CCS SCS HB 655 -- LIMITED LIABILITY COMPANIES

This bill makes several changes in the law governing
partnerships, limited partnerships, limited liability
partnerships, "S" corporations, and limited liability
companies.  In the area of the law governing the taxation of
business entities, the bill requires any nonresident partner or
"S" corporation shareholder to agree to file a state income tax
return and be subject to personal jurisdiction (for the purposes
of collecting any state income tax due) before the partnership
or "S" corporation is released from the requirement of
withholding state income tax due from the partner or "S"
corporation shareholder.

LIMITED LIABILITY COMPANIES

In the area of the law governing limited liability companies,
(LLC) the bill:

(1)  Repeals the definition of "limited liability company" that
required an LLC to be composed of 2 or more persons, and
clarifies that no existing LLC will be found to be not in
compliance with Chapter 347, RSMo, on the basis that it has only
one member;

(2)  Limits the definition of "person" as that term is used in
the chapter governing LLC's, by replacing the phrase "any other
legal entity" with the phrase any "other business or not for
profit entities";

(3)  Allows the name of an LLC, as set forth in its articles of
incorporation, to include the word "association";

(4)  Allows an LLC to set forth in its articles of organization
the date the company will be formed, but such date may not be
more than 90 days from the date the articles are filed with the
Secretary of State;

(5)  Repeals the provision requiring the articles of
organization to set forth any rights granted to remaining
members to continue the business and affairs of the LLC upon a
member's withdrawal;

(6)  Makes any operating agreement provision that provides for
the dissolution of an LLC upon the withdrawal of a member
subject to the remedy of specific performance (whereas current
law requires specific performance only for agreements to
continue the company);

(7)  Allows the articles of organization of an LLC to stipulate
an event or events, as opposed to dates, upon which the company
would dissolve;

(8)  Grants a withdrawn member the rights of an assignee with
respect to the withdrawn member's interest in an LLC that is
continuing its operation, unless otherwise provided for in the
operating agreement;

(9)  Entitles a member withdrawing from a continuing LLC to
payment of the member's interest upon demand and within 180
days, rather than "within a reasonable time after" the
withdrawal.  This provision will apply to existing LLC's, unless
such a company elects otherwise by written agreement of all its
members;

(10)  Limits a member's liability for making or accepting
wrongful distributions to a period of 3 years following the date
of distribution, and only to the extent of the value of the
wrongful distribution;

(11)  Clarifies that upon the withdrawal of an LLC member, the
member has no duties to the company except a duty to account for
any profit or benefit derived from the company, including the
use of any company property, without the informed consent of the
majority of the members of the company.  Also, such a withdrawn
member has no further right to participate in the management of
the company, and has only the rights of an assignee;

(12)  Requires the inclusion of any registered fictitious names
used by a general partnership when filing articles of
organization to convert to an LLC;

(13)  Cancels automatically any registered fictitious name or
certificate of limited partnership when a general or limited
partnership converts to an LLC, upon the filing of the articles
of organization;

(14)  Requires merger or consolidation agreements to be written,
and sets forth the information to be addressed in the agreement;

(15)  Requires any merger or consolidation to become effective
within 90 days of the filing of the notice of merger or
consolidation;

(16)  Requires the articles of organization to be attached to
any notice of merger or consolidation; and

(17)  Allows a majority to vote for dissolution of an LLC upon
the withdrawal of a member, except as otherwise provided in the
operating agreement.  Current law requires consent of all
remaining members.

LIMITED LIABILITY PARTNERSHIPS

In the area of the law governing registered limited liability
partnerships (LLP), the bill:

(1)  Requires any agreement to contribute capital to an LLP to
be written and signed by the contributing partner.  Third
parties may not enforce such agreements unless the partner
consents or the LLP assigns the obligation to the third party;

(2)  Prohibits a registered LLP from making any distribution to
a partner that would make the LLP insolvent;

(3)  Limits the liability of a partner in a registered LLP for
making or accepting wrongful distributions to a period of 3
years following the date of distribution, and only to the extent
of the value of the wrongful distribution; and

(4)  Limits the personal liability of a partner in a registered
LLP to the total amount of assets distributed to the partner in
liquidation, in the event a claim against a dissolved
partnership cannot be paid by the remaining partnership assets.

