BILL NUMBER: SB 513 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 22, 1995
AMENDED IN SENATE MAY 8, 1995
AMENDED IN SENATE MAY 4, 1995
INTRODUCED BY Senator Calderon
(Principal coauthor: Senator Campbell)
FEBRUARY 17, 1995
An act to amend Section 17900 of the Business and Professions
Code, to amend Sections 15002, 15006, 15015, 15018, 15034, 15036, and
15040 of, and to add Article 8 (commencing with Section 15047) to
Chapter 1 of Title 2 of, the Corporations Code, and to amend Section
19132 of, and to add Chapter 1.7 (commencing with Section 23097) to
Part 11 of Division 2 of, the Revenue and Taxation Code, relating to
limited liability partnerships, making an appropriation
therefor, and declaring the urgency thereof, to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 513, as amended, Calderon. Limited liability partnerships.
Existing law provides for the formation of various types of legal
entities, including corporations, limited liability companies,
partnerships, and limited partnerships. Under existing law, in an
ordinary partnership each partner is generally liable for all debts
and obligations of the partnership.
This bill would authorize the establishment of registered limited
liability partnerships. It would be a partnership, and each of the
partners would generally be required to be licensed to practice law
or professional accountancy, as specified. The bill would provide
for registration with the Secretary of State, would provide for the
registration of foreign limited liability partnerships, and would
specify that limited liability partnerships are subject to the
minimum franchise tax.
The bill would appropriate an unspecified amount from the General
Fund to the Franchise Tax Board in augmentation of an unspecified
Budget Act item.
The bill would declare that it is to take effect immediately as an
urgency statute.
Vote: 2/3. Appropriation: yes no
. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17900 of the Business and Professions Code is
amended to read:
17900. (a) As used in this chapter, "fictitious business name"
means:
(1) In the case of an individual, a name that does not include the
surname of the individual or a name that suggests the existence of
additional owners.
(2) In the case of a partnership or other association of persons,
other than a limited partnership that has filed a certificate of
limited partnership with the Secretary of State pursuant to Section
15621 of the Corporations Code, a foreign limited partnership that
has filed an application for registration with the Secretary of State
pursuant to Section 15692 of the Corporations Code, a registered
limited liability partnership that has filed a registration pursuant
to Section 15049 of the Corporations Code, or a foreign limited
liability partnership that has filed an application for registration
pursuant to Section 15055 of the Corporations Code, a name that does
not include the surname of each general partner or a name that
suggests the existence of additional owners.
(3) In the case of a corporation, any name other than the
corporate name stated in its articles of incorporation.
(4) In the case of a limited partnership that has filed a
certificate of limited partnership with the Secretary of State
pursuant to Section 15621 of the Corporations Code and in the case of
a foreign limited partnership that has filed an application for
registration with the Secretary of State pursuant to Section 15692 of
the Corporations Code, any name other than the name of the limited
partnership as on file with the Secretary of State.
(5) In the case of a limited liability company, any name other
than the name stated in its articles of organization and in the case
of a foreign limited liability company that has filed an application
for registration with the Secretary of State pursuant to Section
17451 of the Corporations Code, any name other than the name of the
limited liability company as on file with the Secretary of State.
(b) A name that suggests the existence of additional owners within
the meaning of subdivision (a) is one which includes such words as
"Company," "& Company," "& Son," "& Sons," "& Associates," "Brothers,"
and the like, but not words that merely describe the business being
conducted.
SEC. 2. Section 15002 of the Corporations Code is amended to read:
15002. As used in this act:
(a) "Court" includes every court and judge having jurisdiction in
the case.
(b) "Business" includes every trade, occupation, or profession.
(c) "Person" includes individuals, partnerships, limited liability
partnerships, limited partnerships, corporations, limited liability
companies, and other associations.
(d) "Bankrupt" includes a debtor under Chapter 7 of the federal
bankruptcy law or an insolvent under any state insolvency act.
(e) "Conveyance" includes every assignment, lease, mortgage, or
encumbrance.
(f) "Real property" includes land and any interest or estate in
land.
(g) "Professional limited liability partnership services" means
the practice of public accountancy or the practice of law.
(h) "Licensed person" means any person who is duly licensed,
authorized, or registered under the provisions of the Business and
Professions Code to provide professional limited liability
partnership services or who is lawfully able to render professional
limited liability partnership services in this state.
(i) (1) "Registered limited liability partnership" means a
partnership, other than a limited partnership, formed pursuant to an
agreement governed by Article 8 (commencing with Section 15047), that
is registered under Section 15049 and (A) each of the partners of
which is a licensed person, a person licensed or authorized to
provide professional limited liability partnership services in a
jurisdiction or jurisdictions other than this state, (B) is licensed
under the laws of the state to engage in the practice of public
accountancy or the practice of law, or (C) is related to a registered
limited liability partnership or foreign limited liability
partnership and provides services related or complementary to the
professional limited liability partnership services provided by, or
provides services or facilities to, the registered limited liability
partnership or foreign limited liability partnership.
