ENGROSSED HOUSE
BILL NO. 1088	By:	Grau of the House

			   and

		Holt of the Senate 

An Act relating to corporations; amending 18 O.S. 2001, Sections 2001 and 2008, as amended by Sections 16 and 21, Chapter 253, O.S.L. 2008 (18 O.S. Supp, 2010, Sections 2001 and 2008), which relate to the Oklahoma Limited Liability Company Act; defining term; modifying restrictions of company name; permitting low-profit limited liability companies; requiring certain steps to qualify as low-profit limited liability company; stating consequences of not qualifying; describing failure to qualify; requiring company to change name and amend articles of organization; allowing exception when company produces significant income; providing for codification; and providing an effective date.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     AMENDATORY     18 O.S. 2001, Section 2001, as amended by Section 16, Chapter 253, O.S.L. 2008 (18 O.S. Supp. 2010, Section 2001), is amended to read as follows:
Section 2001.  As used in this act the Oklahoma Limited Liability Company Act, unless the context otherwise requires:
1.  "Articles of organization" means documents filed under Section 2019 of this title for the purpose of forming a limited liability company;
2.  "Bankrupt" means bankrupt under the United States Bankruptcy Code, as amended, or insolvent under any state insolvency act;
3.  "Business" means any trade, occupation, profession or other activity regardless of whether engaged in for gain, profit or livelihood;
4.  "Capital contribution" means anything of value that a person contributes to the limited liability company as a prerequisite for, or in connection with, membership, including cash, property, services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services;
5.  "Capital interest" means the fair market value as of the date contributed of a member's capital contribution as adjusted for any additional capital contributions or withdrawals;
6.  "Corporation" means a corporation formed under the laws of this state or a foreign corporation as defined in this section;
7.  "Court" includes every court and judge having jurisdiction in the case;
8.  "Foreign corporation" means a corporation formed under the laws of any state other than this state, or under the laws of the District of Columbia or any foreign country;
9.  "Foreign limited liability company" means an entity that is:
a.	an unincorporated association,
b.	organized under the laws of a state other than the laws of this state or organized under the laws of any foreign country,
c.	organized under a statute pursuant to which an association may be formed that affords to each of its members limited liability with respect to the liabilities of the entity, and
d.	not required to be registered or organized under any statute of this state other than this act;
10.  "Foreign limited partnership" means a limited partnership formed under the laws of any state other than this state, or under the laws of the District of Columbia or any foreign country;
11.  "Limited liability company" or "domestic limited liability company" means an entity that is an unincorporated association or proprietorship having one or more members that is organized and existing under the laws of this state;
12.  "Limited partnership" means a limited partnership formed under the laws of this state or a foreign limited partnership as defined in this section;
13.  “Low-profit limited liability company” or “L3C” means a for-profit limited liability company which satisfies the requirements of Section 3 of this act and does not have as a significant purpose the production of income or the appreciation of property;
14.  "Manager" or "managers" means a person or persons designated by the members of a limited liability company to manage the limited liability company as provided in the articles of organization or an operating agreement;
14. 15.  "Member" means a person with an ownership interest in a limited liability company, with the rights and obligations specified under this act;
15. 16.  "Membership interest" or "interest" means a member's rights in the limited liability company, collectively, including the member's share of the profits and losses of the limited liability company, the right to receive distributions of the limited liability company's assets, and any right to vote or participate in management;
16. 17.  "Operating agreement", regardless of whether referred to as an operating agreement and whether oral, in a record, implied, or in any combination thereof, means any agreement of the members, including a sole member, as to the affairs of a limited liability company and the conduct of its business, including the agreement as amended or restated;
17. 18.  "Person" means an individual, a general partnership, a limited partnership, a limited liability company, a trust, an estate, an association, a corporation or any other legal or commercial entity; and
18. 19.  "State" means a state, territory or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico.
SECTION 2.     AMENDATORY     18 O.S. 2001, Section 2008, as amended by Section 21, Chapter 253, O.S.L. 2008 (18 O.S. Supp. 2010, Section 2008), is amended to read as follows:
Section 2008.  The name of each limited liability company as set forth in its articles of organization:
1.  Shall contain either the words "limited liability company" or "limited company" or the abbreviations “LLC”, “LC”, "L.L.C.", or "L.C."  The word "limited" may be abbreviated as "LTD." and the word "Company" may be abbreviated as "CO."; and or
