Our Mini-Theme: LLCs, Partnerships and Unincorporated Entities

Limited Liability Companies are now the dominant form for the organization of business ventures in the United States, employed in applications as broad as is the economy. Some LLCs are holding companies for family vacation homes while other LLCs are publically traded. Some LLCs are used to structure professional practices while others operate as hedge funds.

In October 2012, the Committee on LLCs, Partnerships and Unincorporated Entities held its inaugural LLC Institute at which there were reviewed a wide variety of issues involving LLCs and related unincorporated forms. Questions arising with respect to LLCs have a pair of bases. First, LLCs remain relatively young - it was not until they received IRS sanction in 1988 that they began to expand beyond two initial adoptions, and it was not until the adoption of the "check-the-box" classification regulations in 1997 that complete flexibility, including the single-member LLC, was available. Where and how the LLC fits into the range of other areas of law (agency, tax, and bankruptcy being but three examples) involves questions that continue to be assessed. Second, while we speak of LLCs as a single phenomenon across the country, there are in fact often material distinctions between the various statutes, and individual operating agreements can create structures that are radically different from one another. While most states by statute provide a default rule as to the fiduciary obligations of the members and managers, the Delaware act is silent, a lacuna that has given rise to numerous conflicting opinions as to what duties, if any, exist in the absence of a standard agreed to by contract. A few states as well provide for "series," an internal segregation of assets and liabilities that give rise to significant questions including the ability to seek bankruptcy protection for an individual series, tax treatment of a series, and interstate recognition of the asset/liability segregation.

Building on some of the presentations that took place at the 2012 LLC Institute, Allen Sparkman offers his insights on how series will be treated in interstate transactions and possible tax aspects, while Professor Michelle Harner, Jennifer Ivey-Crickenberger, and Tae Kim provide especially helpful thoughts on the analysis to be employed in determining whether an individual series of an LLC may seek bankruptcy protection and other uncertainties under the bankruptcy law including substantive consolidation. Jay Adkisson, Professor Carter Bishop, and I review a number of developments in the law of charging orders including tax treatment and choice of law concerns. Last, but certainly not least, Paul Altman, Elisa Erlenbach Maas, and Michael Maxwell review opportunities for modifying fiduciary duties (whatever they may be) in Delaware LLCs.

In closing, if you are involved in drafting LLC agreements, representing persons investing in LLCs, or litigating disputes involving LLCs, you are hopefully already a member of the Committee on LLCs, Partnerships and Unincorporated Entities. If you are not, you hopefully will join, and we will look forward to meeting you at the 2013 Spring Meeting or at the 2013 LLC Institute scheduled for October 17-18 in Arlington, Virginia.



Nominations Sought for Section Leadership Positions

Do you know anyone who has what it takes to be a good Section leader? The Nominating Committee of the Section needs your recommendations for leadership positions for the 2017-2018 association year. Nominees will be selected for: Chair-elect (who automatically assumes the position of chair the following year); Secretary (who automatically assumes the position of vice chair the following year); Content Officer; two Section Delegates to the ABA House of Delegates; and five additional Council members for a four-year term expiring in 2021. The Nominating Committee will take into account the following principles in making its selections. It will: select nominees who have been substantial and active contributors to the Section; seek geographic diversity in the leadership of the Section; strive for representation from a broad cross-section of the areas of law represented in the Section; and seek to draw leaders from a broad cross-section of the various sectors of practice, including corporate law departments, government, academia and private law firms; and actively recruit nominees that reflect the diversity of the Section. Please send your nominations by email to susan.tobias@americanbar.org no later than November 18.

Question: Between November 2, 2015 and November 4, 2015, Harris Poll conducted an online survey of 2,017 adults ages 18 and older on behalf of NerdWallet, Inc. to understand U.S. consumers’ credit card payment habits and feelings around different types of debt. The results of this study were published in the 2015 American Household Credit Card Debt Study. According to the 2015 American Household Credit Card Debt Study, what percentage of U.S. adults would be more embarrassed to tell others about credit card debt than any other type of debt?
A. 10%
B. 35%
C. 55%
D. 90%

Question: From the late 1600s to the early 1800s, “debtors’ prisons” were commonplace with many cities and states operating brick-and-mortar detention facilities that were designed for incarcerating individuals who were unable or unwilling to pay their debts. Imprisonment for indebtedness was so commonplace that two signatories of the Declaration of Independence were jailed for failure to pay their debts. Can you name those two signatories?

The November issue of Business Law Today will focus on Nonprofits. Articles will range from the “Delaware Advantage” to nonprofit organizations needing nonprofit lawyers. In addition, other features include keeping pace with disruptive technological change, insurance bad faith recoveries, and constitutional issues in granting Americans a “Right to Dispute.”

Do you have a great idea for a BLT article? Would you like to see more of a featured column? Let us know how we can make Business Law Today the best resource for you and your clients. We welcome any suggestions. Please send us your feedback here.

Business Law Section Fall Meeting
November 18-19, 2016
Washington, DC

Business Law Section Spring Meeting
April 6-8, 2017
New Orleans, LA

Miscellaneous IT Related Legal News (MIRLN) 25 September - 15 October 2016 (v19.14)

BLT is a web-based publication drawing upon the best of the Section's resources, including featured articles and other information from around the Section. Stay informed on the latest business law practice news and information that will benefit you and your clients.