Archive for December, 2005
How can entities law be so confusing? In the United States there are 50 states, and each state has its own laws governing corporations and other entities. That means there are 50 corporation statutes, 50 partnership statutes, 50 LLC statutes, 50 nonprofit corporation statutes, etc.
However, many states have adopted laws similar to those of other states. Bar associations, law schools and other astute organizations have come up with draft laws called model and uniform acts. You might have heard of Model Corporation Acts and Uniform Partnership Acts. These acts are not laws (only legislatures can pass laws, remember), but they often become laws when adopted by state legislatures. They have been around for a long time because we now have Revised Model Corporation Acts and Revised Uniform Partnership Acts that have been adopted in many, if not most, states.
Of course, some state laws differ more than others. Especially Louisiana, whose law is based on French law. The law of other states was based on English common law, which is generally considered to be the law in effect in England in 1776. Yes, 1776. Over 200 years ago.
There were not many corporations back then. That’s why most of entity law is statutory law–based on statutes passed by legislatures instead of case law created by the precedent of legal opinions issued by courts deciding disputes between real parties.
So, there are 50 states with 50 entity laws adopted and revised by 50 legislatures interpreted by 50 states’ courts. It is no wonder entity law is confusing, and no wonder it takes a lawyer to decipher it.
By the way, this article is not legal advice; it’s a history lesson.
James W. Martin, President
Government Files Online, Inc.
St. Petersburg, Florida
December 7, 2005
December 8th, 2005
There are many kinds of entities. Partnerships, corporations and limited liability companies (LLC) are the most common. There are also limited partnerships (LP), limited liability partnerships (LLP, and limited liability limited partnerships (LLLP). Let’s start with the common and work up to more the complex.
But before doing that consider this: is an individual engaged in business on his or her own an entity? Not yet. Lawyers call that person a sole proprietor. Generally, a sole proprietor is liable for contracts entered into and for negligence and other torts commited by the business and employees. So, it’s a not a very sophisticated way to engage in business. But, it’s easy to form a sole proprietorship because it’s automatic when a natural person (a legal term for people) starts his or her own business.
A partnership is generally formed when two or more persons engage in business to share profits and losses. This is a general partnership. The persons can be individuals or entities such as corporations or other partnerships. Like a sole proprietorship, partners are usually liable for the contract debts of the partnership. Also, it’s easy to form a partnership because it’s automatic when two persons go into business and share profits and losses and do not form a corporation, LLC or other type of entity. Even if there is no written partnership agreement. Of course, it’s best to have a written partnership agreement, and they are often complicated to draft because there are so many optional provisions that can be included.
Some states allow or require partnerships to file a partnership registration statement with the state secretary of state or other filing office. Such states often maintain online databases of public records information about partnerships that file annual returns and registration statements. This information might include names of partners, addresses, and sometimes copies of documents.
Some states allow a partnership to file a statement of qualification to elect to have limited liability, so that it then becomes a limited liability partnership or LLP.
A limited partnership is similar to a general partnership but it has two types of partners: general partners and limited partners. The general partners have liability for contract debts of the limited partnership, but the limited partners do not (if the limited partnership and partners comply with the limited partnership law). The limited partnership is usually formed by filing a certificate of limited partnership with the state secretary of state or other filing office. Some states allow a limited partnership to elect limited liability for its general partner by filing a statement of qualification with the state, thus becoming a limited liability limited partnership or LLLP.
Partnerships, limited partnerships, LLPs and LLLPs are burdened with complex income tax codes and accounting methods that often challenge intuition. For that reason, many lawyers and accountants still advise clients to form corporations for their businesses instead of partnerships or limited liability companies (LLC’s usually elect to be taxed the same as partnerships).
A corporation is an entity generally formed by one or more persons filing articles of incorporation with the state secretary of state or other filing office. Most states maintain online databases of public records information about corporations that file annual reports, articles of incorporation, mergers, name changes, and other forms. This information might include names and addresses of officers, directors and registered agents, as well as copies of documents. This information often includes names of presidents, vice presidents, secretaries, treasurers and other officers of corporations.
