Utah Law Firm Predicts RULLCA Will Cause Utah Citizens to Form LLCs in Other States

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Utah Law Firm Predicts RULLCA Will Cause Utah Citizens to Form LLCs in Other States

The Utah law firm of Armstrong Law Offices, P.C., wrote an article called “How Could ‘Choice of Entity’ Be Affected By New LLC Act?”  I recommend the article, but here are some key statements:

“The Internet . . . have

[sic] enabled easy access to the statutory laws of all 50 states as well as the ability to file entity documents electronically from anywhere. . . . Rather than use the traditional approach to choose an entity, the astute advisor is now able:

–via the Internet, to forum shop for the entity law, structure and allowable attributes most friendly to the client’s needs in the particular situation;

–via the Internet, to consider and compare the tax and non-tax attributes of not only the four traditional choices of entity, but to also consider those attributes for other types of entities or variants of those entities [see 2. below] and to consider the unique features of each entity candidate under the laws in each of the 50 states (where applicable);

–to recommend to the client the entity jurisdiction, structure and attributes most conducive to the client’s needs; and

–via the Internet, to prepare and file entity formation documents in any of the 50 states. . . .

Thus, there has been a paradigm shift in the choice of entity process that enables professionals with knowledge of the laws of multiple entities, and the entity laws of multiple states, as well as tax laws, to provide much quicker and more targeted entity choices for the client. . . .

If secrecy and anonymity are the goal, the New LLC Act is tops! It requires no disclosures about an LLC on the public file except its name, its registered agent . . . .

Where certainty and predictability are desired, the New LLC Act is a bad choice. . . .

In effect, its defects and omissions require more details to be included in an LLC operating agreement than ever before in order to create more certainty of outcome. . . .”

At least twice I remember telling the members of the Arizona State Bar LLC subcommittee on RULLCA that if Arizona were to pass RULLCA revised by the subcommittee that the informed prospective LLC member and his or her attorney will not form an Arizona LLC, but will instead form the LLC in a state like Nevada or Delaware that has good LLC law.  I also told the subcommittee that if Arizona adopts RULLCA it could be legal malpractice for an attorney to recommend to a client that the client form an LLC in Arizona unless there were extraordinary circumstances that justified forming the LLC in Arizona.

Here is the closing statement made by the Armstrong Law Offices, P.C.:

“By inducing LLC advisors to look to LLC statutes that are clearer and more comprehensive than the New LLC Act, many LLCs that would otherwise be formed in Utah will be formed in states outside Utah, and that situation will require Utah lender personnel to review and consider the laws of multiple states in granting loans and in conducting due diligence.”

Emphasis added.

See also “How Could Due Diligence Be Affected By New LLC Act?” which contains this statement:

“Conclusion: organizational due diligence under the New LLC Act will be much more difficult and result in less certainty than under the Existing LLC Act.”

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By |October 7th, 2012|RULLCA Cons|0 Comments

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