5374-S AMH LJ H2839.1

5374-S AMH LJ H2839.1

SSB 5374 - H COMM AMD ADOPTED 4/5/95

By Committee on Law & Justice

Strike everything after the enacting clause and insert the following:

"NEW SECTION. Sec. 1. This subchapter applies to limited liability partnerships. All other provisions of this chapter, not in conflict with this subchapter, also apply.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this subchapter.

(1) "Limited liability partnership" or "partnership" means a partnership formed pursuant to an agreement governed by the laws of this state, registered under section 6 of this act.

(2) "Foreign limited liability partnership" means a limited liability partnership formed pursuant to an agreement governed by the laws of another jurisdiction.

NEW SECTION. Sec. 3. (1) To become and to continue as a limited liability partnership, a partnership shall file with the secretary of state an application stating the name of the partnership; the address of its principal office; if the partnership's principal office is not located in this state, the address of a registered office and the name and address of a registered agent for service of process in this state which the partnership will be required to maintain; the number of partners; a brief statement of the business in which the partnership engages; any other matters that the partnership determines to include; and that the partnership thereby applies for status as a limited liability partnership.

(2) The application shall be executed by a majority in interest of the partners or by one or more partners authorized to execute an application.

(3) The application shall be accompanied by a fee of one hundred seventy-five dollars for each partnership.

(4) The secretary of state shall register as a limited liability partnership any partnership that submits a completed application with the required fee.

(5) A partnership registered under this section shall pay an annual fee, in each year following the year in which its application is filed, on a date and in an amount specified by the secretary of state. The fee must be accompanied by a notice, on a form provided by the secretary of state, of the number of partners currently in the partnership and of any material changes in the information contained in the partnership's application for registration.

(6) Registration is effective immediately after the date an application is filed, and remains effective until: (a) It is voluntarily withdrawn by filing with the secretary of state a written withdrawal notice executed by a majority in interest of the partners or by one or more partners authorized to execute a withdrawal notice; or (b) thirty days after receipt by the partnership of a notice from the secretary of state, which notice shall be sent by certified mail, return receipt requested, that the partnership has failed to make timely payment of the annual fee specified in subsection (5) of this section, unless the fee is paid within such a thirty-day period.

(7) The status of a partnership as a limited liability partnership, and the liability of the partners thereof, shall not be affected by: (a) Errors in the information stated in an application under subsection (1) of this section or a notice under subsection (5) of this section; or (b) changes after the filing of such an application or notice in the information stated in the application or notice.

(8) The secretary of state may provide forms for the application under subsection (1) of this section or a notice under subsection (5) of this section.

NEW SECTION. Sec. 4. The name of a limited liability partnership shall contain the words "limited liability partnership" or the abbreviation "L.L.P." or "LLP" as the last words or letters of its name.

NEW SECTION. Sec. 5. A person or group of persons licensed or otherwise legally authorized to render professional services, as defined in RCW 18.100.030, within this state may organize and become a member or members of a limited liability partnership under the provisions of this chapter for the purposes of rendering professional service. Nothing in this section prohibits a person duly licensed or otherwise legally authorized to render professional services in any jurisdiction other than this state from becoming a member of a limited liability partnership organized for the purpose of rendering the same professional services. Nothing in this section prohibits a limited liability partnership from rendering professional services outside this state through individuals who are not duly licensed or otherwise legally authorized to render such professional services within this state.

NEW SECTION. Sec. 6. (1) A limited liability partnership formed and existing under this chapter, may conduct its business, carry on its operations, and have and exercise the powers granted by this chapter in any state, territory, district, or possession of the United States or in any foreign country.

(2) It is the intent of the legislature that the legal existence of a limited liability partnership formed and existing under this chapter be recognized outside the boundaries of this state and that the laws of this state governing a limited liability partnership transacting business outside this state be granted the protection of full faith and credit under the Constitution of the United States.

(3) The internal affairs of a partnership, including a limited liability partnership formed and existing under this chapter, including the liability of partners for debts, obligations, and liabilities of or chargeable to the partnership, shall be subject to and governed by the laws of this state.

(4) Subject to any statutes for the regulation and control of specific types of business, a foreign limited liability partnership, formed and existing under the laws of another jurisdiction, may do business in this state provided it registers with the secretary of state under this chapter in the same manner as a limited liability partnership.

(5) It is the policy of this state that the internal affairs of a foreign limited liability partnership, including the liability of partners for debts, obligations, and liabilities of or chargeable to partnerships, shall be subject to and governed by the laws of such other jurisdiction. However, a foreign limited liability partnership formed and existing under the laws of another jurisdiction is subject to section 7 of this act if it renders professional services, as defined in RCW 18.100.030, in this state.

NEW SECTION. Sec. 7. (1) Except as provided in subsection (2) of this section, all partners are liable:

(a) Jointly and severally for everything chargeable to the partnership under RCW 25.04.130 and 25.04.140; and

(b) Jointly for all other debts and obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract;

(i) In no event shall a trustee or personal representative, a fiduciary, acting as a partner have personal liability except as provided in RCW 11.98.110 (2) and (4);

(ii) Any such liability under this section shall be satisfied first from the partnership assets and second from the trust or estate; and

(iii) If a fiduciary is liable, the fiduciary is entitled to indemnification first from the partnership assets and second from the trust or estate.