(2) For the purposes of subparagraph (C) of paragraph (1), a
partnership is related to a registered limited liability partnership
or foreign limited liability partnership if at least a majority of
partners in one partnership are also partners in the other
partnership, or if at least a majority in interest in each
partnership hold interests or are members in another person, except
an individual, and each renders services pursuant to an agreement
with that other person.
(j) (1) "Foreign limited liability partnership" means a
partnership, other than a limited partnership, formed pursuant to an
agreement governed by the laws of another jurisdiction and
denominated or registered as a limited liability partnership or
registered limited liability partnership under the laws of that
jurisdiction (A) in which each partner is a licensed person, a person
licensed or authorized to provide professional limited liability
partnership services in a jurisdiction or jurisdictions other than
this state, (B) is licensed under the laws of the state to engage in
the practice of public accountancy or the practice of law, or (C) is
related to a registered limited liability partnership or foreign
limited liability partnership and provides services related or
complementary to the professional limited liability partnership
services provided by, or provides services or facilities to, that
registered limited liability partnership or foreign limited liability
partnership.
(2) For the purposes of subparagraph (C) of paragraph (1), a
partnership is related to a registered limited liability partnership
or foreign limited liability partnership if (A) at least a majority
of the partners in one partnership are also partners in the other
partnership, or (B) at least a majority in interest in each
partnership, hold interests or are members in another person, except
an individual, and each renders services pursuant to an agreement
with that other person.
SEC. 3. Section 15006 of the Corporations Code is amended to read:
15006. (1) A partnership is an association of two or more persons
to carry on as coowners a business for profit, and includes, for all
purposes of the laws of this state, a registered limited liability
partnership.
(2) But any association formed under any other statute of this
state, or any statute adopted by authority, other than the authority
of this state, is not a partnership under this act, unless such
association would have been a partnership in this state prior to the
adoption of this act; but this act shall apply to limited, special,
and mining partnerships except insofar as the statutes relating to
such partnerships are inconsistent herewith.
SEC. 4. Section 15015 of the Corporations Code is amended to read:
15015. (a) Except as provided in subdivision (b), all partners
are liable as follows:
(1) Jointly and severally for everything chargeable to the
partnership under Sections 15013 and 15014.
(2) Jointly for all other debts and obligations of the
partnership; but any partner may enter into a separate obligation to
perform a partnership contract.
(b) Subject to subdivision (c), a partner in a registered limited
liability partnership is not liable or accountable, directly or
indirectly, including by way of indemnification, contribution,
assessment, or otherwise, for debts, obligations, or liabilities of
or chargeable to the partnership or another partner in the
partnership, whether arising in tort, contract, or otherwise, that
are incurred, created, or assumed by the partnership while the
partnership is a registered limited liability partnership, by reason
of being a partner or acting in the conduct of the business or
activities of the partnership.
(c) Nothing in subdivision (b) shall be construed to affect the
liability of a partner of a registered limited liability partnership
to third parties for that partner's participation in tortious
conduct.
(d) A partner in a registered limited liability partnership is not
a proper party to a proceeding by or against a registered limited
liability partnership, unless that partner is personally liable under
subdivision (c).
SEC. 5. Section 15018 of the Corporations Code is amended to read:
15018. The rights and duties of the partners in relation to the
partnership shall be determined, subject to any agreement between
them, by the following rules:
(a) Each partner shall be repaid his or her contributions, whether
by way of capital or advances to the partnership property and share
equally in the profits and surplus remaining after all liabilities,
including those to partners, are satisfied; and, except as provided
in subdivision (b) of Section 15015, must contribute towards the
losses, whether of capital or otherwise, sustained by the partnership
according to his or her share in the profits.
(b) The partnership must indemnify every partner in respect of
payments made and personal liabilities reasonably incurred by him or
her in the ordinary and proper conduct of its business, or for the
preservation of its business or property.
(c) A partner, who in aid of the partnership makes any payment or
advance beyond the amount of the capital that he or she agreed to
contribute, shall be paid interest from the date of the payment or
advance.
(d) A partner shall receive interest on the capital contributed by
him or her only from the date when repayment should be made.
(e) All partners have equal rights in the management and conduct
of the partnership business.
(f) No partner is entitled to remuneration for acting in the
partnership business, except that a surviving partner is entitled to
reasonable compensation for his or her services in winding up the
partnership affairs.
(g) No person can become a member of a partnership without the
consent of all the partners.
(h) Any difference arising as to ordinary matters connected with
the partnership business may be decided by a majority of the
partners; but no act in contravention of any agreement between the
partners may be done rightfully without the consent of all the
partners.