S corporations are corporations that have filed a form with IRS to elect to be treated as such for tax purposes.
Public corporations are corporations whose shares of stock are held by many people such that they are subject to the Securities Exchange Act. Privately held corporations are the typical corporations of businesses whose stock is not traded publicly.
Of course, it is likely that the ownership interests in all corporations, partnerships, limited liability companies and other entities are securities that are subject to the federal and state securities laws.
Nonprofit corporations are generally formed by three or more persons filing articles of incorporation with the state secretary of state or other filing office. Some states have various categories of nonprofit corporations, such as religious, charitable, benevolent, etc. If the nonprofit corporation requires tax exemption, a separate application for recognition of tax exempt status must be filed with IRS. This makes nonprofit corporations frequently more complicated to form than for profit business corporations. Nonprofit corporations usually appear in state online databases of corporate information.
There are other types of entities, such as business trusts, real estate investment trusts, but they are less common and are usually created by special purpose statutes for specific types of business, government or quasi-government functions. They often do not appear in state online databases of public records information due to their unusual nature.
By the way, this is not legal advice. This is a general background discussion of the types of entities in the US. The specifics vary from state to state because entities are generally created under state law, and each state has its own law, so there are 50 sets of entities laws in the US.
James W. Martin, President
Government Files Online, Inc.
St. Petersburg, Florida
December 7, 2005
December 7th, 2005
I’m a Florida lawyer (www.JamesMartinPA.com), and I’ve been forming corporations and other entities for years. I also do litigation so I sometimes sue corporations, LLCs, and other entities. I also write contracts, including loan documents that require UCC financing statements to be searched and filed. When you sue a corporation, you need to know its legal name as well as the names of its officers and registered agent and its address. When you prepare UCC filings or search UCC records, you need to know how to do this in other states.
Before the Internet, it was difficult to find out information about corporations and UCC filings in other states. When they were in Florida, I knew how to call the Florida Secretary of State and the Florida Division of Corporations. But if the corporation was in New York, Arizona, Michigan, Georgia or another state, I had trouble. But I still needed the information in order to file suit or search UCC filings for my client.
So, before the Internet, I had to first find out the capital of the state where the subject corporation was located since I could never remember the capital city from grade school. Then I had to call long distance information 1-area code-555-1212. I had to hope that state’s division of corporations had its own phone number. Often they did not. Before the Internet, it was tedious and time-consuming to find information about corporations, partnerships and other entities in other states.
This changed when the Internet came along in the 1990’s. I began to compile a list of Internet Web addresses for state secretaries of state, divisions of corporations, and UCC filing offices. Initially, only a few states had Web sites but as more and more set them up I created a page on my own law office Web site www.jamesmartinpa.com listing all of the links to state secretaries of state.
As more and more Internet users went to my Web page listing, I decided to create a Web site devoted to finding online public records in government agencies such as the secretaries of state which file corporate, partnership, LLC, LLP, LLLP and other entity records as well as Uniform Commercial Code financing statements. The Web site I created was www.SecSt.com, which is the predecessor to www.GovernmentFilesOnline.com.
In creating the site, I tried to keep these things in mind:
1-It should be simple.
2-It should be intuitive.
3-Scrolling should not be necessary.
4-Search icons should be arranged logically for each state.
5-The position of search icons should not change from state to state.
6-It should be accurate.
7-It should be current.
8-It should be pleasing to look at.
9-It should not have banners and ads.
10-It should be reasonably priced.
Over the years, other Web sites appeared that also provided links to public records of government agencies, but I think our site remains unique in maintaining the initial Ten Point Vision listed above.
I hope you agree.
James W. Martin, President
Government Files Online, Inc.
St. Petersburg, Florida
December 5, 2005
December 6th, 2005