PARTNERSHIPS AND LIMITED PARTNERSHIPS

In the area of the law governing partnerships and limited
partnerships, the bill:

(1)  Allows a domestic partnership to merge or consolidate with
any type of business entity;

(2)  Requires limited partnerships that are merging or
consolidating to file a certificate with the Secretary of State,
and sets forth the information that must be included in such a
certificate;

(3)  Bars any claim against a partnership that is dissolved
without fraudulent intent when the claim against the partnership
is not timely filed, and establishes procedures for disposing of
claims against a dissolved partnership, including notice
requirements and time restrictions;

(4)  Repeals the provision making a limited partner liable for
the obligations of the partnership when the limited partner
participates in the management or control of the business;

(5)  Repeals the provision requiring 6 months notice for a
limited partner to withdraw, unless otherwise provided in the
agreement;

(6)  Allows partners owning a majority interest in the limited
partnership to agree to continue a limited partnership after the
withdrawal of a partner, rather than requiring the agreement of
all partners.

OTHER PROVISIONS

In addition, the bill:

(1)  Creates the entity "Limited Liability Limited Partnership,"
whose members' personal liability will be limited as though they
were partners of a registered LLP, and sets forth the
requirements for forming such a partnership;

(2)  In the event a limited partnership ceases to be registered
as a limited liability limited partnership, the limited
partnership must file an amendment with the Secretary of State
within 90 days.  Operating the limited partnership after failing
to timely file such a certificate is a Class B misdemeanor,
subjecting the general partners to criminal prosecution, in
addition to civil fines;

(3)  Defines "organizational document," as that term is applied
in the sub-chapter governing merger and consolidation of
business entities, with respect to general partnerships, LLP's
and limited liability limited partnerships;

(4)  Clarifies that limited partnerships and LLC's may agree to
borrow money at any interest rate or terms;

(5)  Adds LLC's and LLP's to the list of entities under which a
person may be organized for the practice of law; and

(6)  Sets forth a form for a certificate of acknowledgment
executed by a member of an LLC.

The bill has an emergency clause.

HB 655 -- LIMITED LIABILITY COMPANIES (May, 108)

This bill requires any agreement to contribute capital to a
limited liability partnership to be written and signed by the
contributing partner.  Third parties may not enforce such
agreements unless the partner consents or the partnership
assigns the obligation to the third party.  The bill also
repeals the definition of limited liability company, which
states that such entities must consist of at least two members.

FISCAL NOTE:  No impact on state funds.

HB 655 -- LIMITED LIABILITY COMPANIES

SPONSOR:  May

COMMITTEE ACTION:  Voted "do pass by consent" by the Committee
on Judiciary By a vote of 9 to 0.

This bill requires any agreement to contribute capital to a
limited liability partnership to be written and signed by the
contributing partner.  Third parties may not enforce such
agreements unless the partner consents or the partnership
assigns the obligation to the third party.  The bill also
repeals the definition of limited liability company, which
states that such entities must consist of at least two members.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that this bill simply cleans up a
couple of drafting errors made in the legislation last year
regarding limited liability companies and limited partnerships.

Testifying for the bill were Representative May; and the
Missouri Bar.

OPPONENTS:  There was no opposition voiced to the committee.

Richard Smreker, Research Analyst

HB 655 -- Limited Liability Companies

Sponsor:  May

This bill requires any agreement to contribute capital to a
limited liability partnership to be written and signed by the
contributing partner.  Third parties may not enforce such
agreements unless the partner consents or the partnership
assigns the obligation to the third party.  The bill also limits
the definition of "person," as the term is applied in the
chapter governing limited liability companies, so as not to
include limited liability partnerships.