SEC. 6. Section 15034 of the Corporations Code is amended to read:
15034. Where the dissolution is caused by the act, death or
bankruptcy of a partner, each partner is liable to his or her
copartners for his or her share of any liability created by any
partner acting for the partnership as if the partnership had not been
dissolved unless one or more of the following applies:
(a) The dissolution being by act of any partner, the partner
acting for the partnership had knowledge of the dissolution.
(b) The dissolution being by the death or bankruptcy of a partner,
the partner acting for the partnership had knowledge or notice of
the death or bankruptcy.
(c) The liability is for a debt, obligation, or liability for
which the partner is not liable as provided in subdivision (b) of
Section 15015.
SEC. 7. Section 15036 of the Corporations Code is amended to read:
15036. (1) The dissolution of the partnership does not of itself
discharge the existing liability of any partner.
(2) A partner is discharged from any existing liability upon
dissolution of the partnership by an agreement to that effect between
himself or herself, the partnership creditor and the person or
partnership continuing the business; and such agreement may be
inferred from the course of dealing between the creditor having
knowledge of the dissolution and the person or partnership continuing
the business.
(3) Where a person agrees to assume the existing obligations of a
dissolved partnership, the partners whose obligations have been
assumed shall be discharged from any liability to any creditor of the
partnership who, knowing of the agreement, consents to a material
alteration in the nature or time of payment of such obligations.
(4) The individual property of a deceased partner shall be liable
for those obligations of the partnership incurred while he or she was
a partner, and for which he or she was liable under Section 15015,
but subject to the prior payment of his or her separate debts.
SEC. 8. Section 15040 of the Corporations Code is amended to read:
15040. In settling accounts between the partners after
dissolution, the following rules shall be observed, subject to any
agreement to the contrary:
(a) The assets of the partnership are the following:
(1) The partnership property.
(2) The contributions of the partners specified in subdivision
(d).
(b) The liabilities of the partnership shall rank in order of
payment, as follows:
(1) Those owing to creditors other than partners.
(2) Those owing to partners other than for capital and profits.
(3) Those owing to partners in respect of capital.
(4) Those owing to partners in respect of profits.
(c) The assets shall be applied in the order of their declaration
in subdivision (a) to the satisfaction of the liabilities.
(d) Except as provided is in
subdivision (b) of Section 15015, (A) the partners shall contribute,
as provided by subdivision (a) of Section 15018, the amount necessary
to satisfy the liabilities; and (B) if any, but not all, of the
partners are insolvent, or, not being subject to process, refuse to
contribute, the other partners shall contribute their share of the
liabilities, and, in the relative proportions in which they share the
profits, the additional amount necessary to pay the liabilities.
(e) An assignee for the benefit of creditors or any person
appointed by the court shall have the right to enforce the
contributions specified in subdivision (d).
(f) Any partner or his or her legal representative shall have the
right to enforce the contributions specified in subdivision (d), to
the extent of the amount that he or she has paid in excess of his or
her share of the liability.
(g) The individual property of a deceased partner shall be liable
for the contributions specified in subdivision (d).
(h) When partnership property and the individual properties of the
partners are in possession of a court for distribution, partnership
creditors shall have priority on partnership property and separate
creditors on individual property, saving the rights of lien or
secured creditors as heretofore.
(i) Where a partner has become bankrupt or his or her estate is
insolvent the claims against his or her separate property shall rank
in the following order:
(1) Those owing to separate creditors.
(2) Those owing to partnership creditors.
(3) Those owning to partners by way of contribution.
SEC. 9. Article 8 (commencing with Section 15047) is added to
Chapter 1 of Title 2 of the Corporations Code, to read:
Article 8. Limited Liability Partnerships
15047. No registered limited liability partnership or foreign
limited liability partnership may render professional limited
liability partnership services in this state except through licensed
persons.
15048. The name of a registered limited liability partnership
shall contain the words "Registered Limited Liability Partnership" or
"Limited Liability Partnership" or one of the abbreviations "L.L.P.,"
"LLP," "R.L.L.P.," or "RLLP" as the last words or letters of its
name.
15049. (a) To become a registered limited liability partnership,
a partnership, other than a limited partnership, shall file with the
Secretary of State a registration, executed by one or more partners
authorized to execute a registration, stating the name of the
partnership; the address of its principal office; if the partnership'
s principal office is not located in this state, the name and address
of its agent for service of process in this state; a brief statement
of the business in which the partnership engages; any other matters
that the partnership determines to include; and that the partnership
is registering as a registered limited liability partnership.
(b) The registration shall be accompanied by a fee of eighty
dollars ($80).
(c) The Secretary of State shall register as a registered limited
liability partnership any partnership that submits a completed
registration with the required fee.
