Tuesday, December 29, 2015

Year-End Edition: LLCs Are Still Not Corporations, Even if They Try to Pass a Law

A quick break from grading for my year-end report on the use of "limited liability corporation" instead of the correct "limited liability company" when referring to LLCs.  Hold on to your hats. 

Since December 31, 2014, Westlaw reports the following using the term "limited liability corporation":

The most concerning of these, though, is Proposed & Enacted Legislation View all 169.  That's not just misstating the law; it's trying to make incorrect law. 

For example, Massachusetts has the following proposed legislation from, Sen. Tarr, Bruce (R), with the following summary: " An Act relative to limited liability corporation filing fees."  2015 Massachusetts Senate Bill No. 238, Massachusetts One Hundred Eighty-Ninth General Court. Of course, the proposed change is to the state's Limited Liability Company Act, Mass. Gen. Laws Ann. ch. 156C, § 12 (West 2015).  

And one proposed change to "limited liability corporations" is not sufficient for that state this year. Rep. Arciero, James (D), similarly proposed "An Act relative to limited liability corporations dealing with children." 2015 Massachusetts House Bill No. 304, Massachusetts One Hundred Eighty-Ninth General Court. The sponsors of these bills show that the "limited liability corporation" mistake is, at least, bipartisan.  

A bipartisan effort in the U.S. Congress is underway, as well, with "[a] bill to amend the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 to modify provisions relating to grants, and for other purposes."  This proposed amendment to Superfund boasts Sen. Inhofe, James M. R-OK, as the primary sponsor, and co-sponsors include Sen. Markey, Edward J. D-MA, Sen. Rounds, Mike R-SD, Sen. Boxer, Barbara D-CA, Sen. Crapo, Mike R-ID, Sen. Booker, Cory A. D-NJ.  The bill was referred to the Committee on Environment and Public works, and included the following provisions: 
Section 104(k)(1) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9604(k)(1)) is amended-

. . . .

(3) by adding at the end the following:
 
'(I) an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of that Code;
 
'(J) a limited liability corporation in which all managing members are organizations described in subparagraph (I) or limited liability corporations whose sole members are organizations described in subparagraph (I);
 
'(K) a limited partnership in which all general partners are organizations described in subparagraph (I) or limited liability corporations whose sole members are organizations described in subparagraph (I); or
 
'(L) a qualified community development entity (as defined in section 45D(c)(1) of the Internal Revenue Code of 1986).'.
S. 1479, 114th CONGRESS, 1st Session (emphasis added).
 
Sigh.  
 
Finally, less binding than a statute would be, but perhaps more upsetting given its source, is Senate Resolution 210 from June 23, 2015.  A resolution "[c]elebrating the 125th anniversary of the State of Wyoming" as proposed by Wyoming Senator Enzi (for himself and Senator Barrasso) has the following bit of history wrong: "Whereas in 1977, Wyoming was the first State to establish a limited liability corporation (LLC) statute . . . ."  While the Senate resolution appropriately "commends and celebrates Wyoming and the people of Wyoming on the 125th anniversary of the State of Wyoming," it is a something of a travesty that a "limited liability corporation" is part of that celebration of the state that gave us the limited liability company.  
 
Okay, just to be clear, I know that relative to real world problems like starvation, illness, and violence, this is not even a blip on the radar of relative importance. But, this should also not be that hard to fix, even with 169 proposed pieces of legislation last year using such abominable language.  
 
As we close out the year, I am hoping to see Michigan State at the top of both the men's football and basketball rankings, and I wish everyone a happy and healthy New Year that is entirely free of LLCs being called "limited liability corporations." 

http://lawprofessors.typepad.com/business_law/2015/12/year-end-edition-llcs-are-still-not-corporations-even-if-they-try-to-pass-a-law.html

Corporations, Current Affairs, Joshua P. Fershee, Legislation, LLCs | Permalink

Comments

Your title is reminiscent of the famous "Indiana Pi Bill" that attempted to legislatively square the circle. https://en.wikipedia.org/wiki/Indiana_Pi_Bill But while legislatures do not have the power to define mathematical truths, their power to muck up the law of business organizations has never been in doubt.

Posted by: Scott Killingsworth | Dec 30, 2015 7:36:24 AM

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