On April 15, 2022, Wisconsin Governor Tony Evers signed Senate Bill 566/Act 258 into law (with phase-in provisions for its effective dates as described below). The bill modernizes Wisconsin’s business entity laws by, among other changes, adopting the latest versions of the Revised Uniform Limited Partnership Act and the Revised Uniform Limited Liability Company Act (the New Acts), with modifications. Let’s look at some of the highlights of these New Acts.
Limited Partnerships
Formation/Registration requirements: Under current law, a domestic LP generally is formed at the time of filing of the Certificate of Limited Partnership with the Department of Financial Institutions (DFI). The Certificate of Limited Partnership must include a statement requiring the latest date upon which the LP is to dissolve. Under the New Act, formation of a domestic LP occurs when: the Certificate of Limited Partnership becomes effective; at least 2 persons have become partners; at least one person has become a general partner; and at least one person has become a limited partner. The New Act removes the requirement to list the latest dissolution date on the Certificate of Limited Partnership (179.0201).
Name standard: Current law generally does not permit the name of a domestic LP to contain the name of a limited partner. The New Act allows the name of a domestic LP to contain the name of any partner (179.0114) and changes the name standard from “deceptively similar” to “distinguishable on the records” (179.02, 179.84).
Rights and liabilities of general and limited partners: Current law specifies that a general partner of an LP has the liabilities, powers, rights, and is subject to the same restrictions as a partner in a general partnership (179.33). The New Act includes more details for the general partner role. Except as otherwise provided by statute or agreement, general partners may be responsible for debts, obligations, and other liabilities of the LP (179.0404).
The New Act also specifies that each general partner has equal rights in the management and conduct in the LP’s activities and affairs (179.0406). While current law includes brief provisions on a general partner’s right to vote, the New Act provides for voting decisions by a majority of the general partners if there is more than one general partner (179.0406).
Under current law, a limited partner is generally not liable for the obligations of an LP unless he or she is also a general partner or participates in the control of the business. The New Act provides that a limited partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the partnership solely by reason of being or acting as a limited partner, even if the limited partner participates in the management and control of the LP (179.0303). The New Act also allows an LP to form as or to become an LLLP, and liability for an LLLP’s debts and obligations are generally limited to the LLLP itself (179.0201).
Fiduciary and other duties of partners: In contrast to current law, the New Act more specifically sets forth a general partner’s fiduciary duties to other partners and to the limited partnership, and details the duties of limited partners (which are minimal in comparison to the general partners).
Reporting requirements: The New Act requires annual reporting for domestic and foreign LPs.
Mergers, conversions, domestications, and interest exchanges: The New Act has different provisions for mergers and conversions than the current law and allows generally for domestications and interest exchanges involving LPs.
Effective date/Applicability of the New Act: The New Act applies to LPs formed on or after January 1, 2023. It applies on January 1, 2023, to LPs formed prior to January 1, 2023, unless: (a) the LP elects to be subject to the new law before January 1, 2023; or (b) the LP elects to remain subject to former law that was applicable before the enactment of the new law (with some exceptions).
Learn about other legislative changes from 2021 in our blog Summary of 2021 Legislative Changes Across the United States.
Limited Liability Companies
Organization/Registration: Under current law, LLCs are limited to including only mandatory information in their articles of organization. Under the New Act, an LLC’s articles of organization can also include optional provisions (183.0201).
Name standard: The name standard under both current and new law is “distinguishable on the records” (183.0103, 183.0112).
Fiduciary duties of members and managers: The New Act describes the duties of members and managers differently from current law. It provides in detail that a member of a member-managed LLC, or a manager of a manager-managed LLC owes the LLC and its members the fiduciary duties of loyalty and care, among other duties. To some extent, these duties may be modified in the operating agreement (183.0409).
Reporting requirements: The required content of annual reports for domestic and foreign LLCs under the New Act differs somewhat from the required content under current law. Additionally, under the New Act, a foreign LLC must include in its annual report any fictitious name adopted under Wisconsin statutes (183.0212).
Mergers, conversions, domestications, and interest exchanges: The New Act has different provisions for mergers and conversions than the current law and allows generally for domestications and interest exchanges involving LLCs.
Effective date/Applicability of the New Act: The New Act applies to LLCs formed on or after January 1, 2023. It applies on January 1, 2023, to LLCs formed prior to January 1, 2023, unless: (a) the LLC elects to be subject to the new law before January 1, 2023; or (b) the LLC elects to remain subject to former law that was applicable before the enactment of the new law (with some exceptions).
These are some highlights of the changes to Wisconsin’s LP and LLC laws. For the full text of Senate Bill 566, which also includes changes to portions of the state’s Partnership, Non-stock Corporation and Business Corporation laws, see: https://docs.legis.wisconsin.gov/2021/related/acts/258
This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.
