[Federal Register Volume 64, Number 71 (Wednesday, April 14, 1999)]
[Notices]
[Pages 18397-18398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8975]
========================================================================
Notices
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains documents other than rules
or proposed rules that are applicable to the public. Notices of hearings
and investigations, committee meetings, agency decisions and rulings,
delegations of authority, filing of petitions and applications and agency
statements of organization and functions are examples of documents
appearing in this section.
========================================================================
Federal Register / Vol. 64, No. 71 / Wednesday, April 14, 1999 /
Notices
[[Page 18397]]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
[Docket No. FV99-360]
Information About Recognizing Limited Liability Companies Under
the Perishable Agricultural Commodities Act (PACA)
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This document provides notice to the public that it is USDA
policy to recognize a limited liability company (LLC) as a legal entity
under the Perishable Agricultural Commodities Act (PACA), and that any
member of an LLC, and/or any other person authorized by the members to
conduct business on behalf of an LLC, may be considered to be
``responsibly connected'' with the LLC.
DATES: April 14, 1999.
ADDITIONAL INFORMATION: Contact Charles W. Parrott, Assistant Chief,
PACA Branch, Fruit and Vegetable Division, AMS, USDA, Room 2095-So.
Bldg., P.O. Box 96456, Washington, DC 20090-6456. Echarles.parrott@usda.gov. This notice will also be posted on the
Internet at www.ams.usda.gov/fv/paca.htm.
SUPPLEMENTARY INFORMATION: The Perishable Agricultural Commodities Act
(PACA) establishes a code of fair trade practices covering the
marketing of fresh and frozen fruits and vegetables in interstate and
foreign commerce. The PACA protects growers, shippers, distributors,
and retailers dealing in those commodities by prohibiting unfair and
fraudulent practices. In this way, the law fosters an efficient
nationwide distribution system for fresh and frozen fruits and
vegetables, benefitting the whole marketing chain from farmer to
consumer. USDA's Agricultural Marketing Service (AMS) administers and
enforces the PACA.
Any person who buys or sells commercial quantities of fruits and
vegetables in interstate or foreign commerce must be licensed under the
PACA. Under the Act, the term ``person'' means any individual,
partnership, corporation, association, or separate legal entity. 7
U.S.C. 499a(b)(1); 7 CFR 46.2(i). Separate licenses are required for
each person. A person is designated as ``responsibly connected'' with a
firm under the PACA if that person is affiliated as an owner, as a
partner in a partnership, or as an officer, director or holder of more
than 10 percent of the outstanding stock of a corporation or
association. 7 U.S.C. 499a(b)(9); 7 CFR 46.2(ff). In the event that a
licensee is found to have violated the Act and USDA suspends or revokes
the firm's license, then the licensee and its ``responsibly connected''
principals face PACA licensing and employment restrictions which may
include the denial of a license, a prohibition on employment with
another PACA licensee, or the requirement that a bond be posted as a
prerequisite to licensing or employment in the fruit and vegetable
industry. 7 U.S.C. 499h.
Although the PACA and PACA regulations do not specifically list the
LLC as a ``person,'' it is USDA policy to recognize an LLC as a
separate legal entity, just as LLCs are recognized in most states,
subject to licensing under the PACA regulations. This notice provides
information about how AMS handles LLCs under the PACA, especially with
regard to the licensing of LLCs and the responsibly connected status of
LLC members.
An LLC may be described as a cross between a partnership and a
corporation. This hybrid business structure is now available to
businesses in most states. The personal liability protection afforded
by the LLC is similar to that of a corporation. For example, the
members are insulated from liability arising solely from being a member
but are not insulated from liability for the acts of the LLC which
violate any laws or regulations. Liability issues may vary somewhat
according to state law and the LLC's organizational agreement.
Although an LLC affords personal liability protection to its owners
that is similar to that of a corporation, the ownership characteristics
of an LLC more closely resemble those of a partnership. The LLC owners
are often referred to as members, and member-managers may be
designated. Membership requirements in an LLC can be determined by the
members; for example, members may join through financial contributions
or through the performance of services.
In general, state LLC statutes require the filing of documentation
similar to articles of incorporation, sometimes called articles of
organization. In addition, an operating agreement is entered into which
usually designates who has the authority to run the LLC company. This
operating agreement usually details the process to be followed in
choosing the manager(s) and sets forth the manager(s)' authority and
the authority retained by the members. The manager(s) is often, but not
always, a member of the LLC. Specific requirements vary by state.
Because of the unique composite nature of the LLC, an LLC's members
are analogous to partners in a partnership, while managers, who are not
always members, may be analogous to corporate officers, depending on
the manager's responsibilities as set out by the LLC's operating
agreement. Therefore, it is USDA's policy that all LLC members,
regardless of the member's financial contribution, are ``responsibly
connected'' persons under the PACA, just as all partners are
``responsibly connected'' with a partnership. In addition, any
person(s), whether or not a member, who is authorized by the LLC to be
in charge of the daily business operations, management, and control of
the LLC, may be considered responsibly connected to the LLC by USDA,
just as officers in a corporation are under the PACA. The determination
of whether a person other than a member is ``responsibly connected''
will depend upon the terms of the LLC's operating agreement. These
agreements are similar to a partnership agreement or corporate bylaws
which outline who is in charge of the business' daily operations. Those
persons whom the LLC authorizes to be in charge of the day-to-day
operation, management and control of the LLC's daily business
activities may include, but are not limited to, those with the titles
of managers, officers, and/or directors.
An LLC members' ownership in the company closely resembles a
[[Page 18398]]
partnership. Therefore, all LLC members, including corporations or
other entities, must be identified on the firm's PACA license
application. If a member is a corporation or other legal entity, more
information, such as the names of officers of the corporation or other
data, will be required by AMS. PACA license applications submitted by
LLCs should include organizational information about the company,
including, but not limited to, documentation filed with the state in
which the LLC is legally established, such as its articles of
organization and its operating agreement. Only one member's signature
is required to make a valid PACA application. In addition, just as is
required of other legal entities, if the articles of organization or
the operating agreements change, the LLC should notify AMS' PACA Branch
as soon as possible and the LLC should submit revised documents to the
PACA Branch.
The LLC business structure has become widely accepted throughout
the United States as a new legal entity. AMS is hereby providing notice
to all current and future licensees that certain information is
required in order to obtain a license as an LLC under the PACA. In
addition, notice is given to all LLC members that they are presumed to
be ``responsibly connected'' persons and to all LLC managers, who are
not also members, that they are potentially ``responsibly connected''
persons. The ``responsibly connected'' status of LLC managers will be
determined on a case-by-case basis, depending upon the terms of the
LLC's operating agreement and the ways in which the person's status is
analogous to that of an officer, director or shareholder of a
corporation. Therefore, both members and managers may be subject to
PACA sanctions if the Act is violated by the LLC.
Dated: April 6, 1999
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-8975 Filed 4-13-99; 8:45 am]
BILLING CODE 3410-02-U