2.  If organized as a low-profit limited liability company under Section 3 of this act, shall contain the term “low-profit limited liability company” or “L3C”; and
3.	a.	May not be the same as or indistinguishable from:
(1)	names upon the records in the Office of the Secretary of State of limited liability companies, whether organized pursuant to the laws of this state or licensed or registered as foreign limited liability companies, then in good standing or registered or which were in good standing or registered at any time during the preceding three (3) years, or
(2)	names upon the records in the Office of the Secretary of State of corporations organized under the laws of this state or of foreign corporations registered in accordance with the laws of this state then existing or which existed at any time during the preceding three (3) years, or
(3)	names upon the records in the Office of the Secretary of State of general or limited partnerships, whether formed under the laws of this state or registered as foreign general or limited partnerships, then in good standing or registered or which were in good standing or registered at any time during the preceding three (3) years, or
(4)	trade names, fictitious names, or other names reserved with the Secretary of State.
b.	The provisions of subparagraph a of this paragraph shall not apply if one of the following is filed with the Secretary of State:
(1)	the written consent of the other limited liability company, corporation, limited partnership, or holder of the trade name, fictitious name or other reserved name to use the same or indistinguishable name with the addition of one or more words, numerals, numbers or letters to make that name distinguishable upon the records of the Secretary of State, except that the addition of words, numerals, numbers or letters to make the name distinguishable shall not be required where such written consent states that the consenting entity is about to change its name, cease to do business, withdraw from the state or be wound up, or
(2)	a certified copy of a final decree of a court of competent jurisdiction establishing the prior right of such limited liability company or holder of a limited liability company name to the use of such name in this state.
SECTION 3.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 2003.1 of Title 18, unless there is created a duplication in numbering, reads as follows:
A.  To be a low-profit limited liability company, a company:
1.  Shall state in its articles of organization that it is a low-profit limited liability company;
2.  Shall organize under the Oklahoma Limited Liability Company Act; and
3.  Shall be organized for a business purpose that satisfies, and operates to satisfy each of the following requirements:
a.	it shall significantly further the accomplishment of one or more charitable or educational purposes within the meaning of Section 170(c)(2)(B) of the Internal Revenue Code,
b.	it shall demonstrate that the low-profit limited liability company would not be formed but for the company's relationship to the accomplishment of a charitable or educational purpose,
c.	subject to subsection E of this section, it shall not have as a significant purpose the production of income or the appreciation of property, and
d.	it shall not have as a purpose to accomplish one or more political or legislative purposes within the meaning of Section 170(c)(2)(D) of the Internal Revenue Code.
B.  If a company that is a low-profit limited liability company at its formation at any time ceases to meet a requirement to be a low-profit limited liability company under subsection A of this section, the company:
1.  Ceases to be a low-profit limited liability company on the day on which the company no longer meets the requirement; and
2.  If it continues to meet the requirements of the Oklahoma Limited Liability Company Act to be a limited liability company, it continues to exist as a limited liability company that is not a low-profit limited liability company.
C.  A low-profit limited liability company's failure to meet a requirement of subsection A of this section may be:
1.  Voluntary, in order to convert to a limited liability company that is not a low-profit limited liability company; or 
2.  Involuntary.
D.  If a low-profit limited liability company ceases to be a low-profit limited liability company in accordance with subsection B of this section, the company shall:
1.  Change its name to conform with Section 2008 of the Oklahoma Limited Liability Company Act; and
2.  Amend its articles of organization in accordance with Section 2011 of the Oklahoma Limited Liability Company Act.
E.  Notwithstanding subsection A of this section, if a low-profit limited liability company produces significant income or capital appreciation, in the absence of other factors, the fact that the low-profit limited liability company produces significant income or capital appreciation is not conclusive evidence of a significant purpose involving the production of income or the appreciation of property.
SECTION 4.  This act shall become effective November 1, 2011.
Passed the House of Representatives the 17th day of March, 2011.

	
Presiding Officer of the House of
	Representatives

Passed the Senate the ____ day of __________, 2011.

	
Presiding Officer of the Senate