What a difference an extra L makes. Secured lending to an LP or to an LLP shouldn’t be that different; but it is.

Article 9 of the UCC provides very simple rules for perfecting a security interest in the assets of a limited partnership. An LP qualifies as a “registered organization” so you file your financing statement in the state under whose law it was organized and you use the name specified for the LP in the public records. Not a lot to worry about as long as you are good with details.

A limited liability partnership (LLP), on the other hand, probably isn’t a registered organization. That means you can never be certain that you used the correct name on the financing statement because there is no single legally sufficient place to look for the name. Worse, you can never be certain where to file the financing statement because that turns on often unclear factual determinations of where the place of business or chief executive office is. Further, the critical facts can change without any signs visible to an outside observer.

Why “probably”? As if the practical implications of being a non-registered organization were not enough, it turns out that the UCC doesn’t provide a simple answer to the question of what type of entity an LLP is. The accepted, and probably correct, answer turns on an exceedingly close reading of the Code in conjunction with the applicable LLP statute. Under the 2010 amendments to Article 9 that became effective in most states in 2013 (but not yet in New York), a registered organization must be “formed or organized…by the filing of a public organic record.” See 9-102(a)(71). Was a new LLP entity formed by the public filing of the LLP qualification, or did the filing of the LLP qualification merely provide a continuing partnership with a new liability shield?

In 2012, the UCC’s Permanent Editorial Board took the view that an LLP (at least under the uniform version of the 1997 Uniform Partnership Act) is a mere continuation of an existing partnership and thus not a registered organization. It added a new paragraph to that effect to Official Comment 11 of UCC 9-102. Of course, the Official Comments aren’t the law and a judge somewhere could disagree, so the safest practice would be to perfect against an LLP both ways; by filing financing statements in both the state of organization and the location of its place of business or chief executive office, whichever is applicable.

The answer to such a simple question really shouldn’t be so complicated.