(d) The Secretary of State may cancel the filing of the
registration if a check or other remittance accepted in payment of
the filing fee is not paid upon presentation. Upon receiving written
notification that the item presented for payment has not been
honored for payment, the Secretary of State shall give a first
written notice of the applicability of this section to the agent for
service of process or to the person submitting the instrument.
Thereafter, if the amount has not been paid by cashier's check or
equivalent, the Secretary of State shall give a second written notice
of cancellation and the cancellation shall thereupon be effective.
The second notice shall be given 20 days or more after the first
notice and 90 days or less after the date of the original filing.
(e) A partnership becomes a registered limited liability
partnership at the time of the filing of the initial registration
with the Secretary of State or at any later date or time specified in
the registration and the payment of the fee required by subdivision
(b). A partnership continues as a registered limited liability
partnership until a notice that it is no longer a registered limited
liability partnership has been filed pursuant to subdivision (b) of
Section 15050 or, if applicable, until it has been dissolved and
finally wound up. The status of a partnership as a registered
limited liability partnership and the liability of a partner of the
registered limited liability partnership shall not be adversely
affected by errors or subsequent changes in the information stated in
a registration under subdivision (a) or an amended registration or
notice under Section 15050.
(f) The fact that a registration or amended registration pursuant
to this section is on file with the Secretary of State is notice that
the partnership is a registered limited liability partnership and of
those other facts contained therein that are required to be set
forth in the registration or amended registration.
(g) The Secretary of State shall provide a form for a registration
under subdivision (a).
15050. (a) The registration of a registered limited liability
partnership may be amended , by an amended
registration , executed by one or more partners
authorized to execute an amended registration and filed with the
Secretary of State, as soon as reasonably practical after any
information set forth in the registration or previously filed amended
registration becomes inaccurate or to add information to the
registration or amended registration.
(b) If a registered limited liability partnership ceases to be a
registered limited liability partnership, it shall file with the
Secretary of State a notice, executed by one or more partners
authorized to execute the notice, that it is no longer a registered
limited liability partnership.
(c) An amendment pursuant to subdivision (a) and a notice pursuant
to subdivision (b) shall each be accompanied by a fee of thirty
dollars ($30).
(d) The Secretary of State shall provide forms for an amended
registration under subdivision (a) and a notice under subdivision
(b).
15051. (a) A domestic partnership, other than a limited
partnership, may convert to a registered limited liability
partnership by the vote of a majority in interest of its partners or
such different vote as may be required in its partnership agreement.
(b) When such a conversion takes effect, all of the following
apply:
(1) All property, real and personal, tangible and intangible, of
the converting partnership remains vested in the converted registered
limited liability partnership.
(2) All debts, obligations, liabilities, and penalties of the
converting partnership continue as debts, obligations, liabilities,
and penalties of the converted registered limited liability
partnership.
(3) Any action, suit, or proceeding, civil or criminal, then
pending by or against the converting partnership may be continued as
if the conversion had not occurred.
(4) To the extent provided in the agreement of conversion and in
this chapter, the partners of a partnership shall continue as
partners in the converted registered limited liability partnership.
(5) A partnership that has been converted to a registered limited
liability partnership pursuant to this chapter is the same person
that existed prior to the conversion.
15052. (a) At the time of registration pursuant to Section 15049,
in the case of a registered limited liability partnership, and
Section 15055, in the case of a foreign limited liability
partnership, and at all times during which those partnerships shall
transact intrastate business, every registered limited liability
partnership and foreign limited liability partnership, as the case
may be, shall be required to provide security for claims against it
by its clients for errors or omissions arising out of the practice of
public accountancy or law in one or both of the following ways:
(1) Maintaining a policy or policies of insurance against
liability imposed on or against it by law for damages arising out of
any or all established claims by its clients for liabilities in an
amount for each claim of at least one hundred thousand dollars
($100,000) multiplied by the number of licensed persons rendering
professional services; provided, that, in any event, the maximum
amount of insurance shall not be required to exceed five million
dollars ($5,000,000) for all claims during any one calendar year.
(2) Maintaining bank deposits, in trust or bank escrow, of cash,
bank certificates of deposit, or United States Treasury or bank
letters of credit, or bonds by insurance companies or accredited
financial institutions guaranteeing payment of liabilities imposed
upon it by law for damages arising out of all claims established by
its clients in an amount of at least one hundred thousand dollars
($100,000) multiplied by the number of licensed persons rendering
professional services; provided, that, in any event, the maximum
amount of that security shall not be required to exceed five million
dollars ($5,000,000) for all claims during any one calendar year.
(b) In lieu of complying with the requirements of paragraph (1) or
(2) of subdivision (a), a registered limited liability partnership
law firm may enter into a written agreement executed by each partner
of the registered limited liability partnership or foreign limited
liability partnership guaranteeing payment of liabilities imposed
upon it by law for damages arising out of all claims established by
its clients in an amount for each claim of at least one hundred
thousand dollars ($100,000) multiplied by the number of licensed
persons rendering professional services and with an aggregate maximum
limit of liability per calendar year of five million dollars
($5,000,000).
