Opinion ID: 1895452
Heading Depth: 1
Heading Rank: 4

Heading: General Summary of Background of the Act

Text: The phenomenon of business arrangements using alternative entities has been developing rapidly over the past several years. Long gone are the days when business planners were confined to corporate or partnership structures. Limited partnerships date back to the 19th Century. They became an important and popular vehicle with the adoption of the Uniform Limited Partnership Act in 1916. Sixty years later, in 1976, the National Conference of Commissioners on Uniform State Laws approved and recommended to the states a Revised Uniform Limited Partnership Act (RULPA), many provisions of which were modeled after the innovative 1973 Delaware Limited Partnership (LP) Act. Difficulties with the workability of the 1976 RULPA prompted the Commissioners to amend RULPA in 1985. [11] To date, 48 states and the District of Columbia have adopted the RULPA in either its 1976 or 1985 form. [12] Delaware adopted the RULPA with innovations designed to improve upon the Commissioners' product. [13] Since 1983, the General Assembly has amended the LP Act eleven times, with a view to continuing Delaware's status as an innovative leader in the field of limited partnerships. The Delaware Act was adopted in October 1992. The Act is codified in Chapter 18 of Title 6 of the Delaware Code. To date, the Act has been amended six times with a view to modernization. The LLC is an attractive form of business entity because it combines corporate-type limited liability with partnership-type flexibility and tax advantages. [14] The Act can be characterized as a flexible statute because it generally permits members to engage in private ordering with substantial freedom of contract to govern their relationship, provided they do not contravene any mandatory provisions of the Act. [15] Indeed, the LLC has been characterized as the best of both worlds. [16] The Delaware Act has been modeled on the popular Delaware LP Act. [17] In fact, its architecture and much of its wording is almost identical to that of the Delaware LP Act. [18] Under the Act, a member of an LLC is treated much like a limited partner under the LP Act. [19] The policy of freedom of contract underlies both the Act and the LP Act. [20] In August 1994, nearly two years after the enactment of the Delaware LLC Act, the Uniform Law Commissioners promulgated the Uniform Limited Liability Company Act (ULLCA). [21] To coordinate with later developments in federal tax guidelines regarding manager-managed LLCS, the Commissioners adopted minor changes in 1995. [22] The Commissioners further amended the ULLCA in 1996. Despite its purpose to promote uniformity and consistency, the ULLCA has not been widely popular. In fact, only seven jurisdictions have adopted the ULLCA since its creation in 1994. [23] A notable commentator on LLCs has argued that legislatures should look to either the Delaware Act or the Prototype Act created by the ABA when drafting state statutes. [24]