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Heminway, Joan MacLeod --- "Fundamental changes in the LLC: a study in path-divergence and convergence" [2015] ELECD 955; in Hillman, W. Robert; Loewenstein, J. Mark (eds), "Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations" (Edward Elgar Publishing, 2015) 189

Book Title: Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations

Editor(s): Hillman, W. Robert; Loewenstein, J. Mark

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781783474394

Section: Chapter 12

Section Title: Fundamental changes in the LLC: a study in path-divergence and convergence

Author(s): Heminway, Joan MacLeod

Number of pages: 17

Abstract/Description:

As most commentators note, architects of the law governing the limited liability company business form (LLC) in the United States (a relatively late entrant in the U.S. business entity race) could, and did, look to the law of partnerships, limited partnerships, and corporations in formulating LLC law. The Revised Uniform Partnership Act (RUPA) was, rather transparently, the original basis for many of the statutory rules in the Uniform Limited Liability Company Act (ULLCA). The RUPA codified partnership norms that focus on the co-equal consent of partners for the entity’s formation, maintenance, wind-up, and termination. As a result, the ULLCA’s RUPA foundation gave the LLC form, in a simple, direct way, the attributes needed to secure pass-through treatment for the entity under federal income tax law while providing limited liability to owners under state entity law, a major driving force behind the LLC. Specifically, under the pre-existing federal income tax regulations, an unincorporated business entity enjoyed pass-through tax treatment if it lacked at least two of four core characteristics of corporations: (1) continuity of life, (2) centralization of management, (3) limited liability, and (4) free transferability of interests.