House panel backs idea of 'limited liability' firms

March 20, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- Businesses that want the tax benefits of partnerships and the legal liability protections of corporations are closer to getting their wish.

The House Judiciary Committee passed House Bill 373, which allows businesses to set up "limited liability companies," a relatively new type of corporate structure that features the best of two worlds:

* Like partnerships, the limited liability company avoids the "double taxation" of profits -- the first time paid by the corporation; the second time paid by shareholders on dividends;

* And like corporations, the limited liability structure protects shareholders from lawsuits.

The limited liability company originated in 1977 when Wyoming passed a law authorizing them.

Now six states, including Virginia, have passed laws allowing limited liability companies and others are considering them. Supporters here have argued that without the legislation, Maryland could begin to lose businesses to surrounding states.

The structure is particularly useful for real estate partnerships and for small high-technology companies that need financing from unusual sources, such as foreign companies.

The Senate already has passed a slightly different version of the bill. If the differences stand, the measure will go to a House-Senate conference committee.

In other action yesterday, the House of Delegates:

* Approved a bill to allow the state's economic development department to make equity investments in start-up companies, rather than simply loans and grants.

* Unanimously passed a bill to require companies that review the medical decisions of health-care providers to reveal the standards they use in making those decisions. These so-called "utilization review agents" are hired by insurers and HMOs to search for unnecessary medical care that is not covered by insurance coverage.

* Passed a bill to allow real estate investment trusts to limit the liability of their officers and trustees under certain circumstances.

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