Unicorporated Limited Liability Business Organizations: Limited Liability Companies and Partnerships
Carter G. Bishop
Suffolk University Law School
Suffolk University Law Review, Vol. 29, p. 985, 1995
The Massachusetts Limited Liability Company Act (LLC Act) and Registered Limited Liability Partnership Act (LLP Act) link Massachusetts to a national movement proliferating new unincorporated business entities with corporate-styled liability shields. Limited liability companies (LLCs) and limited liability partnerships (LLPs) offer business owners a unique combination of business entity features not available in any other business entity - a corporate-styled liability shield and partnership tax status in which profits are passed through the entity and taxed directly to the business owners.
The availability of these new business organizations in Massachusetts generates several new and important issues. For example, most existing corporations will not convert from their corporate form to one of these new forms because of the tax cost associated with liquidating a corporation. These new forms are not practical for businesses with publicly-traded ownership interests. Because more states have adopted LLCs than LLPs and limited liability limited partnerships (LLLPs), firms with interstate business activity may prefer the LLC form.
Each new business form generates a host of drafting considerations unique to that particular business form. LLCs, LLPs, and LLLPs with at least two owners may be formed by filing a simple LLC certificate or LLP registration with the state secretary. Although simple to create, these new business forms are taxed like partnerships because they resemble partnerships rather than corporations. However, just as a partnership should never be formed without a written partnership agreement setting forth the terms of the business arrangement among the partners, these new business organizations should not be created without a similar agreement.
Number of Pages in PDF File: 61
Keywords: Limited liability company, limited liability partnership, LLC, LLP, Massachusetts
JEL Classification: G39, H25, K19, K20, K34
Date posted: September 17, 2006