Legislature(1993 - 1994)
03/24/1994 01:40 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.