BILL ANALYSIS �
SB 323
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 323 (Vargas) - As Amended: August 6, 2012
Policy Committee:
JudiciaryVote:10-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill repeals the Beverly-Killea Limited Liability Company
Act and enacts the California Revised Uniform Limited Liability
Company Act, which recasts provisions governing the formation
and operation of limited liability companies (LLCs).
FISCAL EFFECT
The Secretary of State will incur one-time special fund costs of
around $90,000 to revise forms and materials on its website and
for staff training regarding the revised provisions governing
LLCs (Business Fees Fund).
COMMENTS :
1)Background . An LLC is a hybrid between a corporation and a
partnership. An LLC generally has the beneficial
characteristics of a partnership for operational and taxation
purposes, but its members enjoy the immunity provided by a
corporation to its shareholders for contract debts or tort
liability. The interest of a member in an LLC is an economic
interest, in the same manner that a partnership interest or a
corporate share is an economic interest, that may be
transferred under terms and conditions provided by the LLC
agreement, the partnership agreement, or the corporate
structure.
California first recognized LLCs in 1994 with the enactment of
the Beverly-Killea Limited Liability Company Act. That same
year, the National Conference of Commissioners on Uniform
State Laws approved the use of the Uniform Limited Liability
SB 323
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Company Act. In 2006, after reviewing the development of LLC
laws across the states, the National Conference of
Commissioners on Uniform State Laws adopted the Revised
Uniform Limited Liability Company Act, which has since been
enacted in five states (Idaho, Iowa, Nebraska, Utah, and
Wyoming) and the District of Colombia.
2)Purpose . This bill, sponsored by the Partnerships and Limited
Liability Companies Committee of the Business Law Section of
the State Bar, repeals the Beverly-Killea Limited Liability
Company Act and, taking into account California's particular
LLC protections, replaces it with a modified version of the
Revised Uniform Limited Liability Company, which recasts
provisions governing the formation and operations of LLCs.
According to the sponsor, "SB 323 clarifies many issues that
existed under Beverly-Killea and includes a more robust set of
default rules on many topics, which apply if the LLC operating
agreement is silent. SB 323 will bring California LLC law more
in line with the LLC laws of other states, making it easier
for multi-state businesses to operate both in and outside
California."
The author's recent amendments have addressed cost issues
identified by the Secretary of State and a potential
Constitutional question discussed in the Assembly Judiciary
Committee's analysis of this bill.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081