Kentucky Business Organizations “Created” by a Filing with the Secretary of State
Thomas E. Rutledge*
Introduction
Under the federal Corporate Transparency Act (the “CTA”)[2] and the related Reporting Regulations,[3] most business organizations created in the United States[4] are subject, absent the availability of one or more of twenty-three exemptions,[5] to beneficial ownership reporting obligations.[6] Now “most” is not all, so it is important to distinguish between those organizations that at least initially are subject to these reporting obligations with all of the penalties that may attach upon a failure to discharge those obligations from those organizations that are ab initio outside the scope of the CTA and the Reporting Regulations. This differentiation will often be a matter of state law, and the objective of this article is to review Kentucky law against those particular provisions of the CTA and the Reporting Regulations.
I. The Gateway Question - Is My ??? a Reporting Company?
The first step in the CTA analysis of a particular venture is to determine whether it is “reporting company.” A reporting company is obligated to file beneficial ownership reports into the Beneficial Ownership Secure System (“BOSS”) database being set up by FinCEN.[7] But if not a reporting company, then there is no filing obligation. The Reporting Regulations provide:
The term “domestic reporting company” means any entity that is:
(A) A corporation;
(B) A limited liability company; or
(C) Created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.[8]
At first blush this provision seems to identify three paths, any of which results in the venture under consideration being a reporting company:[9] (i) if venture is a corporation then it is a domestic reporting company; (ii) if venture is a limited liability company then it is a domestic reporting company; and (iii) if venture is a business entity that is not a corporation or a limited liability company but it is created by “created by the filing of a document with a secretary of state” then it is a domestic reporting company. However, FinCEN has issued a FAQ contradicting that reading, stating:
While FinCEN’s BOI reporting regulations define a domestic reporting company as including a corporation or limited liability company, the inclusion of those entities is based on an understanding that domestic corporations and LLCs are generally created by the filing of a document with a secretary of state or similar office. In an unusual circumstance where a domestic corporation or limited liability company is created, but not by the filing of a document with a secretary of state or similar office, such an entity is not a reporting company.[10]
The second element of the defined term is the use the word “entity.” Recognizing that “entity” is not itself defined (a recurrent problem in this provision and the CTA generally is the utilization of technical, often limiting terms, but without providing a definition), the question is whether the word is employed (i) as a generic equivalent to “any business organization form” or (ii) in its technical sense such that there may be “business organization forms” (to carry over the generic utilization) that are themselves not entities? If the former then “reporting company” is coincident with “created by a filing with the Secretary of State.”[11] Alternatively, if the latter is the correct reading, “reporting company” is the common area in the Venn diagram of (a) an “entity” and (b) “created by a filing with the Secretary of State.” If the first reading is correct, then “entity” may simply be little more than a term of itself denoting noting more than “a something.” If in the alternative “entity” is a second hurdle to classification as a reporting company there arises the significant problem that the term is undefined in the CTA and the Reporting Regulations. Indeed the word, in the context of the law of business organizations, lacks an agreed upon definition in that there is no consistent set of characteristics that follow from “a something” being identified (or not) as an entity.[12] That makes “entityness” a limiting factor unknowable as it does not define of knowable set; “what’s the difference between an orange?”
As that last question is irresolvable, we will here proceed on the basis of the first reading, that “reporting company” is equivalent to “created by a filing with the Secretary of State.” Well, not so fast. The term “created” is not defined in the CTA or the Reporting Regulations, and it is a term not employed in most business organization law. There are clearly defined terms for the “incorporation” of a corporation (business, non-profit, cooperative) and the organization of limited liability companies and other structures such as a cooperative association; they do not discuss how, when or by what mechanism any of those organizational structures are “created.”[13] This is an important issue in a statute with significant penalties, including the possibility of incarceration; ambiguities raise the costs of compliance and unjustifiably raise risk. For that reason, the CTA and the Reporting Regulations should be read as penal statutes in which all ambiguities are interpreted against the government.
But back to the task at hand; if we are to proceed on the basis that “reporting company” is equivalent to “created by a filing with the Secretary of State,” then when an attorney is presented with a particular business organization and needs to advise on whether it is a reporting company and therefore likely subject to the CTA’s reporting obligations[14] it is necessary to investigate the statute under which the organization was “created.”[15] To that end, this article reviews the iterations of the various statutes governing the formation of various business organizational forms to see whether they provide that a particular form is or at least arguably is not “created” by a filing with the Secretary of State.[16] Bear in mind that absent contrary language in the particular statute new legislation becomes effect the summer after then end of a particular General Assembly session. [17] When a law is herein described as being adopted in a particular year the statement speaks to the latter portion of the year. A business organization created earlier in the year, before the revision in the law takes effect is bound as to its organizational procedure by the prior law. For that reason as to business organizations formed in a year in which the law changed, particular attention to formation date and the effective date of new legislation for that year, is necessary.
After considering sole proprietorships, the order in which various forms are considered is based upon the order of the controlling statutes as set forth in KRS.
II. Sole Proprietorships
A sole proprietorship is simply a natural person doing business for her or his own account and benefit; there is no business structure separate and apart from the individual.[18] No filing with the Secretary of State is required for an individual to go into business for himself or herself. Even the filing of an assumed name certificate on behalf of a sole proprietorship is not filed with the Secretary of State - those filings are made with the county clerk.[19] Ergo a sole proprietorship is not a CTA reporting company.[20]
III. Corporations
Under Kentucky law “corporations” cast a wide net and encompasses traditional for profit and non-profit companies as well as atypical organizational forms such as the cooperative corporation. While some, at least in their current incarnations, “piggy-back” on the organizational model utilized for business corporations, that is not always the case. Hence a review of the particular statute under which an organization was incorporated is necessary.
A. Corporations - Business
Kentucky’s 1891 Constitution provided that corporations shall not be chartered by local or special acts.[21] In furtherance thereof Kentucky has adopted a series of “business corporation” acts. Those acts are: (i) the current Kentucky Business Corporation Act, initially adopted in 1988 and codified at KRS ch. 271B (the “BCA-1988”);[22] (ii) the Business Corporation Act adopted in 1972[23] and codified at KRS ch. 271A (the “BCA-1972”);[24] (iii) the 1946 adoption of the Uniform Business Corporation Act codified at KRS ch. 271 (the “BCA-1946”);[25] and prior law (the “Pre-1946 BCA”).[26] In addition there were corporate laws in effect before the 1891 Constitution (the “Pre-1892 BCA”). They are each considered below in that order.
i. The BCA-1988
Under the Kentucky Business Corporation Act adopted in 1988,[27] it based upon the then recently updated Model Business Corporation Act, it is express that incorporation is accomplished by means of a filing with the Secretary of State[28] with incorporation effected by the Secretary of State filing the articles of incorporation.[29] Ergo, every corporation incorporated under the BCA-1988 is a CTA reporting company.
ii. The BCA-1972
Under this act, once articles of incorporation were prepared satisfying the statutory requirements,[30] they were then delivered to the Secretary of State. Assuming they met the statutory requirements and necessary fees were paid, the articles were then endorsed and filed in “his” office.[31] Thereafter, the effect of the certificate of incorporation was defined as:
upon the issuance of the certificate incorporation, the corporate existence shall begin, and such certificate of incorporation shall be conclusive evidence that all conditions required to be performed by the incorporators have been complied with, and that the corporation has been incorporated under this chapter , except as against this state in a proceeding to cancel or revoke the certification or involuntary dissolution of the corporation.[32]
Ergo, a corporation incorporated under the BCA-1972 is a CTA reporting company.
iii. The BCA-1946
Under the 1946 business corporation act, once articles of incorporation satisfying the statutory requirements were prepared and then “signed in triplicate originals by each of the incorporators,”[33] they were then delivered to the Secretary of State.[34] Assuming the requirements were deemed satisfied, the Secretary of State would file the articles and issue a certificate of incorporation.[35] While it remained necessary to file a duplicate copy of the articles of incorporation with the county clerk in which the registered office of the corporation was located,[36] it was upon the Secretary of State’s issuance of the certificate of incorporation that the corporate existence began.[37] Ergo, a corporation incorporated under the BCA-1946 is a CTA reporting company.
iv. Pre-1946 BCA
The General Assembly, in 1893, no doubt in response to the recently approved state constitution and its numerous provisions directly regulating corporations,[38] adopted a comprehensive corporation statute.[39] Thereunder articles of incorporation, the requirements therefore being detailed,[40] were to be signed and then first “recorded in the county clerk’s office of the county in which its principal office or place of business is to be located” and then thereafter “a copy thereof shall be filed and recorded in the office of the Secretary of State.”[41] The statute is less than clear as to differentiating the effect of the county clerk and Secretary of State filings:
When the articles are filed and recorded as provided, and the license tax imposed is paid to the State, the corporation shall be deemed to be organized for the purpose of transacting, promoting or carrying on the business or purpose for which it was created; and shall thereupon become a body-corporate, and be known by its corporate name, and as such may adopt and use a corporate seal; and shall have the power to sue and be sued, to contract and be contracted with; . . .[42]
Now our inquiry is whether or not a particular organization is “created by the filing of a document with [the Kentucky] secretary of state.”[43] In this instance it would appear that both a state and county level filing were necessary for incorporation to take effect, leaving open the question of whether a mandatory two-office filing is outside the CTA’s definition of what is a reporting company, or in the alternative is the fact that there was a required Secretary of State filing, and “he” got the final word, sufficient to bring corporations formed thereunder within the scope of the CTA? It may be important that the delivery to the Secretary of State was of a “copy” of the document submitted to and filed by the county clerk. A reasonable case may be made that a corporation incorporated under 1893 law is not a CTA reporting company.
