Indiana Business Entity Harmonization: Part II

[March 3, 2018. The General Assembly amended some of the provisions created the Business Entity Harmonization Bill, as discussed in a Postscript to this series.]

This is the second of a four-part series discussing the Business Entity Harmonization Bill passed by the Indiana General Assembly in 2017. An overview of the bill is provided in Part I.

Senate Enrolled Act 443 creates, effective as of January 1, 2018, a new Article 0.5 in Title 23 of the Indiana Code, the Uniform Business Organizations Code, that includes a number of provisions that apply to Indiana business corporations (including professional corporations and benefit corporations, but excluding insurance companies), limited liability companies (LLCs, including series LLCs), limited partnerships (LPs), limited liability partnerships (LLPs), and nonprofit corporations, eliminating a number of inconsistencies between similar provisions for different types of entities. The following discussion is a brief description of some of the more important provisions, drawing attention to new or substantially changed provisions.

Chapter 2, Filing

Most general filing requirements are relatively unchanged. Documents may be filed by mail, by personal delivery, or electronically. The new statute permits the Secretary of State to require a second copy of documents filed on paper, even though the Secretary has not done so for some time. The statute continues to provide for certified copies of filed documents and for certificates of existence of entities.  Biennial reports (also called business entity reports) continue to be required every other year for business corporations, nonprofit corporations, and limited liability companies.  For the first time, biennial reports are required for LPs and LLPs.

Chapter 3, Entity Names

Most requirements for the legal names of entities are relatively unchanged or slightly relaxed, and the provision for temporarily reserving an entity name for future use remains in place. The most significant change relates to assumed business names, sometimes called fictitious names or dba (for “doing business as”) names.

Under previous law, the legal name of each entity was required to be distinct from all other names of Indiana entities or of foreign entities registered to do business in Indiana, effectively creating a right of exclusivity to the legal name of an entity, at least within the state of Indiana.  In contrast, there was no exclusivity associated with an assumed business name. Nothing prohibited two entities from having the same assumed business name or one entity from having a legal name that was the same as another entity’s assumed business name.

Under the new statute, assumed business names carry essentially the same right of exclusivity that legal entity names carry. No new legal name, new assumed business name, or reserved name may be indistinguishable from any existing legal name (including the legal name any entities dissolved within the last 120 days), from any existing assumed business name, and from any name reserved within the previous 90 days. There is one new exception:  The Secretary of State may now accept a reserved name that is indistinguishable from the name of an entity that was dissolved within the last 120 days, although it cannot be used as a legal name or assumed business name until the 120 days expires with no revocation of the dissolution or reinstatement of the dissolved entity.

Chapter 4, Registered Agents

The most significant change to the provisions governing registered agents and registered offices is the new concept of a commercial registered agent. An individual, partnership, or entity may become a commercial registered agent by filing a listing statement with the Secretary of State, who is now required to publish a list of all commercial registered agents. Significantly, it is not necessary to be listed as a commercial registered agent for an individual, partnership, or entity to serve as a registered agent.  The primary advantage of being a commercial registered agent, other than having a name appear on the list, is that the registered agent may change its address by filing a single statement of change with the Secretary of State, thereby avoiding the need to file a change of registered office for every entity for which the commercial registered agent serves as registered agent.

Chapter 5, Foreign Entities

Entities that are incorporated or organized in other jurisdictions (i.e., foreign entities) are required to register with the Indiana Secretary of State before doing business in Indiana.  Failure to do so subjects the foreign entity to a civil penalty of $10,000, but failure to do so does not invalidate any contracts made by the foreign entity and is not cause for piercing the veil of the entity.  Although there is no definition of “doing business in Indiana,” a number of activities are specifically permitted without registration.  Chapter 5 has provisions dealing with dissolution or merger of the foreign entity, as well as provisions that permit the Secretary of State to terminate a foreign entity’s registration and for the registration to be reinstated.

Chapter 6, Administrative Dissolution

The provisions of for administrative dissolution of all types of entities and for reinstatement after dissolution have been consolidated into Chapter 6.

Chapter 7, Interrogatories and Investigations

Former I.C. ch. 23‑15‑10 authorized the Secretary of State to issue interrogatories and to investigate whether an entity was created with fraudulent or false information or is being used or fraudulent purposes.  Those provisions have been moved to Chapter 7 of the Uniform Business Organizations Code.

Chapter 8, Miscellaneous Provisions

Former statutory provisions dealing with commercial courts and the right of entities to make charitable donations have been placed in Chapter 8.

Chapter 9, Fees

Statutory fees for filing documents with the Secretary of State are consolidated in Chapter 9.  However, the Secretary of State is authorized to add convenience fees for online filings and charges for paying fees by credit card. As a result, one must consult the Secretary of State’s website or office to determine the exact fees that will be charged or online filings.

Part III of the series will discuss the Uniform Business Organization Transactions Code.

Part IV will consider some minor issues with the Business Harmonization Bill.

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