Pennsylvania has recently enacted a set of laws (known as Act 170) which modernizes the treatment of unincorporated associations (LLCs, Limited Partnerships, Limited Liability Partnerships, and Limited Liability Limited Partnerships) and makes Pennsylvania a much more desirable place for owners of these businesses to run their companies.



The new Act applies to all unincorporated associations formed on or after February 21, 2017, and to all existing entities as of April 1, 2017. The Act completely replaces the statutes governing partnerships, limited partnerships and limited liability companies. Essentially, through the enactment of this Act, Pennsylvania has adopted the most current versions of the Uniform Limited Liability Company Act, the Uniform Limited Partnership Act and the Uniform Partnership Act, putting Pennsylvania in a much stronger position to contend with ultra-business friendly states like Delaware.



There are a number of significant changes imposed by the Act, including the following:

• Duties of Managers and General Partners: The Act establishes that LLC managers, including managing members, and LP general partners owe a duty of loyalty, a duty of care and an obligation of good faith and fair dealing to the entity and the other members/partners. Although these duties can be altered or limited through the Act by way of an operating or partnership agreement, it cannot be eliminated entirely.
  

• Apparent Authority: Members of LLCs no longer have statutory apparent authority, which means that they are not an agent of the LLC solely by reason of being a member.
  
  
  

• Distribution Tests: The new law provides two tests for measuring the legality of LLC distributions, which include transfers of cash or property to members:
  
  
  • “Insolvency Test” – a distribution is not allowed if the company is unable to pay its debts as they become due; and
    
    
    
  • “Balance Sheet Test” – a distribution is unlawful if, after the distribution is made, the company’s total liabilities would exceed the company’s total assets.
    
    

Under the Act, companies must satisfy both tests in order for the distribution to be lawful, and these tests apply to both interim and liquidating distributions.

• Allows for the Creation of Limited Liability Limited Partnerships: A limited liability limited partnership (LLLP) is a type of partnership that is very similar to a limited liability partnership (LLP) in that it has two types of partners, general partners and limited partners. Unlike an LLP, however, the general partners in an LLLP have some liability protection. The general partners of an LLLP are not personally responsible for the debts incurred by the partnership unless they agree to be through debt covenants or other contracts. The main advantage of an LLLP is that all partners are protected by some form of liability protection, but not to the same extent of protection of an LLC or corporation.
  
  
  

• Transfer of Interests and Governance Rights: Absent a provision in the partnership or operating agreement to the contrary, the only interest in a partnership or limited liability company that may be transferred is the partner or member’s Transferable Interest. The Transferable Interest is the financial interest in the entity that entitles the holder to receive distributions, but does not include any voting or management rights. Essentially, a member can only transfer economic rights (the right to receive distributions) to persons outside the business, but managing rights are not transferable unless the operating agreement provides otherwise.
  
  
  
• Charging Orders: Under the Act, the sole method by which a judgment creditor can extract any value from a debtor’s interest in a partnership or limited liability company is by way of a charging order, which gives the creditor a lien on the debtor’s Transferable Interest in the entity. Notably, this only provides the creditor with the right to receive distributions and does not include any management rights.
  
  
  
• Full Shield Protection for Partners: The existing laws on partnerships were amended to replace the former ‘partial shield’ protection for partners and replace it with ‘full shield’ protection by removing language that implied that a partner in a limited liability partnership or limited liability limited partnership could be liable for any act of a person under the supervision and control of the partner even if the partner had no responsibility to supervise or control the act giving rise to the liability.  As a result of the revised language, partners are now only liable for their own negligence or wrongful acts.
  

If you’re currently the owner or operator of a partnership or LLC in the Commonwealth of Pennsylvania, the time is ripe to review your operating/partnership agreement with your attorney. There may be changes required or recommended as a result of the passage of Act 170, and your attorney would be in the best position to point you in the right direction. If you have any questions about the information in this article or are interested in getting more specific information regarding the impact of these changes to the business laws in Pennsylvania, the attorneys at Howland Hess O’Connell are available to assist you today. Call for a free consultation at (215)-947-6240 or contact us online to schedule a meeting.




Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourages all readers to seek and consult professional counsel before acting upon the information contained on this site.

In December, 2015, then Philadelphia Mayor Michael Nutter signed an amendment to the city’s “Ban the Box” law which took effect Monday, March 14, 2016. The goal of the amendment is to make job opportunities available for the approximately 300,000 residents of Philadelphia with a criminal past. 

This amendment adds to the already burdensome hiring restrictions on Philadelphia employers. Philadelphia is now recognized as having one of the most restrictive policies in the country for employers seeking to perform background checks.