B. Corporations - Nonprofit
Kentucky initially adopted its current nonprofit corporation act in 1968.[44] Thereunder, incorporation of the corporation is accomplished by first delivering to the Secretary of State articles of incorporation satisfying the statutory requirements, and upon a determination that the articles “have been signed and acknowledged according to law,” then “he” (the Secretary of State) will “record one original in his office and issue a certificate of incorporation.”[45] Ergo, a nonprofit corporation incorporated under the Kentucky Nonprofit Corporation Act (1968) is a CTA reporting company.
Previously, the law governing nonprofit corporations was not so straightforward. There was one body of law that governed religious, educational and other charitable organizations. These entities, but for the requirement that they maintain an agent for service of process, were not subject to the rules governing for-profit corporations.[46] The organization of such a corporation required that articles of incorporation be signed, and then “filed in the office of the secretary of state, and recorded in the county clerk’s office of the county where the principal place of business of the corporation is located.”[47] From there, it was provided that “when the articles are filed and recorded, and a certificate of that fact is issued by the Secretary of State, the corporation shall be considered organized….”[48] Ergo, these religious, educational, and other charitable nonprofit corporations are CTA reporting companies.
In addition, there existed separate provisions addressing a nonstock, nonprofit corporation.[49] As was the case above with respect to expressly religious organizations, a nonstock, nonprofit corporation is not subject to the laws governing business corporations.[50] After detailing the required contents of the articles of incorporation,[51] it was provided that “The articles of incorporation shall be filed and recorded, a certificate of incorporation shall be issued, in the same manner and upon payment of the same fees, with the same effect, as provided in KRS § 271.055 for business corporations.”[52] It is further provided that “upon the issuance of the certificate of incorporation, the corporate existence shall begin ….”[53] Ergo, these nonstock, nonprofit corporations are CTA reporting companies.
C. Corporations - Cooperative
Kentucky law provides for a variety of purposes (marketing, agricultural and livestock) for which a cooperative corporation may be formed. To suggest that the statutes governing these organizations are confusing would be generous, and in any instance it is going to be necessary to undertake a deep investigation of the statute in place at the time a particular cooperative corporation was created. Restricting this review to the statutes in effect since the mid-1960s, with respect to an agricultural cooperative association it is clear that formation was accomplished by the filing of articles of incorporation with the Kentucky Secretary of State.[54] The curious provision requiring that the Secretary of State provide a certified copy of the articles of incorporation to the Dean of the College of Agriculture at the University of Kentucky and the Commissioner of the Department of Agriculture[55] is not a condition precedent to the due incorporation of the cooperative corporation. Ergo, an agricultural cooperative corporation is a CTA reporting company.
Another form of the cooperative corporation is a livestock protective association. These organizations are a subset of corporations and are to the extent not modified by KRS 272.360 through 272.510 subject to the business corporation act. Organization of a cooperative livestock protective association is accomplished through the filing of articles of incorporation with the Secretary of State as provided for in the then applicable business corporation act.[56] There is, however, a provision that raises the question of whether the action of the Secretary of State is effective to create the corporation, or whether a further act is required; that provision reads:
and, in addition, a quadruplicate of the articles, indorsed by the Secretary of State with the fact and time of recording of the articles in his office, shall be filed with the Department of Agriculture within ten (10) days after the articles have been recorded in the office of the Secretary of State. After the articles have been duly filed and recorded, and a certificate of incorporation has been issued, the corporation may proceed to do business.[57]
Whether the filing of the Secretary of State’s file stamped articles with the Department of Agriculture is a condition precedent to the due incorporation of the livestock protective association, or alternatively whether that is a mere notice filing similar to the filings made for an agricultural cooperative association, is unclear. For that reason, it is not possible to make a definitive statement as to whether a particular cooperative livestock protective corporation was or was not incorporated upon the filing by the Secretary of State of the articles of incorporation; rather this is a question particular to each organization. In consideration of the question, attention should be paid to the applicable statute equivalent to KRS sections 271B.2-030[58] and 14A.2-070.[59]
D. Corporations - Professional Service
The “professional service corporation” arose out the efforts by members of the “learned professions” to benefit from the tax treatment, particularly as to tax-favored benefit and retirement plans, available to shareholders in a corporation.[60] After the IRS adopted the so-called “Kintner Regulations,” thereby effectively precluding professionals from structuring formats, examples being the partnership association and the limited partnership association, that would sufficiently mimic a corporation (as contemplated by the tax code), those “learned professionals” convinced state legislatures to amend their respective business corporation acts so as to permit the incorporation of professional firms.[61] The resultant professional service corporations (“P.S.C”s) are in almost every state organized as corporations under the applicable business corporation act[62] with particular language mandatory in the articles and other organizational documents meant to further the professional nature of the services rendered through the firm; in Kentucky those requirements are set forth in what is currently KRS section 274.015(1).[63]In that a PSC pre-supposes the incorporation of a business corporation under the business corporation act,[64] a professional services corporation is ab initio a reporting company.
E. Corporations - Rural Electric and Rural Telephone
Kentucky has had a statute specific to rural electric cooperative corporations since 1937,[65] the statute being declared an emergency and immediately effective.[66] The incorporation of a rural electric cooperative corporation is initiated through the preparation of articles of incorporation,[67] it at one point in time requiring that there be not less than five incorporators.[68] Thereafter:
The articles of incorporation shall be executed in quadruplicate by the incorporators and each copy shall be acknowledged by each of the incorporators before a notary public or and other officer authorized by the laws of the Commonwealth of Kentucky to take acknowledgements of deeds. When so acknowledged, the four copies of the articles of incorporation, together with the certificate of acknowledgement, shall be filed with the office of the Secretary of State, who, if he shall find the same legal and valid, shall forthwith indorse his approval on each of the said four copies, retain, record and file one of said copies in his office, delivering the other three copies thereof with his approval endorsed thereon to the incorporators, the incorporators upon the receipt of said approved copies of the articles of incorporation, shall thereupon file one of said approved copies of said articles of incorporation in the office of the county court clerk in the county where is to be located the principal office of said corporation and one of said approved copies of said articles of incorporation with the Dean of the College of Agriculture of the University of Kentucky. As soon as the Secretary of State shall have approved the articles of incorporation and endorsed his approval thereon, the proposed corporation described in the articles of incorporation so filed, shall, under its designated name, be and constitute a body politic and corporate and shall thereupon be fully authorized to transact business in its corporate name.[69]
Essentially the same language as to when the existence of the rural electric cooperate corporation exists in the current law, namely:
(2) As soon as the Secretary of State has filed the articles of incorporation, the proposed corporation shall be a body politic and corporate and may transact business in its corporate name.[70]
Ergo, whether formed under the statute as first adopted in 1936 or under the more modern statute, a rural electric cooperative corporation is a CTA reporting company.
Turning to rural telephone cooperatives, the statute providing for their creation was approved by the Kentucky General Assembly in 1950.[71] As then provided, articles of incorporation are to be prepared,[72] and once executed by at least the minimum of five incorporators,[73] the articles are delivered to the to the Secretary of State for filing.
