PA law made broad changes to law governing unincorporated entities

Earlier this year, a new Pennsylvania law went into effect which made significant changes to several types of partnership entities and limited liability companies. The changes were fairly widespread touching upon matters of formation, dissolution, registration, governance, distribution and liability for general and limited partnerships, limited liability partnerships, and limited liability companies.

The basic idea behind the changes was to bring the law governing unincorporated associations up-to-date. One of the ways the law did this was by providing default rules for voting and fiduciary duties for LLCs, which may be modified through an Operating Agreement, though with certain limitations. Another change is that the economic rights to distributions of an LLC interest are now transferable as personal property. 

In addition to these changes, the law also:

• Allows for the creation of nonprofit limited partnerships and nonprofit limited liability companies
• Establishes new rules for dissociation from an LLC as a member and dissolution of an LLC
• Specifies that LLC members do not any longer have statutory apparent authority, but must file a certificate of authority with the state to prove authority to sign legal documents
• Permits the creation of nonprofit LLCs and limited partnerships, as well as benefit companies

Unincorporated associations are likely to be affected to one or more of the changes, and it may be wise for established unincorporated associations to work with an experienced attorney to determine whether any changes are in order. An experienced attorney can made any amendment necessary to ensure governing documents are in line with the new law and achieve the goals of the business going forward.