(c) Neither the existence of the requirements of subdivision (a)
nor the extent of the registered limited liability partnership or
foreign limited liability partnership's compliance with each of the
alternative requirements set forth herein shall be admissible or in
any way be made known to a jury in determining an issue of liability
for or to the extent of the debt or obligation or damages in
question.
15053. (a) No distribution shall be made by a registered limited
liability partnership if, after giving effect to the distribution:
(1) The registered limited liability partnership would not be able
to pay its debts as they become due in the usual course of business.
(2) The registered limited liability partnership's total assets
would be less than the sum of its total liabilities plus the amount
that would be needed, if the registered limited liability partnership
were to be dissolved at the time of the distribution, to satisfy the
preferential rights of other partners upon dissolution that are
superior to the rights of the partners receiving the distribution.
(b) A cause of action with respect to an obligation to return a
distribution is extinguished unless the action is brought within four
years after the distribution is made.
(c) A distribution for purposes of this section means the transfer
of money or property by a registered limited liability partnership
to its partners without consideration.
15054. (a) (1) The laws of the jurisdiction under which a foreign
limited liability partnership is organized shall govern its
organization and internal affairs and the liability and authority of
its partners, and (2) a foreign limited liability partnership may not
be denied registration by reason of any difference between those
laws and the laws of this state.
(b) The name of a foreign limited liability partnership
transacting intrastate business in this state shall contain the words
"Registered Limited Liability Partnership" or "Limited Liability
Partnership" or one of the abbreviations "L.L.P.," "LLP," "R.L.L.P.,"
or "RLLP," or such other similar words or abbreviations as may be
required or authorized by the laws of the jurisdiction of formation
of the foreign limited liability partnership, as the last words or
letters of its name.
15055. (a) (1) Before transacting intrastate business in this
state, a foreign limited liability partnership shall (A) comply with
any statutory or administrative registration or filing requirements
of the California board, commission, or other agency that prescribes
the rules and regulations governing a particular profession in which
the partnership proposes to be engaged, pursuant to the applicable
provisions of the Business and Professions Code relating to the
profession, and (B) register with the Secretary of State by
submitting to the Secretary of State an application for registration
as a foreign limited liability partnership, signed by a person with
authority to do so under the laws of the jurisdiction of formation of
the foreign limited liability partnership, stating the name of the
partnership, the address of its principal office, the name and
address of its agent for service of process in this state, a brief
statement of the business in which the partnership engages, and any
other matters that the partnership determines
to include; provided that no such
registration pursuant to this chapter shall be required within the
first 30 days of the operative date of this section.
(2) Annexed to the application for registration shall be a
certificate from an authorized public official of the foreign limited
liability partnership's jurisdiction of organization to the effect
that the foreign limited liability partnership is in good standing in
that jurisdiction, if the laws of that jurisdiction permit the
issuance of those certificates, or, in the alternative, a statement
by the foreign limited liability partnership that the laws of its
jurisdiction of organization do not permit the issuance of those
certificates.
(b) The registration shall be accompanied by a fee of eighty
dollars ($80).
(c) The Secretary of State shall register as a foreign limited
liability partnership any partnership that submits a completed
application for registration with the required fee.
(d) The Secretary of State may cancel the filing of the
registration if a check or other remittance accepted in payment of
the filing fee is not paid upon presentation. Upon receiving written
notification that the item presented for payment has not been
honored for payment, the Secretary of State shall give a first
written notice of the applicability of this section to the agent for
service of process or to the person submitting the instrument.
Thereafter, if the amount has not been paid by cashier's check or
equivalent, the Secretary of State shall give a second written notice
of cancellation and the cancellation shall thereupon be effective.
The second notice shall be given 20 days or more after the first
notice and 90 days or less after the original filing.
(e) A partnership becomes registered as a foreign limited
liability partnership at the time of the filing of the initial
registration with the Secretary of State or at any later date or time
specified in the registration and the payment of the fee required by
subdivision (b). A partnership continues to be registered as a
foreign limited liability partnership until a notice that it is no
longer so registered as a limited liability partnership has been
filed pursuant to Section 15056 or, if applicable, once it has been
dissolved and finally wound up. The status of a partnership
registered as a foreign limited liability partnership and the
liability of a partner of that foreign limited liability partnership
shall not be adversely affected by errors or subsequent changes in
the information stated in an application for registration under
subdivision (a) or an amended registration or notice under Section
15056.
(f) The fact that a registration or amended registration pursuant
to Section 15056 is on file with the Secretary of State is notice
that the partnership is a foreign limited liability partnership and
of those other facts contained therein that are required to be set
forth in the registration or amended registration.