To understand the amendment to the law, it’s important to compare the new policy with the original 2012 “Ban the Box” legislation. When the law first went into place, it was limited to private employers with at least ten employees. Now, any employer (public or private) in Philadelphia with even as few as one other employee is subject to the law. This is a huge change to the reach of this law and burden on employers. It essentially mandates that unless you work entirely by and for yourself, you must now comply with this law for any and all applicants in your hiring process.

Under the previous version of the law, the main obstacle for Philadelphia employers was that they were barred from asking an applicant about his or her criminal history on the application itself or during the initial interview. However, under the previous law, there was no bar on employers conducting these background checks after the initial interview and before making any conditional offer of employment.

Now, the most impactful change is that employers can only conduct criminal background checks after the employer makes a conditional offer of employment to an applicant.

Additionally, under the new law, employers are restricted to a window of seven years prior to the application to investigate an applicant’s criminal record. Under the previous version of Philadelphia’s “Ban the Box” legislation, an employer had the ability to conduct background checks as far back as they desired.

Finally, the new addition to the law mandates that an employer notify the applicant and send to the applicant a copy of their criminal background check if the applicant is rejected. From that point, the applicant is provided ten (10) days in which to contest the employer’s decision and three-hundred (300) days to file a complaint with the Philadelphia Commission on Human Relations.

PRACTICAL: If you’re an employer in Philadelphia, big OR small, you need to be fully aware of this amendment to the “Ban the Box” Law. If either you or an employee of yours (such as an HR Manager) is charged with interviewing potential candidates for hire, it is critical to cover all bases to demonstrate you complied with the law and engaged in a holistic analysis of the individual before rejecting him or her.

The Law Firm of Howland, Hess, Guinan, Torpey, Cassidy & O’Connell is well versed in Business and Corporate Law. If you’re an employer in Philadelphia seeking to determine how best to defend yourself from claims by rejected applicants who are claiming you violated the “Ban the Box” legislation, the attorneys at Howland Hess O’Connell are ready and able to guide you through this new policy.

Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourages all readers to seek and consult professional counsel before acting upon the information contained on this site.

I am awed by the drive, ingenuity and courage of those willing to make the jump and carry out their dream of being their own boss. It takes a lot of hard work and skill, and for those of you who have recently started your own business or are planning to in the future, here are a few legal issues to keep in mind as you make the jump!

• Business Form: In today’s market, businesses take on many different shapes and sizes. There are sole proprietorships, partnerships, corporations, Subchapter S Corporations (S Corporations), and Limited Liability Corporations (LLCs), to name a few. Why is the business form decision so important? Because, depending on your state, it will likely affect how much you pay in taxes, the amount of paperwork your business is required to prepare and file, the personal liability you face and your ability to borrow money. Notably, sole proprietorships remain the most popular business structure, which is likely due to the ease of their formation (you may not even realize you’ve created one!).
  
  
• Exit Strategy: It may seem like a strange proposition, but arguably just as important as considering how to get your business off the ground is considering how to get out or how to get others out. What’s your plan if you or one of your partners wants to withdraw from the venture? How much are you being paid to go or paying your partner to go? What other terms will apply to your or their buyout? What happens if one of you passes away unexpectedly? These are key issues to consider (and document) when starting a business to avoid confusion down the line.
  
  
• Employees: Whether you have one or one-thousand employees, make no mistake: employee issues will arise. The number of employees under your hire will determine whether you are subject to certain laws (such as those relating to age discrimination, for example), but regardless of the number of your employees there are several key provisions to include in your agreement to hire. The two most important are non-compete and non-disclosure agreements. It is your obligation as the employer to make the terms extremely clear as ambiguity in a contract is read against the party who drafted it. If you’re not sure what to say and/or how to say it, you should consider speaking to a business law attorney in your area!
  
  
• Dollars and Cents: It’s a beautiful thing to start seeing money come in, not always so beautiful seeing it go out. However, you have to be incredibly diligent in accounting for both. Bookkeeping is critical in managing finances, and a small mistake today could cost you big down the line if you don’t exercise caution. There is software and CPAs to help you manage your dollars and cents, and this is one area you definitely don't want to spare.
  
  

There are a multitude of other legal issues to consider in starting your own business, like business permits, licenses, federal tax ID numbers, business names, and protection of intellectual property, just to name a few. As an aside, those of you in the process of starting your own business or with the intention to do so in the future should be wary of using solely the services of an internet-based company to form and register your company without also consulting an attorney. The attorneys at Howland Hess O’Connell are experienced and well-versed in the field of business law and are available to assist you today.

Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourages all readers to seek and consult professional counsel before acting upon the information contained on this site.