Legislature(1993 - 1994)

03/24/1994 01:40 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 SENATOR KELLY introduced  SB 348  (LIMITED LIABILITY PARTNERSHIPS) as    as   
 the next order of business.                                                   
                                                                               
 ROD LIND, an Alaskan CPA representing the Alaska Society of                   
 Certified Public Accountants, stated their support for SB 348.  He            
 said selecting the form in which to operate is one of the most                
 significant decisions a client starting a business or continuing an           
 existing one can make.  The choice of this entity will have broad             
 implications and will affect how the businesses conduct the                   
 personal affairs of its owners and even the employee.                         
                                                                               
 Mr. Lind pointed out that six states have enacted a limited                   
 liability partnership law (LLP), six states have it on their                  
 governor's desk and 15 are considering it in their legislative                
 bodies.                                                                       
                                                                               
 He said the limited liability partnership law has many positive               
 attributes:  it is simple to form; it is simple to operate; and it            
 taxed like a general partnership, meaning that the tax liability              
 flows directly through to the LLP partners.                                   
                                                                               
 Mr. Lind said the adoption of a LLP law will provide a favorable              
 business climate and it will enable Alaska to keep pace with the              
 rest of the businesses that are resident here to better compete               
 with out-of-state firms.                                                      
                                                                               
 Number 366                                                                    
                                                                               
 SENATOR RIEGER asked if LLP was just like a limited partnership               
 except that the other partners are insulated from acts of                     
 negligence of one partner.  ROD LIND answered that it is a general            
 partnership and it only provides limited liability for the partners           
 who did not commit the negligent act.  All the partners will be               
 able to act fully as general partners and it is only their personal           
 assets that will be protected.  Their investment in the                       
 partnership, all of the partnership assets and all of the                     
 partnership insurance are available for all of these judgements.              
                                                                               
 Number 380                                                                    
                                                                               
 SENATOR SHARP commented that he thought by establishing this it is            
 going to really cause confusion, especially when an individual goes           
 to get financing.  He asked who is going to be liable for the                 
 debts.  ROD LIND answered that the limitation on liability only is            
 with respect to the negligence of a partner.  All bank debt,                  
 leases, wages, etc., are the responsibility of all of the partners.           
 This limited partnership is only with respect to the negligent or             
 the wrongful acts of an individual.  He reiterated that this                  
 provision is only changing the liability of personal assets with              
 respect to negligence on the part of a partner or an employee of              
 the firm that a partner is directing.                                         
                                                                               
 Number 413                                                                    
                                                                               
 CRAIG INGHAM, testifying from Fairbanks on behalf of the Alaska               
 Bankers Association, stated their opposition of SB 348, because               
 they feel it does open the door for any and all partnerships to               
 limit their liability for their acts.  State legislation and state            
 law has always held that one partner's act creates the liability              
 for all of the partners in a partnership.  He said that is a very             
 fundamental point that is there because partners and owners are               
 direct managers of the business organization.                                 
                                                                               
 Speaking to  SB 347  (LIMITED LIABILITY COMPANIES), Mr. Ingham said           
 it has the potential to profoundly change the way business is done            
 in the State of Alaska.  There are three basic structures as far as           
 businesses are concerned:  sole proprietorship, partnership and               
 corporation.  Limited liability is only allowed for corporations              
 because the owner of a corporation and its shareholders are not to            
 allowed to manage the affairs of the corporation.  They have to               
 elect a board of directors to manage the affairs of a corporation.            
                                                                               
 Mr. Ingham then addressed several sections in SB 347 and said there           
 are many areas of the bill that are highly technical in nature and            
 are extremely confusing to the reader.  He said the bill in its               
 present form is dangerous piece of legislation, and the banking               
 community feels very strongly that it needs to be examined very               
 closely.                                                                      
                                                                               
 SENATOR KELLY closed the public testimony on SB 347 and SB 348 and            
 stated they would be back before the committee at a later date.               

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