Guest Article by Trey Grayson
Kentucky Secretary of State
During its 2006 session, the Kentucky General Assembly passed legislation that will substantially modernize and enhance Kentucky partnership law for the first time in over fifty years.
House Bill 234, sponsored by Rep. Scott Brinkman (R-Louisville), will align Kentucky partnership law with the most recent versions of the Uniform Partnership Act and the Uniform Limited Partnership Act. Kentucky joins thirty-seven other states that have adopted the Uniform Partnership Act and six other states that have adopted the Uniform Limited Partnership Act.
HB 234 is the product of a partnership among the Kentucky Secretary of State’s office, Representative Brinkman and the Kentucky Bar Association Business Law Section. Similar bills had been unsuccessfully introduced in the past three legislative sessions.
The goal of HB 234 is to bring partnership law in line with modern business practices and trends and to help Kentucky’s business climate remain competitive with the rest of the country. As a result, general partnerships, limited partnerships (LPs), and limited liability partnerships (LLPs) are now a much more appealing choice of entity for businesses.
Much of the appeal results from the additional disclosure opportunities for general partnerships. General partnerships may now voluntarily file documents with the Secretary of State’s office. New general partnership filings include a Statement of Partnership Authority (to record partnership existence, designate partners and identify partners authorized to transfer partnership real property) and a Statement of Dissociation (to record partnership dissociation). The filings are designed to give the partnership a vehicle to better inform customers, lenders and other business associates of its legal status.
Despite the changes to general partnership law, one attribute remains unchanged — general partners are still jointly and severally liable for debts and obligations of the general partnership. As a result, businesses looking for limited liability will still need to consider corporations, LPs, LLPs or limited liability companies (LLCs).
On the other hand, with the extension of the Kentucky corporate income tax to LLCs and LPs, general partnerships may now be more appealing for simple business arrangements where tax considerations outweigh limited liability considerations.
While this article focused on updates to general partnership law, HB 234 updates LP and LLP law as well.
All new partnerships formed on or after July 12, 2006 will be governed by the new laws. Older partnerships may elect to be governed by the new laws, but are not required to make such an election.« Back to news