The incorporators shall execute four copies of the articles of incorporation, and each incorporator shall acknowledge each copy before an officer authorized to take acknowledgments of deeds. They shall then file the four copies, together with the certificate of acknowledgment, in the office of the Secretary of State. If the Secretary of State finds the articles to be legal and valid, he shall immediately endorse his approval on each of the copies, retain, record and file one copy in his office, and deliver the three other copies, with his approval endorsed thereon, to the incorporators. The incorporators shall then file one approve copy in the office of the county clerk of the county in which the principal office of the corporation is to be located.[74]
Thankfully avoiding any ambiguity as to whether the county filing was a condition precedent to the incorporation, the statute went on to provide:
As soon as the Secretary of State has endorsed his approval of the articles of incorporation, the proposed corporation shall be a body politic and corporate and may transact business in its corporate name.[75]
This same language as to when the corporate existence begins exists in the modern codification of this statute.[76] Ergo, a rural telephone cooperative corporation is a CTA reporting company. It should be noted, however, that each rural electric cooperative corporation and rural electric telephone cooperative almost certainly is exempt from the CTA’s definition of a “reporting company” by reason of the exemption for “public utilities”[77]
F. Benefit Corporations
“Benefit corporations” were added to the Kentucky Business Corporation Act in 2017.[78] Rather than a distinct organizational form, a benefit corporation is one that elects in its articles of incorporation to be a benefit corporation, thereby altering the (supposed) rule of shareholder primacy in the operation of the corporation and permitting the Board of Directors to consider the interests of “other constituencies” when making determinations as to the corporation’s path.[79] As a benefit corporation is simply a corporation that has elected a different paradigm for its internal allocation of responsibilities, and pre-supposes the incorporation of a business corporation under the business corporation act, a benefit corporation is ab initio a reporting company.[80]
G. Legislative Corporations
It is a truism that for every categorical statement there is an exception, and there is one here. As noted above, a corporation, LLC or other business organization not created by a secretary of state filing pursuant to a so-called “enabling statute” such as the Kentucky Business Corporation Act or the Kentucky Limited Liability Company Act but rather by a state or federal legislative or other executive act is not a “reporting company.”[81] Certain corporations including those created by legislative act rather than a secretary of state filing are not subject to the CTA as they are not within the scope of the definition of a reporting company.[82] Those corporations are few and far between, but they do exist.[83]
IV. Limited Liability Companies
Kentucky first adopted an LLC Act in 1994.[84] While the LLC Act has undergone repeated amendment in order to accommodate the rapidly evolving form,[85] the manner in which they have been organized has remained consistent, namely through articles of organization that become effective either when filed by the Secretary of State or upon an effective date that post-dates the Secretary of State’s filing, thereby causing the LLC to come into existence.[86]
Ergo, for our purposes, an LLC is created by a filing with the Secretary of State. This conclusion is equally applicable to an LLC that has a single member (a SMLLC) that is for tax purposes treated as either a sole-proprietorship (if the sole member is a natural person) or a division (if the sole member is another business organization). Irrespective[87] of tax classification, the venture is an LLC and therefore falls within the definition of what is a reporting company.
Kentucky permits a general partnership to “convert” into a limited liability company by filing articles of organization that as well as the typical requirements[88] recite additional facts as to the pre-conversion partnership.[89] The conversion is effective upon the Secretary of State’s filing of the articles or organization.[90] So far it would appear we have a CTA reporting company. But then there is the question of the effect of a conversion; the statute provides in part:
A partnership or limited partnership that has been converted pursuant to this chapter shall for all purposes be the same entity that existed before the conversion.[91]
Does the fact that the now LLC is the “same entity” that was converted impact the CTA analysis when it is remembered that a general partnership (even one that has elected LLP status) is not a CTA reporting company? To date FinCEN has issued no guidance on the question. While it may be argued that the LLC formed via the conversion of a general partnership is not a reporting company, that answer is a stretch, and likely the better answer is to treat the post-conversion LLC as a reporting company.
V. General Partnerships Including Limited Liability Partnerships
No state requires a secretary of state or other filing in order for a general partnership to come into existence.[92] This rule is elemental in that partnership is a default category; when persons enter into a business relationship that satisfies the terms of what is a partnership then a partnership comes into being[93] unless they elect to structure their relations in another way such as a corporation or LLC.[94]
While some states permit a notice filing of a Statement of Partnership Authority to be made for the purpose of making clear who are (and by implication who are not) the partners therein and who has authority to on the partnership’s behalf convey its property,[95] the partnership making that filing exists by reason of the agreement of the partners to be, inter alia, partners, and that relationship is not altered by the fact of filing a Statement of Partnership Authority. There are certain other optional filings that a general partnership governed by a statute patterned upon RUPA may file such as a Statement of Denial,[96] filed by a person to deny they are a partner as listed in a Statement of Partnership Authority, a Statement of Dissociation,[97] filed by a person to state that they are no longer a partner in the named partnership, and a Statement of Dissolution.[98] None of these filings is necessary for the transaction in question to be effective; for example, a partnership may dissolve without filing a Statement of Dissolution.
In that no Secretary of State filing is required for a general partnership to come into being, a general partnership is not a CTA “reporting company” and is not subject to its reporting obligations.
A “limited liability partnership” (“LLP”), which under the Kentucky enactment of the Uniform Partnership Act is labeled a “registered limited liability partnership,”[99] is generally speaking a general partnership that via a state notice filing has elected to be governed by a special rule as to the vicarious liability of a partner for the partnership’s debts and obligations.[100] In a classic general partnership each partner is on a joint and several basis vicariously liable with the partnership and each other partner for the partnership’s debts and obligations.[101] While this rule had a number of benefits in small ventures including professional firms, the fallout of the Savings and Loan Crisis demonstrated that exposing partners across the country and across practices to personal liability for claims often arising in a distant office was no longer a viable structure.[102] There existed, however, a dearth of viable options as particularly professional firms were stymied by state law limitations on how they could be structured.[103] The LLP arose out of that tension. Continuation of the partnership format was desired as it continued existing management structures and tax treatment as well as the perceived value of identifying the firm’s principals as “partners” while not running afoul of then existing rules limiting professional practices to the forms of a general partnership and in certain instances a professional service corporation.[104] What was no longer desired was the rule of joint and several vicarious liability among the partners; the LLP format addressed that by means of a notice filing made by an existing partnership with a Secretary of State combined with a requirement as to the partnership’s name resulting in the elimination of the rule of joint and several liability. While there are a variety of distinctions under various state laws, if a partnership makes this notice filing and satisfies the name requirements, the partners qua partners are to one degree or another (the distinction is between so-called “partial” and “full” shield LLPs) not subject to joint and several liability for the partnership’s obligations, but rather enjoy limited liability akin to that enjoyed by shareholders in a corporation.[105] Some states require that the partnership periodically renew its LLP filing and that in the absence of that renewal it reverts to a traditional general partnership. Kentucky provides that the partnership that elects LLP status is the same entity that existed before that election was made.[106] Ergo, no business organization is “created” by an election by a partnership to be an LLP. Rather, there was a partnership that was not an LLP, and then there was a partnership that is an LLP, and it may come to pass that there is a partnership that once was but is no longer and LLP - throughout all of those conditions there was a single partnership.
In that a limited liability partnership, whether existing under the Kentucky Uniform Partnership Act or the Kentucky Revised Uniform Partnership Act (2006), is a general partnership whose organization was not contingent upon a Secretary of State filing, it is not a CTA reporting company.
VI. Limited Partnerships Including Limited Liability Limited Partnerships
Kentucky’s laws governing limited partnerships date back to 1849-50, and over the years there have been numerous iterations of these laws, including the adoption in sequence of three uniform acts. Under only the last two are limited partnerships “created” by a Secretary of State filing, so only they are subject to characterization as a “reporting company.”
The most recent statute is the Kentucky Uniform Limited Partnership Act (2006).[107] Under its provisions a limited partnership comes into being through a filing with the Secretary of State.[108]
Under the immediately preceding statute, an enactment of the Uniform Limited Partnership Act of 1976 with the 1985 Amendments adopted in Kentucky in 1988,[109] a limited partnership came into being through a filing with the Secretary of State.[110]
Previously, under Kentucky’s 1970 adoption of the Uniform Limited Partnership Act (1916),[111] a limited partnership was formed via the preparation and execution of a certificate satisfying the statutory requirements that was then “file[d] for record the certificate in the office of the clerk of the county court in the county in which the principal place of business of the partnership is located.”, formation taking place upon “substantial compliance” with those requirements.[112] While the statute is not express as to whether the county clerk filing was a precondition to formation (i.e., is the only manner of substantial compliance with the filing requirement to effect the filing), the certificate was filed at the county, and not the Secretary of State, level. Ergo, a limited partnership formed under the 1970 limited partnership act is not a reporting company. Well, almost. In 1986 the KRS section 362.420 was amended to provide:
(1) Two (2) or more persons desiring to form a limited partnership shall:
….
(b) File for record duplicate copies of the certificate first with the secretary of state, and thereafter file for record one (1) duplicate original of the certificate in the office of the county clerk in the county in which the principal place of business of the partnership is located.[113]
Now what is less than clear is whether that Secretary of State filing was a condition precedent to the formation of the limited partnership as only “substantial compliance” with the laws governing the filing of the certificate (as well as its contents) was required.[114] For our purposes a provision addressing which filing (if any) was necessary for the limited partnership to come into being would be most helpful but alas there is none. While reasonable minds could differ on the point, a solid case may be made that a limited partnership governed by this amendment to Kentucky’s then limited partnership act (i.e., one formed after the effective date of the 1986 amendment and before the effective date of the Act adopted in 1988), while being the first time a Secretary of State filing is provided for in connection with a limited partnership’s formation, is not a CTA reporting company.
