Vol. 75, No. 8, August
History of the LLC and NEL
The Wisconsin Legislature created chapter 183, the Wisconsin Limited
Liability Company Law (LLC Law), in 1993. Since then, LLCs have become
the dominant form of new business entity in Wisconsin. In 2001 nearly 70
percent of the new entities formed in Wisconsin were LLCs, while new
corporations declined to 28 percent of the total. LLCs currently
constitute more than 30 percent of all entities organized under
Wisconsin law. Not only has the LLC been favorably received by small
business, it also has become the entity of choice for many large,
sophisticated matters. Increasingly, LLCs are used as corporate
subsidiaries, for joint ventures and project financings, and in other
transactions that require limited liability, flexibility, and favorable
The 1993 LLC Law did not include comprehensive provisions dealing
with mergers or conversions involving other types of entities. At the
time, so-called "cross-species" transactions were not seen as essential,
both because switches to "partnership" status from "corporate" status
were, and are, fully taxable for income tax purposes and because most
practitioners used the new LLC entities to avoid the less flexible
corporate tax rules to begin with. Also, many felt that the difficult
tax issues associated with cross-species mergers and conversions would
present a tax trap for the unwary. In addition, few other states' LLC
statutes allowed for cross-species mergers or conversions. Therefore,
prior to the passage of the NEL, the merger language in the LLC Law was
rudimentary. LLCs could only merge with other domestic or foreign
With the growth in use of LLCs and their engagement in transactions,
such as acquisitions, with other types of entities, it soon became
apparent that additional flexibility was required. Several states began
to enact comprehensive cross-species merger and conversion provisions,
making these states more attractive as forums in which to organize.
Among these states was Delaware, long known for its flexible entity
legislation. By not providing for these types of corporate transactions,
Wisconsin was missing an element critical to maintaining its progressive
business entity statutes.
Wis. Stat. § 183.1201 et. seq. (1999-2000).
Joseph W. Boucher, U.W.
1978 cum laude, M.B.A., CPA, practices in business and tax law and
estate planning at Neider & Boucher S.C., Madison. Boucher also
teaches business law at the U.W.-Madison Business School. He assisted in
drafting the Wisconsin LLC Act and is coauthor of the State Bar CLE
publication, LLCs and LLPs: A Wisconsin Handbook.
Leonard S. Sosnowski, Michigan 1972 cum laude, is a
partner in the Madison office of Foley & Lardner. He assisted in
drafting the Wisconsin LLC Act and is a coauthor of the State Bar CLE
book, LLCs and LLPs: A Wisconsin Handbook.
Thomas J. Nichols, Marquette 1979, CPA, is a
shareholder in the Milwaukee firm of Meissner Tierney Fisher &
Nichols S.C., where he has practiced corporate and tax law since
The Next Economy and the
Wisconsin Uniform Securities Law
One of the stated purposes of the Next Economy package was to "change
our securities law to promote capital formation."
The amendments to the Wisconsin Uniform Securities Law as a result of
the Next Economy legislative package:
- raise to 25 the number of security holders permitted by the
securities registration exemption under Wis. Stat. section
- raise to 25 the number of offerees permitted by the securities
registration exemption under Wis. Stat. section 551.23(11);
- allow agents for securities issuers to sell securities to accredited
investors without the requirement that they be licensed as agents under
chapter 551; and
- delete the "investor sophistication" requirement in the Wisconsin
accredited investor exemption under Wis. Stat. section
- like the other provisions of the Next Economy package, the
securities law revisions take effect Oct. 1, 2002.
As a companion initiative to the Next Economy legislation, the
Department of Financial Institutions' Division of Securities promulgated
a Next Economy rule package effective Jan. 1, 2002. Containing several
securities registration exemptions suggested in the 2001 Governor's
Summit on Venture Capital, which were designed to balance the capital
needs of business with the division's core mission of the protection of
investors, the rules:
- increase to $5 million from $1 million the maximum amount of capital
that may be raised using the registration exemption under Wis. Admin.
Code section DFI-Sec 2.028, the "Wisconsin issuer registration exemption
by filing"; and
- add the "model accredited investor exemption" of the North American
Securities Administrators Association to the registration exemptions
available by rule.
2002 Securities Law for the Wisconsin Practitioner,
a full-day seminar, is offered by State Bar of Wisconsin CLE Seminars
live on Nov. 22 in Milwaukee and by video on Dec. 13 at select
locations. Several of Wisconsin's most knowledgeable securities law
practitioners will provide a review of recent cases and legislation and
the most current developments in securities law. Tuition is $179. To
register, please call the State Bar at (800) 728-7788.
To learn more
State Bar CLE Seminars and Books:
Expand Your Expertise on Wisconsin's Next Economy Law, Uniform
Securities Law, and LLCs
Wisconsin's Next Economy is the focus of a half-day
seminar, presented live on Oct. 4 in Madison and by video on Nov. 6.
This program provides an overview of the Next Economy Act as it relates
to: mergers and conversions of business entities; exemptions from
securities registration requirements and licensing requirements for
securities broker-dealers and securities agents; registered agents for
business entities; the filing of documents relating to certain business
entities; the administrative dissolution of business entities; and
amended certificates of authority for certain foreign business entities.
Tuition is $149.
2002 Securities Law for the Wisconsin Practitioner
will be presented live on Nov. 22 in Milwaukee and by video on Dec. 13
at select locations. This full-day seminar features several of
Wisconsin's most knowledgeable securities law practitioners who will
provide a review of recent cases and legislation and the most current
developments in securities law. Tuition is $179.
LLCs and LLPs: A Wisconsin Handbook
reflects new developments such as the default pass-through tax treatment
of LLCs and LLPs under the "check-the-box" regulations, the
authorization of single-member LLCs (SMLLCs), and the rule permitting
Wisconsin attorneys to use LLCs and LLPs in their practices. Detailed
discussions on choosing an appropriate business entity, organizing the
business, business formalities, and operational and tax issues are
included, as is an entire chapter devoted to annotated forms. A disk
with the complete set of forms from the book is included. The disks are
available in WordPerfect® or ASCII file format.
Authors: Joseph W. Boucher, Robert M. Fahrenbach, Leonard S.
Sosnowski, Steven R. Battenberg, Debra Sadow Koenig, Marcus S. Loden,
Bret A. Roge, William R. West. 515+ pp.; rev. ed. Jan. 2001; $165; ISBN:
1-57862-026-0; Product Code: AK0065.
To register for either seminar or to order the book, please call the
State Bar of Wisconsin at (800) 728-7788.