(g) The Secretary of State shall provide a form for a registration
under subdivision (a).
(h) A foreign limited liability partnership transacting intrastate
business in this state shall not maintain any action, suit, or
proceeding in any court of this state until it has registered in this
state pursuant to this section.
(i) Any foreign limited liability partnership that transacts
intrastate business in this state without registration is subject to
a penalty of twenty dollars ($20) for each day that unauthorized
intrastate business is transacted, up to a maximum of ten thousand
dollars ($10,000).
(j) A partner of a foreign limited liability partnership is not
liable for the debts or obligations of the foreign limited liability
partnership solely by reason of its having transacted business in
this state without registration.
(k) A foreign limited liability partnership, transacting business
in this state without registration, appoints the Secretary of State
as its agent for service of process with respect to causes of action
arising out of the transaction of business in this state.
(l) "Transact intrastate business" as used in this section means
to repeatedly and successively provide professional limited liability
partnership services in this state, other than in interstate or
foreign commerce.
(m) Without excluding other activities that may not be considered
to be transacting intrastate business, a foreign limited liability
partnership shall not be considered to be transacting intrastate
business merely because its subsidiary or affiliate transacts
intrastate business, or merely because of its status as any one or
more of the following:
(1) A shareholder of a domestic corporation.
(2) A shareholder of a foreign corporation transacting intrastate
business.
(3) A limited partner of a foreign limited partnership transacting
intrastate business.
(4) A limited partner of a domestic limited partnership.
(5) A member or manager of a foreign limited liability company
transacting intrastate business.
(6) A member or manager of a domestic limited liability company.
(n) Without excluding other activities that may not be considered
to be transacting intrastate business, a foreign limited liability
partnership shall not be considered to be transacting intrastate
business within the meaning of this subdivision solely by reason of
carrying on in this state any one or more of the following
activities:
(1) Maintaining or defending any action or suit or any
administrative or arbitration proceeding, or effecting the settlement
thereof or the settlement of claims or disputes.
(2) Holding meetings of its partners or carrying on any other
activities concerning its internal affairs.
(3) Maintaining bank accounts.
(4) Maintaining offices or agencies for the transfer, exchange,
and registration of the foreign limited liability partnership's
securities or maintaining trustees or depositories with respect to
those securities.
(5) Effecting sales through independent contractors.
(6) Soliciting or procuring orders, whether by mail or through
employees or agents or otherwise, where those orders require
acceptance without this state before becoming binding contracts.
(7) Creating or acquiring evidences of debt or mortgages, liens,
or security interests in real or personal property.
(8) Securing or collecting debts or enforcing mortgages and
security interests in property securing the debts.
(9) Conducting an isolated transaction that is completed within
180 days and not in the course of a number of repeated transactions
of a like nature.
(o) A person shall not be deemed to be transacting intrastate
business in this state merely because of its status as a partner of a
registered limited liability partnership or a foreign limited
liability company whether or not registered to transact intrastate
business in this state.
(p) The Attorney General may bring an action to restrain a foreign
limited liability partnership from transacting intrastate business
in this state in violation of this chapter.
(q) Nothing in this section is intended to, or shall, augment,
diminish, or otherwise alter existing provisions of law, statutes, or
court rules relating to services by a California public accountant
or California attorney in another jurisdiction, or services by an
out-of-state public accountant or out-of-state attorney in
California.
15056. (a) The registration of a foreign limited liability
partnership may be amended , by an amended
registration , executed by one or more partners
authorized to execute an amended registration and filed with the
Secretary of State, as soon as reasonably practical after any
information set forth in the registration or previously filed amended
registration becomes inaccurate, to add information to the
registration or amended registration or to withdraw its registration
as a foreign limited liability partnership.
(b) If a foreign limited liability partnership ceases to be a
limited liability partnership, it shall file with the Secretary of
State a notice, executed by one or more partners authorized to
execute the notice, that it is no longer a foreign limited liability
partnership.
(c) An amendment pursuant to subdivision (a) and a notice pursuant
to subdivision (b) shall each be accompanied by a fee of thirty
dollars ($30).
(d) The Secretary of State shall provide forms for an amended
registration under subdivision (a) and a notice under subdivision
(b).
15057. The filing of a registration with the Secretary of State
under Section 15049 or 15055 shall make it unnecessary for all
purposes for the registered limited liability partnership or foreign
limited liability partnership to make any of the filings referred to
in Chapter 5 (commencing with Section 17900) of Part 3 of Division 7
of the Business and Professions Code.
15058. (a) Each registered limited liability partnership whose
principal office is not in this state and each foreign limited
liability partnership registered under Section 15055 shall designate
as its agent for service of process any natural person or a domestic
or foreign corporation entitled to be designated as agent for the
service of process pursuant to Section 1505.
