04/19/1996 03:15 PM House L&C

 HB 549 - LIMITED LIABILITY PARTNERSHIPS                                     
                                                                               
 Number 520                                                                    
                                                                               
 CHAIRMAN KOTT announced the committee would hear HB 549 "An Act               
 relating to partnerships; and providing for an effective date,"               
 sponsored by the House Judiciary Committee by request.  He asked if           
 there was anyone to testify.                                                  
                                                                               
 Number 548                                                                    
                                                                               
 BILL EZELL, Accounting Firm of Deloitte and Touche, Limited                   
 Liability Partnership (LLP), testified via teleconference in                  
 support of HB 459.  He explained 41 states, along with the District           
 of Columbia and Guam, have passed limited liability of partnership            
 legislation.  Remaining states, like Alaska, are considering                  
 similar legislation this year.  The proposed Alaska LLP statute is            
 consistent to the LLP legislation passed in other states.                     
 (Indisc.) a former organization wished to operate is one of the               
 most important decisions an individual starting a new business or             
 continuing an existing will make, providing reasonable protection             
 for our owners' personal assets, considering tax implications and             
 finding an organization form that compliments the culture of the              
 organization for all important factors.  For many businesses,                 
 particularly small businesses, an LLP will be a good choice to meet           
 these objectives.  Mr. Ezell explained an LLP is a form of general            
 partnership.  It is not related to a limited partnership in with              
 only the general partner has unlimited liability.  (Indisc.) a                
 newly formed partnership can elect to register as an LLP.  An LLP             
 is also taxed in the same manner as a general partnership.  In a              
 tradition general partnership, all of the partners are personally             
 liable for all the obligations of partnership and for damages                 
 caused by the action of any other partner acting in the scope of              
 partnership business.  The distinction for an LLP is that a partner           
 would not be personally liable for those partnership obligation who           
 are acting out of negligence, wrongful acts, wrongful admission and           
 so forth, committed by another partner of the partnership.  In                
 other words, a partner remains fully liable for his or her own                
 personal action, but not to the extent of their personal assets for           
 the actions of other partners.  The partnership itself remains                
 fully liable to the extent of its assets, capital and insurance for           
 the obligations of the partnership.  Generally, other forms of                
 organization, which are already available in Alaska, provide far              
 greater protection of the personal assets of their owners.  A                 
 shareholder in a general corporation, professional corporation or             
 limited liability corporation has exposure only to the extent of              
 his or her own stock investment from obligations arising out of the           
 actions of other owners.  These forms of organization can be                  
 expensive to establish and complex to maintain, particularly for              
 small businesses.  An LLP, by contrast, is inexpensive to organize            
 and not complex to maintain.  It also allows the owners to continue           
 to operate as partners rather than individual owners.  Such a                 
 distinction is often important to professional service firms such             
 as attorneys, accountants, architects and engineers, where all the            
 owners are typically active in the business.                                  
                                                                               
 MR. EZELL explained in speaking on behalf of the six largest                  
 accounting firms and limited liability partnerships, they are                 
 interested in having consistent protection for all of the partners            
 no matter where they live and work in the United States, that these           
 protections would only be (indisc.) bankruptcy of a firm.  He noted           
 they have also found in states where LLP has been enacted that many           
 small professional service firms have chosen this new form of                 
 organization.  He urged that the committee pass HB 549.                       
                                                                               
 Number 764                                                                    
                                                                               
 CHAIRMAN KOTT closed the public hearing.  He announced the bill               
 would be held over.