Assembly plans to consider bill for limited liability companies

ANNAPOLIS — ANNAPOLIS -- Supporters of legislation to create a new form of business ownership that could help small high-tech companies attract investment are hoping the second time is the charm.

Del. Robert L. Ehrlich Jr., R-Baltimore Co., submitted a bill yesterday that would allow business owners to form what is known as a "limited liability company," or LLC.


Although the General Assembly rejected the idea last year, the entity is now permitted in eight states, including Virginia, and is being considered in 10 others, including Pennsylvania. Its supporters say Maryland will suffer a competitive setback if it misses the LLC train.

Last year's bill did not die because of outright opposition, according to Mr. Ehrlich. The complicated bill simply came in too late last year for his committee to give it full scrutiny, he said.


"This is not a Trojan horse. This is not special interest legislation," said Stuart Levine, a Towson attorney and chairman of a state bar association committee that drafted the bill. "To my knowledge there is no opposition to this bill. It works for everybody, I think."

As its name suggests, a limited liability company provides legal safeguards to its owners -- called members -- by protecting their personal assets, such as cars and homes, when lawsuits are filed against the company. Owners of a stock corporation are similarly protected.

But the owners of a corporation, unlike members of an LLC, are taxed twice -- first on corporate profits and second on dividends which are taxed when distributed to shareholders. That double tax burden is already absent for partnerships and S-corporations.

The lawyers supporting the bill stress that Maryland should not allow itself to become one of the only states in the region that doesn't permit LLCs. If so, the state will lose small but promising businesses to its neighboring competitors, they say.

"Before long, every state is going to have one," Mr. Levine said. "We're certainly creating this tool, the full potential of which will not be known for four or five years."

Co-sponsors of the bill introduced by Mr. Ehrlich include Judiciary Committee Chairman John S. Arnick, D-Baltimore Co., and Del. D. Bruce Poole, D-Washington, the House majority leader.