Before 1970 Kentucky limited partnerships were covered by a statute codified at KRS 362.010 through 362.160, ultimately having been adopted in 1849-50 and codified at ch. 82. Thereunder, irrespective of the iteration, the certificate of limited partnership was filed with a county level office and not with the Secretary of State.[115] Ergo, a limited partnership formed under the pre-1970 limited partnership law is not a reporting company.
A limited liability limited partnership (“LLLP”) is a limited partnership that has as to the general partner component thereof elected LLP status. There are, however, for purposes of this inquiry, important distinctions between a limited partnership electing LLLP status and a general partnership electing LLP status. Unlike a general partnership/LLP in which a pre-existing partnership makes the LLP election, under Kentucky’s most modern limited partnership law, namely the Kentucky Uniform Limited Partnership Act (2006), the election by a limited partnership to be an LLLP is made in the certificate of limited partnership to the effect that there was never a time in which the LLLP was not a limited partnership created by a filing by the Secretary of State of a certificate of limited partnership.[116] While it is conceivable that a limited partnership created under a pre-2006 statute could elect LLP status under the LLP amendments to the Kentucky Uniform Partnership Act,[117] which at the time of their adoption were not limited to general partnerships,[118] such organizations are at best few and far between. Still, it is possible that they exist, and if they do they are not CTA reporting companies. Other LLLPs existing under the 2006 Limited Partnership Act are CTA reporting companies.
VII. Business and Statutory Trusts
Kentucky has two statutes governing the business organizations generically referenced as “business trusts,” one utilizing the common law concept and the second a statutory model. Both are fully in effect, business trusts organized under the common law model have not been subsumed into the statutory paradigm, and it is possible today to form under either option.
The statute addressing the common law model was adopted in 1966, and under it a business trust[119] comes into being by the declaration of a trust relationship.[120] In 2012 Kentucky adopted a modified form of the Uniform Statutory Trust Entity Act[121] under the name the Kentucky Uniform Statutory Trust Act (2012).[122] In contact to the common law mechanism used under the other statute, under the Statutory Trust Act formation is accomplished by means of a filing with the Secretary of State.[123]
Ergo, whether a “business trust” organized in Kentucky is a CTA reporting company depends upon under which statute it was organized; if under the common law formula it is not while if formed under the Statutory Trust Act then it is a reporting company.
VIII. Limited Cooperative Associations
Kentucky adopted a modified form of the Uniform Limited Cooperative Association Act in 2012.[124] The formation of a limited cooperative association is accomplished via a filing with the Secretary of State.[125] The creation of a Kentucky limited cooperative association being premised upon a Secretary of State filing, a Kentucky limited cooperative association is a reporting company under the CTA.
IX. Unincorporated Non-Profit Associations
Kentucky adopted a version of the Uniform Unincorporated Nonprofit Association Act in 2015,[126] thereby creating a statutory form for what are often informal nonprofit organizations that do not fall within the scope of one of the other organizational forms.[127] Initially, a UNPA comes into being by the agreement of the participants therein and does not require a Secretary of State or other filing.[128] An existing UNPA may file a certificate of association with the Secretary of State, whereupon the otherwise applicable rule of vicarious liability of the participants in the venture for its debts and obligation[129] is set aside, and those persons are no longer vicariously liable for the UNPA’s debts and obligations.[130] Therefore, irrespective of whether an UNPA has filed a certificate of association with the Secretary of State, a UNPA is not created by a Secretary of State filing and is therefore not a CTA reporting company.
Conclusion
The application of the Corporate Transparency Act is a watershed event in business law, it requiring answers to a variety of new questions including the one here reviewed, namely what is a “reporting company” as that term is applied to business organization formed in the Commonwealth of Kentucky. Hopefully these thoughts will guide the assessment of particular organizations.
Post-Script
In late 2024 and through the first months of 2025 there was a flurry of judicial, legislative and executive action as to the validity and application of the Corporate Transparency Act.[131] While the authority to do so has been challenged,[132] on March 26, 2025, the Department of the Treasury published an Interim Final Rule[133] amending the Final Rules to the effect that a “reporting company” does not include a business venture created in the U.S. and that the beneficial owners of the remaining “reporting companies,” they being formed outside of the U.S. and then qualified to transact business under the laws of one of the states, will not include any persons who are U.S. citizens.[134] What is most important for this analysis is that the statutory definition of what is a reporting company has not been altered by this regulatory change.
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*I am a member of Stoll Keenon Ogden PLLC resident in its Louisville, Kentucky office where my practice is focused on the law of business organizations. In addition, I am a frequent commentator on the law of business organizations and am an elected member of the American Law Institute. In 2018 I joined Ribstein and Keatinge on Limited Liability Companies as a co-author in place of the late Professor Ribstein. I would be remiss to not thank William A. Hilyerd, librarian at the University of Louisville Brandeis School of Law, for his cheerful assistance in tracking down some of the law herein discussed.
[2] The Corporate Transparency Act (the “CTA”) was adopted as part of the Anti-Money Laundering Act of 2020, it being part of the 2021 National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”). The full name of the NDAA is the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. (2021). Congress’ override of the President’s veto was taken in Record Vote No. 292 (Jan. 1, 2021). The anti-money laundering provisions are found in §§ 6001-6511 of the NDAA. The CTA consists of §§ 6401-6403 of the NDAA. Section 6402 of the NDAA sets forth Congress’ findings and objectives in passing the CTA, and § 6403 contains its substantive provisions, primarily adding § 5336 to Title 31 of the United States Code.
[3] The Reporting Regulations appear at 31 C.F.R. § 1010.380 (2023). The “final” beneficial ownership report regulations were released in Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498 (Sept. 30, 2022).Those “final” regulations were as to certain due dates amended by Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 66730 (Sept. 28, 2023) and supplemented as to the use of FinCEN Identifiers by the release Use of FinCEN Identifiers for Reporting Beneficial Ownership Information of Entities, 88 Fed. Reg. 76995 (Nov. 8, 2023).
The most recent change to the Reporting Regulations took place on October 17, 2024, when FinCEN altered the definition of what is a “public utility” able to utilize a particular exemption from the CTA’s definition of what is a “reporting company.” See Update of the Public Utility Exemption Under the Beneficial Ownership Information Reporting Rule, 89 Fed. Reg. 83782 (Oct. 18, 2024) (collectively the “Reporting Regulations”).In interpreting and applying the Reporting Regulations, reference should be made as well to the Beneficial Ownership Information Reporting - Frequently Asked Questions (the “FinCEN FAQs”) and the FinCEN Small Entity Compliance Guide - Reporting Requirements (the “FinCEN Guide”). See also infra notes 131 through 134 and accompanying text.
[4] There is under the CTA and the Reporting Regulations a series of reporting requirements applicable to entities “formed” outside the U.S. and qualified to transact in one or more of the states. See, e.g., 31 C.F.R. § 1010.380(c)(1)(ii) (2023) (outlining the reporting requirements for foreign reporting companies under the Reporting Regulations). As this article is focused on business organizations organized in Kentucky those non-U.S. organizations are excluded from this discussion.
[5] An organization that is a “reporting company” may be excised from that classification by the application of one or more of twenty-three exceptions. See 31 U.S.C. § 5336(a)(11)(B) (“The term ‘reporting company’ . . . does not include”); 31 C.F.R. § 1010.380(c)(2) (2023) (“Notwithstanding paragraph (c)(1) of this section, the term ‘reporting company’ does not include:”). The exemptions, as set forth in the Reporting Regulations, appear at 31 C.F.R. §§ 1010.380(c)(2)(i) - (xxiii) (2023).
[6] For a review of the CTA and the Reporting Regulations generally, see Allison J. Donovan and Thomas E. Rutledge, The Corporate Transparency Act Is Happening To You and Your Clients: Dealing with the Tsunami, Kentucky Bar Ass’n (July 30, 2024) (hereinafter “Donovan & Rutledge, Tsunami”) https://www.skofirm.com/news/the-corporate-transparency-act-is-happening-to-you-and-your-clients-dealing-with-the-tsunami/ [https://perma.cc/FX9K-SQ27]. See also 1 Larry E. Ribstein, Robert R. Keatinge and Thomas E. Rutledge, Ribstein & Keatinge on Limited Liability Companies ch. 4A 293 – 460 (2024).
[7] See generally Donovan & Rutledge, Tsunami, supra note 6, at 9.
[8] 31 C.F.R. §§ 1010.380(c)(i)(A)-(C) (2023).
[9] Technically a “domestic reporting company,” but as this article is discussing only reporting companies formed in Kentucky the “domestic” is hereinafter being dropped.