(b) In addition to service that may be made as provided in Section
416.40 of the Code of Civil Procedure, delivery by hand of a copy of
any process against a registered limited liability partnership or
foreign limited liability partnership registered under Section 15055
(1) to any natural person designated by it as agent or (2), if a
corporate agent has been designated, to any person named in the
latest certificate of the corporate agent filed pursuant to Section
1505 at the office of that corporate agent shall constitute valid
service on the registered limited liability partnership or foreign
limited liability partnership.
(c) If an agent for the purpose of service of process has resigned
and has not been replaced or if the agent designated cannot with
reasonable diligence be found at the address designated for
personally delivering the process, or if no agent has been
designated, and it is shown by affidavit to the satisfaction of the
court that process against a registered limited liability partnership
or foreign limited liability partnership registered under Section
15055 cannot be served with reasonable diligence upon the designated
agent by hand in the manner provided in Section 415.10, subdivision
(a) of Section 415.20, or subdivision (a) of Section 415.30 of the
Code of Civil Procedure or upon the registered limited liability
partnership or foreign limited liability partnership in the manner
provided in Section 416.40 of the Code of Civil Procedure, the court
may make an order that the service be made upon the registered
limited liability partnership or foreign limited liability
partnership by delivering by hand to the Secretary of State, or to
any person employed in the Secretary of State's office in the
capacity of assistant or deputy, one copy of the process for each
defendant to be served, together with a copy of the order authorizing
that service. Service in this manner is deemed complete on the 10th
day after delivery of the process to the Secretary of State.
(d) Upon the receipt of the copy of process and the fee therefor,
the Secretary of State shall give notice of the service of process to
the registered limited liability partnership or foreign limited
liability partnership registered under Section 15055 at its principal
executive office, by forwarding to that office, by registered mail
with request for return receipt, the copy of the process or, if the
records of the Secretary of State do not disclose an address for that
principal executive office, by forwarding the copy in the same
manner to the last designated agent for service of process who has
not resigned. If the agent for service of process has resigned and
has not been replaced and the records of the Secretary of State do
not disclose an address for its principal executive office, no action
need be taken by the Secretary of State.
(e) The Secretary of State shall keep a record of all process
served upon the Secretary of State under this section and shall
record therein the time of service and the Secretary of State's
action with reference thereto. The certificate of the Secretary of
State, under the Secretary of State's official seal, certifying to
the receipt of process, the giving of notice thereof to the
registered limited liability partnership or foreign limited liability
partnership, and the forwarding of the process pursuant to this
section shall be competent and prima facie evidence of the matters
stated therein.
(f) The court order pursuant to subdivision (a) that service of
process be made upon the registered limited liability partnership or
foreign limited liability partnership by delivery to the Secretary of
State may be a court order of a court of another state, or of any
federal court, if the suit, action, or proceeding has been filed in
that court.
SEC. 10. Section 19132 of the Revenue and Taxation Code is amended
to read:
19132. (a) (1) Unless it is shown that the failure is due to
reasonable cause and not due to willful neglect, a penalty computed
in accordance with paragraph (2) is hereby imposed in the case of
failure to pay any of the following:
(A) The amount shown as tax on any return on or before the date
prescribed for payment of that tax determined with regard to any
extension of time for payment.
(B) Any amount in respect of any tax required to be shown on a
return which is not so shown including an assessment made pursuant to
Section 19051 within 10 days of the date of the notice and demand
therefor.
(C) The amount required to be paid by Section 19021, if
applicable, that is not paid.
(D) The amount required to be paid by Section 23091, if
applicable, that is not paid.
(E) The amount required to be paid by Section 23097, if
applicable, that is not paid.
(2) The penalty imposed under paragraph (1) shall consist of both
of the following:
(A) Five percent of the total tax unpaid as defined in subdivision
(c).
(B) An amount computed at the rate of 0.5 percent per month of the
"remaining tax" as defined in subdivision (d) for each additional
month or fraction thereof not to exceed 40 months during which the
"remaining tax" is greater than zero.
(3) The aggregate amount of penalty imposed by this subdivision
shall not exceed 25 percent of the total unpaid tax and shall be due
and payable upon notice and demand by the Franchise Tax Board. The
tender of a check or money order does not constitute payment of the
tax for purposes of this section unless the check or money order is
paid on presentment.
(b) The penalty prescribed by subdivision (a) shall not be
assessed if, for the same taxable year, the sum of any penalties
imposed under Section 19131 relating to failure to file return and
Section 19133 relating to failure to file return after demand is
equal to or greater than the subdivision (a) penalty. In the event
the penalty imposed under subdivision (a) is greater that
than the sum of any penalties imposed under
Sections 19131 and 19133, the penalty imposed under subdivision (a)
shall be the amount which exceeds the sum of any penalties imposed
under Sections 19131 and 19133.
