The recently-ended 1999 session of the General Assembly enacted little-noticed legislation (drafted by the Tax and Business Sections of the North Carolina Bar Association) that moves North Carolina's business entity statutes back to the leading edge of states with business-friendly legal systems. The changes are to North Carolina's LLC Act, general and limited partnership statutes, and corporation Acts.
The most significant changes to the LLC Act include:
- LLCs now have perpetual existence unless the articles of organization include a date of dissolution,
- LLC members no longer have a right to withdraw as a statutory default, and
- LLCs now have the same judicial dissolution procedures as NC corporations, as the ultimate means of resolving deadlocks and oppression of minority owners' rights.
These changes are now effective and represent a shift of LLCs toward the corporate end of the partnership/corporation spectrum. All LLC members should review their existing operating agreements to assure themselves that their economic rights are adequately provided for. (If in doubt, you should have an operating agreement.) Owners of all new LLCs should seriously review the provisions of the LLC operating agreements that govern their economic rights.
In addition, the partnership, LLC, and corporate provisions have been revised to:
- Eliminate indirect personal liability of owners of professional entities for the malpractice of others who might be working under the owners' supervision or direction, and
- Permit mergers and consolidations of all types of business entities (including nonprofits) with one another and simplify procedures for converting one type of business entity into another type.
These changes make our business and professional environment more attractive to North Carolina businesses and those that may be considering moving into North Carolina. An incidental benefit is that North Carolina business entities are also now among the most attractive devices available for estate-planning purposes.