[10] See Frequently Asked Questions, C.9, FINCEN (Apr. 18, 2024), https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2] (emphasis added). This emphasis upon creation by a Secretary of State filing is consistent with certain commentary released in connection with the release of the final Reporting Rules. See Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498, 59538 (Sept. 30, 2022) (“FinCEN . . . notes that the core consideration for the purposes of the CTA’s statutory text and the final rule is whether an ‘entity’ is ‘created’ by the filing of the document with the relevant authority.”); Id. (“We emphasize again that the only relevant issue for the purposes of the CTA and the final rule is whether the filing ‘creates’ the entity.”).
[11] Under the CTA and the Reporting Regulations there is not a defined term that encompasses all filing offices in the states including those such as Virginia where the filing is with the Corporations Commission and the equivalent offices of for example the various Indian Tribes, although there is a FAQ on point. See Frequently Asked Questions, C.17, FINCEN (Oct. 3, 2024), https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2]. Again, as we are here concerned only with Kentucky the label Secretary of State is accurate.
[12] See Thomas E. Rutledge, External Entities and Internal Aggregates: A Deconstructionist Conundrum, 42 Suffolk U. L. Rev. 655 (2009) (exploring the characteristics of business organizations identified as being an “entity” and determining the label has no inherent meaning); see also J. William Callison, Indeterminacy, Irony and Partnership Law, 2 Stan. Agora 73–76 (2001), http:// agora.stanford.edu/agora/libArticles2/agora2v1.pdf [permalink unavailable]; David Millon, The Ambiguous Significance of Corporate Personhood, 2 Stan. Agora 38, 58 (2001), http://agora.stanford.edu/agora/libArticles2/ agora2v1.pdf [permalink unavailable].
[13] See, e.g., Ky. Rev. Stat. Ann. § 271B.2-030 (West 2024) (“. . . the corporate existence shall begin . . .”); Ky. Rev. Stat. Ann § 272A.3-010(2) (West 2024) (“The limited cooperative association is formed when . . . ”); Ky. Rev. Stat. Ann. § 273.2531 (West 2024) (“. . . [T]he corporate existence shall begin when . . .”); Ky. Rev. Stat. Ann. § 275.020(2) (West 2024) ([T]he existence of the limited liability company shall begin when . . .”).
[14] Under the CTA and the Reporting regulations, a reporting company may be exempt from the reporting obligations if it meets one or more of twenty-three exemptions. Relatively few companies will fall within the scope of the exemptions; one of them, that for financial market utilities (see 31 C.F.R. 1010.380(c)(2)(xvii) (2023), applies to eight companies (listing available at https://www.federalreserve.gov/paymentsystems/designated_fmu_about.htm [https://perma.cc/XW85-R2T5]).
[15] A great many of the citations to Kentucky’s statutes governing various business organization forms have been “repealed,” but the references herein do not recite a history of, for example, “repealed effective July 15, 2024.”That is intentional because herein the consideration of what was the law governing the organization of a particular form at a particular date - it is the procedure dictated by the law of the time of formation that determines whether a particular company is a CTA reporting company. That a particular statute was subsequently repealed and replaced does not retroactively alter the manner in which a particular organization came into being.
[16] The “arguably” qualification acknowledges that notwithstanding the statutory language as carried forward in the Reporting Regulations, FinCEN could by fiat declare what is not a reporting company to indeed be a reporting company. The likelihood of a lawsuit challenging that determination must be recognized as being low, but still, it is not impossible. In Massachusetts a lawsuit was brought by a (common law) business trust seeking a determination that it and other business trusts are not reporting companies, but it was quickly dismissed for failing to state a claim for which relief can be granted. The plaintiffs asserted that a Massachusetts Business Trust is not a reporting company in that it is not formed by a filing by a Secretary of State or similar officer, an assertion with which FinCEN agreed. There being no controversy as to the non-application of the CTA to the plaintiff its broader challenge to the CTA’s constitutionality was set aside for lack of standings. See Trustees of the Lewis Wharf Condominium Trust v. Yellen, No. 24-11679-LTS, (D. Mass. Nov. 22, 2024) (order granting Defendants’ motion to dismiss without prejudice).
[17] See Ky. Const. § 55 (“No act, except general appropriation bills, shall become a law until ninety days after the adjournment of the session at which it was passed”).
[18] As to the characteristics of a sole proprietorship, see Sparkman v. CONSOL Energy, Inc., 470 S.W.3d 321, 328 (Ky. 2015) (citations omitted):
A sole proprietorship is defined as a business in which one person owns all the assets, owes all the liabilities, and operates in his or her personal capacity. Black's Law Dictionary (10th ed. 2014). A sole proprietorship, therefore, differs greatly from other business organizations such as corporations or limited liability companies (LLCs), even in cases where a business organization has only one shareholder or member. For example, the sole member of an LLC or sole shareholder of a corporation is not entitled to assert in his or her individual capacity the rights of the business organization. An owner of a sole proprietorship, on the other hand, is liable in his or her personal capacity for the liabilities of the sole proprietorship and may assert the rights of the sole proprietorship in his individual capacity.
Keep in mind that the “sole proprietor” here being discussed is a state law concept; a single member LLC that is for tax classification purposes a “disregarded entity” is under the CTA, absent one of the twenty-three exemptions discussed below, a reporting company. See also Frequently Asked Questions, C.8, FINCEN (Apr. 18, 2024) (clarifying pass-through tax treatment of an S-corporation does not exempt it from characterization as a reporting company) https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2].
[19] See Ky. Rev. Stat. Ann. § 365.015(3) (West 2024).
[20]See Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498, 59537 (Sept. 30, 2022) (“In general, FinCEN believes that sole proprietorships, . . . would not be a reporting company under the final rule.”); Frequently Asked Questions, C.6, FINCEN (Dec. 12, 2023), https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2].
[21] See Ky. Const. § 59 (“The General Assembly shall not pass local or special acts concerning any of the following subjects, or for any of the following purposes, namely: . . . Seventeenth, To grant a charter to any corporation, or to amend the charter of any existing corporation . . .”).
[22] See 1988 Ky. Acts, ch. 389; see also Ky. Rev. Stat. Ann. § 271B.1-010 (West 2024) (“This chapter shall be known and may be cited as the ‘Kentucky Business Corporation Act’.”).
[23] See 1972 Ky. Acts, ch. 274 (H.B. 178), see also id., § 1 (codified at Ky. Rev. Stat. Ann. § 271A.005 (“This Act shall be known and may be cited as the Kentucky Business Corporation Act.”) (repealed 1988).
[24] This act was based upon the 1972 edition of the Model Business Corporation Act. See James C. Seiffert, Kentucky Corporation Law with Forms, in Kentucky Practice Series § 3.1 (June 2022).
[25] See 1946 Ky Acts, ch. 141 (S.B. 6) (repealed 1972). This statute was one of the few adoptions of the Uniform Business Corporation Act (1928) written and promulgated by the National Conference of Commissioners of Uniform State Laws (“NCCUSL”), now known as the Uniform Law Commission (the “ULC”). Still, it was not adopted without sometimes questionable modification. See Willburt D. Ham, The Close Corporation Under Kentucky Law, 50 Ky. L. J. 125, 128 (1961). Not long after promulgating this Act NCCUSL abandoned corporate law to the American Bar Association and its Committee on Corporate Laws (the “ABA”). This is the source of the division of labor between the two groups with the ULC being charged with the unincorporated laws (e.g., the Uniform Partnership Act, the Revised Uniform Limited Liability Company Act and the Uniform Unincorporated Nonprofit Association Act) and the ABA taking as its charge the Model Business Corporation Act and the Model Nonprofit Corporation Act. The crafting of the Uniform Commercial Code is governed by different rules.
[26] See generally 1893 Ky. Acts, ch. 171.
[27] See 1988 Ky. Acts, ch. 23 (H.B. 323), codified at KRS ch 271B.
[28] See Ky. Rev. Stat. Ann. § 271B.2-010 (West 2024) (incorporation accomplished by delivering articles of incorporation to the Secretary of State for filing); id. § 271B.2-020 (required contents of articles of incorporation).
[29] See Ky. Rev. Stat. Ann. § 271B.2-030(1) (West 2024) (“Unless a delayed effective date is specified, the corporate existence shall begin when the articles of incorporation are filed by the Secretary of State.”).
[30] See Ky. Rev. Stat. Ann. § 271A.270 (1972 Ky. Acts, ch. 274, § 54).
[31] See Ky. Rev. Stat. Ann. § 271A.275 (1972 Ky. Acts, ch. 274, § 55).
[32] See Ky. Rev. Stat. Ann. § 271A.280 (1972 Ky. Acts, ch. 274, § 57).
[33] See Ky. Rev. Stat. Ann. § 271.035 (1946 Ky. Acts, p. 383).
[34] See Ky. Rev. Stat. Ann. § 271.055(1) (1946 Ky. Acts, p. 385).
[35] Id.