(c) For purposes of this section, total tax unpaid means the
amount of tax shown on the return reduced by both of the following:
(1) The amount of any part of the tax which is paid on or before
the date prescribed for payment of the tax.
(2) The amount of any credit against the tax which may be claimed
upon the return.
(d) For purposes of this section, "remaining tax" means total tax
unpaid reduced by the amount of any payment of the tax.
(e) If the amount required to be shown as a tax on a return is
less than the amount shown as tax on that return, subdivisions (a),
(c), and (d) shall be applied by substituting that lower amount.
(f) No interest shall accrue on the portion of the penalty
prescribed in subparagraph (B) of paragraph (2) of subdivision (a).
SEC. 11. Chapter 1.7 (commencing with Section 23097) is added to
Part 11 of Division 2 of the Revenue and Taxation Code, to read:
CHAPTER 1.7. TAX ON REGISTERED LIMITED LIABILITY PARTNERSHIPS
AND FOREIGN LIMITED LIABILITY PARTNERSHIPS
23097. (a) For each taxable year beginning on or after January 1,
1995, every limited liability partnership doing business in this
state (as defined in Section 23101) and required to file a return
under Section 18633 shall pay annually to this state a tax for the
privilege of doing business in this state in an amount equal to the
applicable amount specified in paragraph (1) of subdivision (d) of
Section 23153 for the taxable year.
(b) In addition to any limited liability partnership that is doing
business in this state and therefore is subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1995, every registered limited liability partnership that
has registered with the Secretary of State pursuant to Section 15049
of the Corporations Code and every foreign limited liability
partnership that has registered with the Secretary of State pursuant
to Section 15055 of the Corporations Code shall pay annually the tax
prescribed in subdivision (a). The tax shall be paid for each
taxable year, or part thereof, until any of the following occurs:
(1) A notice of cessation is filed with the Secretary of State
pursuant to subdivision (b) of Section
Sections 15050 and 15056 of the Corporations Code.
(2) A foreign limited liability partnership withdraws its
registration pursuant to subdivision (a) of Section 15056 of the
Corporations Code.
(3) The registered limited liability partnership or foreign
limited liability partnership has been dissolved and finally wound
up.
(c) The tax assessed under this section shall be due and payable
on the date the return is required to be filed under Section 18633.
23098. No decree of dissolution, withdrawal, or cancellation
shall be made and entered by any court, nor shall the county clerk of
any county or the Secretary of State file any such decree,
withdrawal, or cancellation or any other document by which the term
of existence of the registered limited liability partnership shall be
reduced or terminated, nor shall the Secretary of State file any
amended registration or notice by a foreign limited liability
partnership that its rights to do intrastate business in this state
have ceased or of its dissolution and winding up, unless the
registered limited liability partnership or foreign limited liability
partnership obtains from the Franchise Tax Board and files with the
court, county clerk, or Secretary of State, as the case may be, a tax
clearance certificate indicating that the Franchise Tax Board is
satisfied from the available evidence that all taxes imposed by this
chapter have been paid or are secured by bond, deposit, or otherwise.
Within 30 days after receiving a request for a certificate, the
Franchise Tax Board shall either issue the certificate or notify the
person requesting the certificate of the amount of tax or fees that
must be paid or the amount of bond, deposit, or other security that
must be furnished as a condition of issuing the certificate. The
issuance of the certificate shall not relieve the taxpayer or any
individual, bank, or corporation from liability for any taxes, fees,
penalties, or interest imposed by this code. The Franchise Tax Board
shall furnish a copy of the tax clearance certificate to the
Secretary of State.
23099. A registered limited liability partnership or foreign
limited liability partnership shall not be subject to the taxes and
fees imposed by this chapter if the registered limited liability
partnership or foreign limited liability partnership did no business
in this state during the taxable or income year and the taxable or
income year was 15 days or less.
SEC. 12. For purposes of implementing and administering this act
in the 1995-96 fiscal year, the sum of ____ thousand dollars ($____)
is hereby appropriated from the General Fund to the Franchise Tax
Board, in augmentation of Item ____ of the Budget Act of 1995. It is
the intent of the Legislature that the funds required to administer
this act for the 1996-97 fiscal year, and each fiscal year
thereafter, shall be provided for in the annual Budget Act.
SEC. 13.
SEC. 12. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
Limited liability partnerships may presently do business in at
least ____ 23 states of the United
States. It is essential to the California economy that this state
provide an attractive business environment, which includes provision
for limited liability partnerships. In order to help stem the flow
of business and jobs from California, not disadvantage California
professionals in competing with professionals in other jurisdictions,
not cause California businesses to incur costs in excess of those
incurred for similar services in other jurisdictions, protect the
rights of Californians dealing with limited liability partnerships,
and improve California's business climate and tax base, it is
necessary that this act go into effect immediately.