(2) Subject to subsections (3) and (5) of this section, a partner in a limited liability partnership is not liable directly or indirectly, including by way of indemnification, contribution, assessment, or otherwise for debts, obligations, and liabilities of or chargeable to the partnership, whether in tort, contract or otherwise, arising from omissions, negligence, wrongful acts, misconduct, or malpractice committed in the course of the partnership business by another partner or an employee, agent, or representative of the partnership.

(3) Subsection (2) of this section shall not affect the liability of a partner in a limited liability partnership for his or her own omissions, negligence, wrongful acts, misconduct, or malpractice or that of any person under his or her direct supervision and control.

(4) A partner in a limited liability partnership is not a proper party to a proceeding by or against a limited liability partnership, the object of which is to recover damages or enforce the obligations arising from omissions, negligence, wrongful acts, misconduct, or malpractice described in subsection (2) of this section, unless such partner is personally liable under subsection (3) of this section.

(5) If the partners of a limited liability partnership or foreign limited liability partnership are required to be licensed to provide professional services, as defined in RCW 18.100.030, and the partnership fails to maintain for itself and for its members practicing in this state a policy of professional liability insurance, bond, deposit in trust, bank escrow of cash, bank certificates of deposit, United States Treasury obligations, bank letter of credit, insurance company bond, or other evidence of financial responsibility of a kind designated by rule by the state insurance commissioner and in the amount of at least one million dollars or such greater amount, not to exceed three million dollars, as the state insurance commissioner may establish by rule for a licensed profession or for any specialty within a profession, taking into account the nature and size of the businesses within the profession or specialty, then the partners shall be personally liable to the extent that, had such insurance, bond, deposit in trust, bank escrow of cash, bank certificates of deposit, United States Treasury obligations, bank letter of credit, insurance company bond, or other evidence of responsibility been maintained, it would have covered the liability in question.

NEW SECTION. Sec. 8. The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:

(1) Each partner shall be repaid his or her contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied; and except as provided in section 7(2) of this act, each partner must contribute toward the losses, whether of capital or otherwise, sustained by the partnership according to his or her share in the profits.

(2) The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him or her in the ordinary and proper conduct of its business, or for the preservation of its business or property.

(3) A partner, who in aid of the partnership makes any payment or advance beyond the amount of capital which he or she agreed to contribute, shall be paid interest from the date of the payment or advance.

(4) A partner shall receive interest on the capital contributed by him or her only from the date when repayment should be made.

(5) All partners have equal rights in the management and conduct of the partnership business.

(6) No partner is entitled to remuneration for acting in the partnership business, except that a surviving partner is entitled to reasonable compensation for his or her services in winding up the partnership affairs.

(7) No person can become a member of a partnership without the consent of all the partners.

(8) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all the partners.

NEW SECTION. Sec. 9. Where a dissolution is caused by the act, death, or bankruptcy of a partner, each partner is liable to his or her copartners for his or her share of any liability created by any partner acting for the partnership as if the partnership had not been dissolved unless:

(1) The dissolution being by act of any partner, the partner acting for the partnership had knowledge of the dissolution; or

(2) The dissolution being by the death or bankruptcy of a partner, the partner acting for the partnership had knowledge or notice of the death or bankruptcy; or

(3) The liability is for a debt, obligation, or liability for which the partner is not liable as provided in section 7(2) of this act.

NEW SECTION. Sec. 10. (1) The dissolution of the partnership does not of itself discharge the existing liability of any partner.

(2) A partner is discharged from any existing liability upon dissolution of the partnership by an agreement to that effect between himself or herself, the partnership creditor and the person or partnership continuing the business; and such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business.

(3) Where a person agrees to assume the existing obligations of a dissolved partnership, the partners whose obligations have been assumed shall be discharged from any liability to any creditor of the partnership who, knowing of the agreement, consents to a material alteration in the nature or time of payment of such obligations.

(4) The individual property of a deceased partner shall be liable for those obligations of the partnership incurred while he or she was a partner and for which he or she was liable under section 7 of this act, but subject to the prior payment of his or her separate debts.

NEW SECTION. Sec. 11. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary:

(1) The assets of the partnership are:

(a) The partnership property;

(b) The contributions of the partners specified in subsection (4) of this section.

(2) The liabilities of the partnership shall rank in order of payment, as follows:

(a) Those owing to creditors other than partners;

(b) Those owing to partners other than for capital and profits;

(d) Those owing to partners in respect of profits.

(3) The assets shall be applied in the order of their declaration in subsection (1) of this section to the satisfaction of the liabilities.

(4) Except as provided in section 7(2) of this act: (a) The partners shall contribute, as provided by section 8(1) of this act the amount necessary to satisfy the liabilities; and (b) if any, but not all, of the partners are insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities.

(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contribution specified in subsection (4) of this section.

(6) Any partner or his or her legal representative shall have the right to enforce the contributions specified in subsection (4) of this section, to the extent of the amount which he or she has paid in excess of his or her share of the liability.

(7) The individual property of a deceased partner shall be liable for the contributions specified in subsection (4) of this section.

(8) When partnership property and the individual properties of the partners are in possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors as heretofore.

(9) Where a partner has become bankrupt or his or her estate is insolvent the claims against his or her separate property shall rank in the following order:

(a) Those owing to separate creditors;

(b) Those owing to partnership creditors;

NEW SECTION. Sec. 12. Sections 1 through 11 of this act are each added to chapter 25.04 RCW and codified with the subchapter heading of "limited liability partnerships.""

SSB 5374 - H COMM AMD

By Committee on Law & Justice

On page 1, line 1 of the title, after "partnerships;" strike the remainder of the title and insert "and adding new sections to chapter 25.04 RCW."