[36] See Ky. Rev. Stat. Ann. § 271.055(2) (1946 Ky. Acts, p. 385).
[37] See Ky. Rev. Stat. Ann. § 271.065 (1946 Ky. Acts, p. 386).
[38] See, e.g., Ky. Const. § 207 (repealed 2002) (requiring that corporations utilize cumulative voting in the election of directors).
[39] See generally 1893 Ky. Acts, ch. 171.
[40] See 1893 Ky. Acts, ch. 171, § 2 (detailing the requirements to properly effectuate articles of incorporation).
[41] See 1893 Ky. Acts, ch. 171, § 3.
[42] 1893 Ky. Acts, ch. 171, § 5.
[43] 31 U.S.C.A. § 5336(a)(11)(A)(i).
[44] See 1968 Ky. Acts, ch. 165 (S.B. 254); id. § 1 (“This Act shall be known and may be cited as the ‘Kentucky Nonprofit Corporation Act.’”).
[45] See 1968 Ky. Acts, ch. 165, § 29.
[46] See Ky. Rev. Stat. Ann. § 273.010 (repealed 1968) (“Unless expressly included, corporations organized under KRS 273.020 shall not be subject to any statutes relating to corporations having a capital stock or organized for pecuniary profit, except KRS 271.385, requiring an agent for service of process, but shall at all times, be subject to visitation by the legislature.”).
[47] See Ky. Rev. Stat. Ann. § 273.020 (repealed 1968).
[48] See Ky. Rev. Stat. Ann. § 273.030 (repealed 1968).
[49] See Ky. Rev. Stat. Ann. § 273.160 (repealed 1968).
[50] See Ky. Rev. Stat. Ann. § 273.160(4) (repealed 1968) (“except as specifically provided in KRS 273.160 to 273.290, corporations organized under KRS 273.160 to 273.290 are not subject to any of the statues relating to corporations having capital stock or organized for pecuniary profit . . . .”).
[51] See Ky. Rev. Stat. Ann. § 273.170 (repealed 1968).
[52] See Ky. Rev. Stat. Ann. § 273.190 (repealed 1968).
[53] See Ky. Rev. Stat. Ann. § 273.200 (repealed 1968).
[54] See Ky. Rev. Stat. Ann. § 272.131(3) (repealed and reenacted 2010) (The articles of incorporation “shall be filed and recorded in accordance with the statute relating to corporations generally; and when so filed, the articles of incorporation, or certified copies thereof, shall be received in all the courts of this state, and other places, as prima facie evidence of the facts contained therein, and of the due incorporation of the association . . . .”).
[55] See Id. (“A copy of the articles of incorporation, indorsed by the Secretary of State with the fact and time of recording in his office, shall be filed with the dean of the College of Agriculture of the University of Kentucky and with the Commissioner of the Department of Agriculture.”).
[56] See Ky. Rev. Stat. Ann. § 272.410 (amended 1980) (“The articles of incorporation shall be signed, acknowledged, filed and recorded in accordance with the provisions of the general corporation law of this state, . . . .”).
[57] See Id.
[58] Currently, KRS § 271B.2-030 provides:
(1) Unless a delayed effective date is specified, the corporate existence shall begin when the articles of incorporation are filed by the Secretary of State.
(2) The Secretary of State's filing of the articles of incorporation shall be conclusive proof that the incorporators satisfied all conditions precedent to incorporation, except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the corporation.
[59] Currently, KRS § 14A.2-070(1) provides:
(1) Except as provided in subsection (2) of this section and KRS 14A.2-090(3), a document delivered to the Secretary of State for filing shall be effective:
(a) On the date and at the time of filing, as evidenced by such means as the Secretary of State may use for the purpose of recording the date and time of filing; or
(b) At the time specified in the document as its effective time on the date it is effective.
[60] See Thomas E. Rutledge and Lady E. Booth, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L. J. 1 at 59 - 61 (1994-95).
[61] See T.D. 6797, 1965-1 C.B. 553. This path greatly irritated the IRS, and it attempted to deprive these newly minted corporations of classification as “corporations” under the Internal Revenue Code. See Rutledge & Booth, supra note 60, at 74 (“Those efforts were unavailing and ultimately abandoned by the Service”). Professional service corporation provisions were first added to Kentucky law in 1962. See 1962 Ky. Acts, ch. 236 (H.B. 97).
[62] See Ky. Rev. Stat. Ann. § 274.015:
(1) One (1) or more individuals, … may incorporate and form a professional service corporation by filing articles of incorporation in the office of the Secretary of State.….
(2) A professional service corporation formed under the provisions of this chapter, except as this chapter may otherwise provide, shall have the same powers, authority, duties, and liabilities as a corporation formed under, and shall be otherwise governed by, KRS Chapter 271B.
[63] See also 1962 Ky. Acts, ch. 236 (H.B. 97) § 2(1) (referencing then in effect KRS ch. 271).
[64] See also Ky. Rev. Stat. Ann. § 274.015(2); 1962 Ky. Acts, ch. 236, § 2(2).
[65] See 1936 Ky. Acts, 4th Ext. Sess. ch. 6, § 1 (“This act may be known, cited and referred to as the ‘Rural Electric Cooperative Corporation Act.’”).
[66] See 1936 Ky. Acts, 4th Ext. Sess. ch. 6, § 32 (“Whereas, many Rural Electric Cooperative Corporations are now ready to be organized and delay in their organization will endanger their receiving the federal funds appropriated for that purpose, an emergency is hereby declared to exist and this Act shall become a law and be effective from and after it’s approval by the Governor.”).
[67] See Baldwins (1939 supp.) § 833j-4 (Setting forth the required contents of the articles of incorporation); Ky. Rev. Stat. Ann. § 279.030 (repealed and reenacted 2010).
[68] See Baldwins (1939 supp.) § 833j-3; Ky. Rev. Stat. Ann. § 279.020 (Under current law the required number of incorporators has been reduced to three).
[69] See Baldwins (1939 supp.) § 833j-5.
[70] See Ky. Rev. Stat. Ann. § 279.040(2) (amended 2010).
[71] See 1950 Ky. Acts, ch. 147 (S.B. 69).
[72] See 1950 Ky. Acts, ch. 147, § 3 (detailing required and optional provisions of articles of incorporation).
[73] See 1950 Ky. Acts, ch. 147, § 2.
[74] See 1950 Ky. Acts, ch. 147, § 5(1).
[75] See 1950 Ky. Acts, ch. 147, § 5(2).
[76] See Ky. Rev. Stat. Ann. § 279.350 (amended in 2010).
[77] See 31 C.F.R. § 1010.380(c)(2)(xvi); see also Update of the Public Utility Exemption Under the Beneficial Ownership Information Reporting Rule, 89 Fed. Reg. 83782 (Oct. 18, 2024).
[78] See 2017 Ky. Acts ch. 28, § 7(8) (H.B. 35); Ky. Rev. Stat. Ann. § 271B.8-300(8) (amended in 2017).
[79] See also Thomas E. Rutledge, The 2017 Amendments to Kentucky’s Business Entity Statutes, 56 Lou. L. Rev. 55 (Fall 2017). Amendments to the Model Business Corporation Act to provide for benefit corporations were approved in 2020. See Proposed Changes to the Model Business Corporation Act - New Chapter 17 on Benefit Corporations, 74 Bus. L. 819 (Summer 2019); Proposed (Revised) Changes to the Model Business Corporation Act - New Chapter 17 on Benefit Corporations, 74 Bus. L. 1177 (Fall 2019).
[80] The CTA and the Reporting Regulations provide an exception from classification as a reporting company for a “tax exempt entity.” See 31 C.F.R. § 1010.380(c)(2)(xix). This exemption is not applicable to a benefit corporation in that a benefit corporation is a for-profit venture that ipso facto is not a non-profit organization able to qualify under Code § 501(c).
[81] See FinCEN FAQ C.9 (Apr. 18, 2024) (emphasis added) https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2]. This focus upon creation by a Secretary of State filing is consistent with certain commentary released in connection with the release of the final Reporting Rules. See Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. at 59538 (“FinCEN … notes that the core consideration for the purposes of the CTA’s statutory text and the final rule is whether an “entity” is “created” by the filing of the document with the relevant authority.”); id. (“We emphasize again that the only relevant issue for the purposes of the CTA and the final rule is whether the filing “creates” the “entity.”) (emphasis added).
[82] See FinCEN FAQ C.9 (Apr. 18, 2024) https://www.fincen.gov/boi-faqs [https://perma.cc/789C-PXM2].
