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House adopts substitute HB 5 to create limited liability partnership; lawmakers debate liability and tax implications
Summary
Substitute HB 5, introduced by Representative John L. Valentine, would add a limited liability partnership form modeled on the Delaware Act. Supporters said it helps small business; colleagues raised questions about liability exposure, bank treatment, interstate recognition and tax consequences. The House passed the substitute 72‑1 and referred it to the Senate.
Representative John L. Valentine introduced Substitute House Bill 5 to create a limited liability partnership (LLP) form intended to give small businesses the flexibility of a partnership while limiting some partner liabilities.
Valentine framed the bill as filling a gap between general partnerships and limited liability companies, saying the LLP lets partners "get some of those advantages without having to go through all of the paperwork necessary to get there." He said the bill was modeled after the Delaware Act and pointed to Texas and Delaware as early adopters.
Members engaged in sustained questioning. Representative Hickman and others asked how LLPs would differ from limited liability companies and whether liability for partnership debts would remain chargeable to the partnership. Valentine replied that "all of the assets of the partnership are liable" for partnership‑level obligations but that individual partner liability for another partner’s wrongful acts would be limited as provided in the bill.
Questions also addressed tax treatment, bank and creditor responses, interstate recognition, and whether the Utah State Bar or sections of the bar had taken official positions. Valentine said the bill had support from the Chamber of Commerce, Department of Commerce, CPA groups and some bar sections but not an official bar association position.
After debate and recorded conflicts of interest by several members, the House voted on the substitute and the measure passed with 72 affirmative and 1 negative votes; it was referred to the Senate for further consideration.
The bill creates a new partnership form to be registered with the state for limited liability status; details on tax treatment and cross‑jurisdictional recognition will be considered in committee and by the Senate.
