FINAL BILL REPORT

                 EHB 2322

                         C 169 L 00

                     Synopsis as Enacted

Brief Description:  Amending the partnership and limited liability company acts.

Sponsors:  Representatives Esser, Lantz and Constantine.

House Committee on Judiciary

Senate Committee on Judiciary

Background:

A business entity has a variety of organizational forms to choose from, including limited liability company (LLC) and limited partnership (LP).  Both LLCs and LPs offer some limitation on the liability of the persons or entities that are members, managers, or partners in the entity.

An LLC is a noncorporate entity with a flexible management structure.  An LLC may be managed by its members, or by one or more managers appointed by the members.

An LP is a form of business organization that consists of limited partners and at least one general partner.  General partners run the business and are personally liable for the debts and obligations of the limited partnership.  Limited partners are liable for the partnership's debts and obligations only to the extent of their contributions, as long as they do not participate in control of the business. 

An LLC and an LP may set a specific date of dissolution of the entity in their respective LLC agreements and certificates of limited partnership.  If no dissolution date is specified, the default period is 30 years, unless an event of dissolution occurs.

Dissolution of an LLC occurs upon the dissociation of a member, unless within 90 days all remaining members agree to continue the LLC.  Dissolution of an LP occurs upon the withdrawal of a general partner unless within 90 days all partners agree to continue the LP.

A general partner may be admitted to an LP only with the consent of all partners, both general and limited.

Summary of Bill:

Various amendments are made to the Limited Liability Company (LLC) Act and the Limited Partnership (LP) Act relating to length of existence of the entities; withdrawal of members, managers, and partners; dissolution of the entities; and technical and clarifying corrections.

If a member of an LLC or a general partner of an LP ceases to be a member or general partner, those persons attain the status of assignees of the interests in the LLC and LP.

Both LLCs and LPs have perpetual existence unless a dissolution date is specified in the certificate of formation or certificate of limited partnership, respectively, or an event of dissolution occurs.  An LLC is dissolved 90 days after the dissociation of the last remaining member unless the assignees of the LLC rights have voted to admit one or more new members.  An LP is dissolved 90 days following the withdrawal of the last remaining limited partner or the last remaining general partner, unless one or more new limited or new general partners are admitted.  New limited partners may be admitted with the majority vote of all general partners.  New general partners may be admitted with a two-thirds vote of the voting power of all limited partners.

A clarification is made that an LLC can be composed of just one member, and the LLC agreement can be the statement of the sole member.

If the sole remaining manager of an LLC dies, resigns, is removed or otherwise dissociated from the LLC, the LLC becomes member-managed unless new managers are appointed by a majority of the members within 90 days.

A new general partner of an LP may be admitted with the consent of all general partners and two-thirds of the voting power of the limited partners.

Cross-reference corrections are made.

Votes on Final Passage:

House970

Senate440

Effective:June 8, 2000