[83] See, e.g., 2021 Ky. Acts. ch. 203, § 3 (HB 321) (creating a corporation under the name the “West End Opportunity Partnership”); 2024 Ky. Acts ch. 171, § 4 (SB 299) (repealing and reenacting KRS § 230.225(1) to establish a corporation under the name the “Kentucky Horse Racing and Gaming Corporation.”). See also Mark Harris, The Government Corporation in Kentucky, 29 Ky. L. J. 288 (1941). At the federal level, the Boy Scouts of America is a corporation created through federal law passed by Congress. See 36 U.S.C. § 30901(a). The same applies to the Girl Scouts of the United States of America. See 36 U.S.C. § 80301. Indian tribal corporations may be formed under federal law through the issuance of a charter of incorporation by the Secretary of the Interior pursuant to section 17 of the Indian Reorganization Act of 1934 (25 U.S.C. § 477) while in Oklahoma the same action is accomplished under section 3 of the Oklahoma Indian Welfare Act. See 25 U.S.C. § 503. See also U.S. Dept. of the Interior, Tribal Economic Development Principles at a Glance Series - Choosing a Tribal Business Structure, (last visited Aug. 13, 2024) https://www.bia.gov/sites/default/files/dup/assets/as-ia/ieed/bia/pdf/idc1-032915.pdf [https://perma.cc/52QC-6TPW]. As such, these are not “reporting companies” as defined under the CTA. Alternatively, corporations may come into existence pursuant to Indian tribal law or through a state corporation act; in either of those instances the company so created is absent an applicable exemption subject to the CTA as a reporting company.
[84] See 1994 Ky. Acts, ch. 389; see also Rutledge & Booth, supra note 60 at 4.
[85] By way of example, under the LLC Act as originally adopted, it was required that the articles of organization recite that the LLC would have at least two members. This requirement was put in as a bulwark against the accidental creation of a single member LLC, an organizational structure that, in 1994, was significantly unknown as the tax code did not contemplate a single-member limited liability organization that was not a corporation. See also Rutledge & Booth, supra note 60 at 9–10. In December 1996, the IRS modified its classification rules, abandoning as to unincorporated entities the “Kintner Regulations” and adopting the current “Check the Box” rules and as well providing for the tax treatment of what was referred to therein as a “disregarded entity.” In response this provision of the LLC act was repealed, allowing there to be organized in Kentucky single-member limited liability company. See 1998 Ky Acts, ch. 341, § 23 (amending KRS § 275.025).
[86] See Ky. Rev. Stat. Ann. § 275.025(7) (2011); id. §§ 14A.2-070(1), (2) (2011).
[87] And not “irregardless.”
[88] See Ky. Rev. Stat. Ann. § 275.025 (2011).
[89] See Ky. Rev. Stat. Ann. §§ 275.370(3)(a)-(e) (2010).
[90] See Ky. Rev. Stat. Ann. § 275.370(4) (2010).
[91] See Ky. Rev. Stat. Ann. § 275.375(1) (2010).
[92] I cannot address the laws of any of the Indian Tribes or of any of the U.S. Territories.
[93] See, e.g., Unif. P’ship. Act (1914) § 6(1); Revised Unif. P’ship. Act (1997) § 202(a); 6 Del. Code § 15-202(a); Ala. Code § 10A-8A-1.01; Ky. Rev. Stat. Ann. § 362.175; id. § 362.1-202(1); Va. Code § 50-73.88(A); see also In re: Copeland, 291 B.R. 740, 769 (Bankr. E.D. Tenn. 2003); Flying Phx. Corp. v. Sinclair, 2024 WYCH 3, 40–41, 2024 Wyo. Trial Order LEXIS 4 (Wyo. Chan. Ct. April 25,2024) (“A partnership is formed when ‘two or more persons’ associate ‘to carry on as co-owners a business for profit,’ ‘whether or not the persons intended to form a partnership.’ The determinative intent is not the parties’ subjective intent to be characterized (or not characterized) as partners, but their ‘intent to do things that constitute a partnership.’ This means that absent a partnership agreement, or even when the parties express their subjective intent not to form a partnership, the parties may inadvertently create a partnership through their conduct.”) (citations omitted); William Mead Fletcher, Fletcher Cyclopedia of the Law of Private Corporations, § 20 (1917) (“A partnership is created by mere agreement between the partners. The approval of the state is not necessary.”); John Bouvier, A Law Dictionary, vol. II, Partnership, 228 (1839) (“Partnerships are created by mere act of the parties; and in this they differ from corporations which require the sanction of state authority, either express or implied.”) (Law Book Exchange, 2003, at p. 294).
[94] See Unif. P’ship. Act. (1914) § 6(2); Rev. Unif. P’ship. Act (1997) § 202(b); 6 Del. Code § 15-202(b); Ky. Rev. Stat. Ann. § 362.175 (2011); id. § 362.1-202(2); Va. Code § 50-73.88(B).
[95] See, e.g., Revised Unif. P’ship. Act (1997) § 303; 6 Del. Code § 15-303(b); Ala. Code § 10A-8A-3.03; Calif. Corps. Code § 16105; Ky. Rev. Stat. Ann. § 362.1-303 (2011); Va. Code § 50-73.93.
[96] See, e.g., Revised Unif. P’ship. Act (1997) § 304; Ala. Code § 10A-8A-3.04; Ky. Rev. Stat. Ann. § 362.1-304 (2011); Va. Code § 50-73.94.
[97] See, e.g., Revised Unif. P’ship. Act (1997) § 704; 6 Del. Code § 15-704(a); Ala. Code § 10-8A-7.04; Ky. Rev. Stat. Ann. § 362.1-704 (2011); Va. Code § 50-73.115.
[98] See, e.g., Revised Unif. P’ship. Act (1997) § 805; 6 Del. Code § 15-805; Ala. Code §10-8A-8.05; Ky. Rev. Stat. Ann. § 362.1-805 (2011); Va. Code § 50-73.121.
[99] See Ky. Rev. Stat. Ann. § 362.555(1) (2011); id. § 362.155(7).
[100] In certain states including Delaware a limited partnership may as well make this filing, but for purposes of simplicity and to retain our focus upon Kentucky law this discussion is in the context of a general partnership. Under the Kentucky Revised Uniform Partnership Act (2006), a limited partnership may not elect LLP statute. See Ky. Rev. Stat. Ann. § 362.1-931 (2013) (LLP election made in a statement of qualification which may be filed by a “partnership,” a class that does not encompass a limited partnership); id. § 362.1-202(2) (an organization created other than under the partnership act is not a partnership).
[101] See Unif. P’ship. Act § 15; Revised Unif. P’ship. Act § 306(a); 6 Del. Code § 15-306(a); Ky. Rev. Stat. Ann. § 362.220 (2007); id. § 362.2-306(1).
[102] See, e.g., Thomas E. Rutledge and Robert R. Keatinge, LLPS Are Not Reporting Companies, Bus. L. Today (Oct. 10, 2024); Robert W. Hamilton, Registered Limited Liability Partnerships: Present at Birth (Nearly), 66 Colo. L. Rev. 1065, 1069 (1995); Robert R. Keatinge et al., Limited Liability Partnerships: The Next Step in the Evolution of the Unincorporated Business Organization, 51 Bus. L. 147, 147–49 (Nov. 1995). See also Harwell Wells, The Unexpected Origins of the US Limited Liability Partnership, in The Origins of Company Law (eds. Victoria Barnes and Jonathan Hardman 2024).
[103] See generally Thomas E. Rutledge, The Place (If Any) of the Professional Structure in Entity Rationalization, 58 Bus. L. 1413, 1419–21 (Aug. 2003) (discussing several states’ partnership laws, with a focus on the leniency of some states compared to others). Please note as well that from 1982 through 1997, S-corporation status was limited to firms with 75 or fewer shareholders, greatly reducing the utility of S-corporation classified PSCs for the organization of professional firms. Further, because of the requirement to accelerate recognition of accounts receivable upon conversion from Subchapter K to either Subchapter C or Subchapter S, there existed significant impediments to the conversion of an existing firm from a general partnership to a professional service corporation.
[104] Through 1992 the AICPA provided that CPAs could practice as sole proprietorships, as general partnerships and as professional service corporations. See also Rutledge and Keatinge, supra note 102.
[105] See, e.g., Ky. Rev. Stat. Ann. § 362.220(2) (2007); id. § 362.555 (a partial shield statute); id. 362.1- 306 (full shield); Rev. Unif. P’ship. Act § 306(c) (full shield); 6 Del. Code § 15-306(c); Ala. Code § 10-8A-306(c); Va. Code §50-73.96(C).
