One of the more interesting topics that I have been following under the Corporate Transparency Act (CTA) is the debate about the reporting status of limited liability partnerships (LLPs). Are LLPs reporting companies under the CTA? A recent Business Law Today article written by friends-of the-BLPB Bob Keatinge and Tom Rutledge argues they are not.
As the article notes, the debate centers around whether an LLP is an “entity” similar to a corporation or limited liability company that is “created by the filing of a document with a secretary of state or a similar office under the law of a State.” Certainly, an LLP is created by a secretary of state filing. However, is a new entity created by that filing, or is an LLP merely a type or status of partnership created by that filing?
I have read much on this debate over the past year and had conversations with many intelligent, experienced practitioners on both sides of the matter. A textualist approach supports the conclusion reached by Bob and Tom in their article–that LLPs are not new entities. Yet, detractors note that Bob and Tom’s conclusion, well supported by the history and interpretations of partnership law they present, seems a bit too cute.
The missing link relates to the policy intended to be served by the CTA through its reporting company definition. In general, the CTA is designed to provide government law enforcement agents with beneficial ownership information to help preempt, discover, and punish misconduct occurring in business organizations. Given that policy, we might ask whether Congress and FinCEN intended to establish reporting company status based on the concept of a legal entity (the focus of Bob and Tom’s article) or, instead, on the governmental recognition and regulation of an organization through a filing process that brings a business firm and certain information about it into the public realm. Ultimately, if the federal government desires to ensure that LLPs file reports under the CTA, Congress should act to clarify the matter.
In any case, I appreciate the analysis Bob and Tom have provided and am happy to be able to share it here.