the joint editorial board. In any case, I think it useful to determine what provisions should be consistent among the statutes. ============ Appended by: Aileen R. Leventon -- Atty-Leventon, A. - New York Date: Thu Jun 1 22:19:02 1995 Subject: Universal Unincorp. Entity George, Marty, Bob, and others: What is the effect of the IRS "check the box " proposal on your uniform unincorporated entity? Does the flexibility afforded by the tax analysis...should the proposal come to pass....solve some of the issues that you are stuggling with? I concur strongly with Marty. As one of the many among us in this discussion who are in the trenches trying to educate the bar and the business community about LLCs and LLPs, I can tell you that novelty--no matter how elegant or well explained--breeds confusion. I am also noticing a resistence by some because of the absence of decisional law relating to LLCs. Consequently, the "wait and see" approach has significant merit. At the same time, as practice experience develops it would be worthwhile to start conceptualizing the ideal unincorporated entity, with a long-term view toward reshaping the landscape in this area of practice. ============ Appended by: Robert R. Keatinge -- Holland & Hart - Denver Date: Sat Jun 3 09:19:12 1995 Subject: Universal Unincorp. Entity Check the box merely means that many will change their statutes do eliminate inefficiencies. Thus, we will have entirely new formulations regardless of whether we try to coordinate. In any case, with so many issues being resolved through arbitration, how much interpretative case law can we anticipate, and when. The resistance of those involved in the development of LLCs to a universal entity simply reconfirms that history is the progression of revolution becoming orthodoxy.