[106] See Ky. Rev. Stat. Ann.§ 362.1-201(2)(2006); see also Revised Unif. P’ship. Act § 201(b) (“A limited liability partnership continues to be the same entity that existed before the filing of the statement of qualification under Section 1001.”); 6 Del. Code § 15-201(b); 805 ILCS 206/201(b); Va. Code § 50-73.132(E) (“A partnership that has been registered as a limited liability partnership under this chapter is, for all purposes, the same entity that existed before it registered.”); Mudge Rose Guthrie Alexander & Ferdon v. Pickett, 11 F.Supp.2d 449, 452 at fn. 12 (S.D. N.Y. 1998) (commenting in footnote that the New York LLP statute “clearly enunciates that a general partnership that is registered as a RLLP is for all purposes the same entity that existed before registration and continues to be general partnership under the laws of New York”) (citation omitted); Howard v. Klynveld Peat Marwick Goerdeler, 977 F.Supp. 654, 657 fn.1 (S.D.N.Y. 1997), aff’d 173 F.3d 844 (2nd Cir. 1999) (upon a partnership becoming a limited liability partnership, “The partnership was not dissolved and continued without interruption with the same partners, principals, employees, assets, rights, obligations, liabilities and operations as maintained prior to the change. Thus, Peat Marwick LLP is in all respects the successor in interest to Peat Marwick.”); Sascki v. McKinnon, 707 N.E.2d 9, 14 (Ohio App. 1997) (“Those two entities, E&Y and E&Y LLP are, but for the corporate change to a limited liability partnership designation, the same entities for all practical intents and purposes.”); Maupin v. Meadow Park Manor, 125 P.2d 611 (Mont. 2005) (LLP is “same entity that existed before registration”); Ex parte Haynes Downard Andra & Jones, LLP, 924 So.2d 687, 699 (Ala. 2005) (A LLP “is for all purposes, except as provided in Section 10-8A-306 [not relevant to our inquiry], the same entity that existed before the registration and continues to be a partnership under the laws of this state . . . .” (citing Ala. Code § 10-8A-1001(i)); Riccardi v. Young & Young, LLP, 74 Misc.3d 911, 915 (City Court of New York, Cohoes, Albany County 2022) (“An LLP is a general partnership which acquires limited liability characteristics upon registration with the Secretary of State.”) (citation omitted).
[107] Codified at Ky. Rev. Stat. Ann. ch. 362.2. See also Thomas E. Rutledge & Allan W. Vestal, The Uniform Limited Partnership Act (2001) Comes to Kentucky: An Owner’s Manual, 34 N. Ky. L. Rev. 41, 411–121 (2007); Thomas E. Rutledge and Allan W. Vestal, Rutledge & Vestal on Kentucky Partnerships and Limited Partnerships (2010).
[108] See Ky. Rev. Stat. Ann. § 362.2-201(1) (2011) (“In order to form a limited partnership, a certificate of limited partnership shall be delivered to the Secretary of State for filing.”); see also id. § 14A.2-010 (2015); id. § 14A.2-070 (2012).
[109] See 1988 Ky Acts, ch. 284 (HB 582), codified at KRS §§ 362.401 through 550.
[110] See Ky. Rev. Stat. Ann. § 362.415(1) (“In order to form a limited partnership, a certificate of limited partnership shall be executed and filed with the Secretary of State.”); id. § 362.415(2) (“A limited partnership shall be formed at the time of the filing of the certificate of limited partnership with the Secretary of State or at any later times specified in the certificate of limited partnership …”).
[111] See 1970 Ky. Acts ch. 97 (S.B. 172).
[112] See Ky. Rev. Stat. Ann. § 362.420(b).
[113] See Ky. Rev. Stat. Ann. § 362.420 as amended by 1986 Ky. Acts 342 (SB 224) (newly added text underlined and italics).
[114] See Ky. Rev. Stat. Ann. § 362.420(2) (“A limited partnership is formed if there has been substantial compliance in good faith with the requirements of subsection (1) of this section.”).
[115] See Ky. Rev. Stat. Ann. § 362.020 (“The persons desiring to form a limited partnership shall sign a written statement, showing the name and place of residence of each partner, the name or style of the firm, who are the general and who are the special partners, ….”); id. § 362.030 (“The statement and affidavit shall be acknowledged or approved before and recorded by the county clerk of each county in which a place of business of the firm is situated, in the same manner as deeds are acknowledged, approved and recorded. No limited partnership shall be deemed to have been formed until such record has been made and the statement has been published once a week for four consecutive weeks in a newspaper printed in each of the proposed places of business”); see also Baldwins 3769, GS ch. 82, § 4.
[116] See Ky. Rev. Stat. Ann. § 362.2-201(2).
[117] See Ky. Rev. Stat. Ann. § 362.555.
[118] See 1994 Ky. Acts, ch. 389, § 102(1) (not containing the “that is not a limited partnership” language subsequently added in 2006).
[119] What is a “business trust” under this statute is defined as:
A business trust is an express trust created by a written declaration of trust whereby property is conveyed to one (1) or more trustees, who hold and manage same for the benefit and profit of such persons as may be or become, the holders of transferable certificates evidencing the beneficial interest in the trust estate. For the purposes of KRS 386.370 to 386.440, business trusts shall include but are not limited to "Real Estate Investment Trusts" as defined by and which comply with the Federal Internal Revenue Code of 1986 as amended or such section or sections of any subsequent Internal Revenue Code as may be applicable to real estate investment trusts.
See Ky. Rev. Stat. Ann § 386.370(1) (2010).
[120] See Ky. Rev. Stat. Ann § 386.380 (1966) (“A business trust may be established by a declaration of trusts, duly executed by one (1) or more trustees, for any full purpose . . . .”).
[121] For a review of this uniform act, see Thomas E. Rutledge & Ellisa O. Habbart, The Uniform Statutory Trust Entity Act: A Review, 65 Bus. L. 1055 (Aug. 2010).
[122] See Ky. Rev. Stat. Ann. § 386A.1-010 (2012). For a review of this act as adopted in Kentucky, see Thomas E. Rutledge, The Kentucky Uniform Statutory Trust Act (2012): A Review, 40 N. Ky. L. Rev. 93 (2012–13) (explaining how at the time of the work’s publication, Kentucky was at the forefront of states by enacting the USTA).
[123] See Ky. Rev. Stat. Ann. § 386A.2-010(1) (2012) (“A statutory trust is formed when a certificate of trust that complies with subsection (2) of this section and filed by the Secretary of State is effective as determined under KRS 14A.2–070.”).
[124]See Thomas Earl Geu and James Dean, The Uniform Limited Cooperative Association Act: An Introduction, 13 Drake J. of Agric. L. 63 (2008) (reviewing the Uniform Act); Thomas E. Rutledge, The 2012 Amendments to Kentucky’s Business Entity Statutes, 101 Ky. L.J. Online 1 (2012) (reviewing the act as adopted in Kentucky including the departures from the uniform act). The Kentucky Limited Cooperative Associations Act is codified at chapter 272A of KRS.
[125] See Ky. Rev. Stat. Ann. § 272A.3-010(2) (2012) (“To form a limited cooperative association, an organizer of the association shall deliver articles of association to the Secretary of State for filing. The limited cooperative association is formed when articles of association that comply with subsection (3) of this section are filed by the Secretary of State, and are effective as determined under KRS 14A.2-070.”).
[126] See Ky. Rev. Stat. ch. 273A.
[127] See generally Thomas. E. Rutledge, The 2015 Amendments to the Kentucky Business Entity Statutes, 42 N. Ky. L. Rev. 128 at 160 et seq. (2016) (explaining the formation process).
[128] See Ky. Rev. Stat. Ann. § 273A.005(11) (2015) (“‘Unincorporated nonprofit association’ means in unincorporated association consisting of two (2) or more members joined under an agreement that is oral, in a record, or implied from conduct, for one (1) or more common, nonprofit purposes.”).
[129] See Ky. Rev. Stat. Ann. § 273A.040 (2017).
[130] See Ky. Rev. Stat. Ann. § 273A.030(1) (2015).
[131]See Christina M. Houston, Robert R. Keatinge, Thomas E. Rutledge & James J. Wheaton, The Corporate Transparency Act: Are Rumors of its Death Exaggerated?, Bus. L. Today (March 17, 2025); Christina M. Houston, Robert R. Keatinge, Thomas E. Rutledge & James J. Wheaton, The Corporate Transparency Act Is Still on Pause, but Less So, Bus. L. Today (Feb. 7, 2025); and Christina M. Houston, Robert R. Keatinge, Thomas E. Rutledge & James J. Wheaton, The FinCEN That Stole Christmas: The Corporate Transparency Act Year 1, Bus. L. Today (Jan. 13, 2025).
[132] See Letter from Senators Sheldon Whitehouse and Charles E. Grassley to Scott Bessent, U.S. Sec’y of Treasury (Mar. 10, 2025).
[133] See Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension, 90 C.F.R. 13688 (Mar. 26, 2025); see also FinCEN, Interim Final Rule: Questions and Answers, available at Interim Final Rule: Questions and Answers. FinCEN.gov.
[134] See also Nikki McCann Ramirez, Exciting News’: Trump Brags About Gutting Anti-Money Laundering Law, Rolling Stone (March 3, 2025); Casey Wetherbee, The United States of Money Laundering, MSN.com (March 8, 2025).