Entities: Types, Requirements to Insure and Various Title Issues

Presented by: Shawn F. McKernanWestern Pennsylvania Agency Services Manager

Pennsylvania Underwriting CounselDelaware State Counsel

Stewart Title Guaranty Company

2013 Agency Services

Group Conference

May 16, 2013

Presentation Overview

• Discussion Points

• Goals/Objectives

Entities

Sole Proprietorship

General Partnership

Limited Partnership

Limited Liability

Company

Corporation

Limited Liability

Partnership

Professional Corporation

Foreign Entities

- A sole proprietorship, by definition, means one natural

person owner.

Sole Proprietorship

Sole Proprietorship

- Requirement to Insure

– Fictitious Name Registration

-The use of fictitious names is governed by the Fictitious Names

Act of 1982, (54 Pa.C.S. Section 301 et seq.)

Sole Proprietorship

54 Pa.C.S.§ 303

- (b) Mandatory registration.--

(1) Except as provided in paragraph (2), any entity which either

alone or in combination with any other entity conducts any business

in this Commonwealth under or through any fictitious name shall

register the fictitious name under this chapter and shall amend such

registration whenever necessary to maintain the accuracy of the

information disclosed thereby.

General Partnership

- A partnership is similar to a sole proprietorship, except

that two or more parties are involved. The parties carry

on as co-owners of the business.

- It can consist of individuals, corporations, trusts, other

partnerships, or a combination of all of the above.

General Partnership

- Governed by The Uniform Partnership Act 15 Pa.C.S.

§8301- et. seq.

- A partnership is an association of two or more persons

to carry on as co-owners a business for profit.

- Partners must voluntarily intend to associate together

in a business relationship usually expressed in an

Agreement, which may be written or oral and need not

be recorded.

General Partnership

Rules for Determining Existence of Partnership

- Persons who are not partners as to each other, are not partners as to third persons.

- Tenancies (joint, common or entireties) or part ownership, do not themselves

establish a partnership.

- Sharing of gross returns does not itself establish a partnership.

- Receipt of share of profits of business implies the person is a partner; except when

profit is received in payment of a debt, wages of an employee, rent, annuity to a

widow or representative of deceased partner, interest on a loan, or as consideration

for sale of goodwill.

General Partnership

Name of Partnership

- If all partners’ names are used in the firm name, then a

Fictitious Name Filing is not necessary as the entity is

not fictitious.

- If less than all partners’ names are used or if the name is

other than that of the parties, then a Fictitious Name

Filing must be completed with Pennsylvania Department

of State.

General Partnership

Requirements to Insure

- Partnership agreement, if in existence, to be produced

and examined.

- Certification as to the names of all partners of the

partnership.

- Insured documents to be executed by all partners of the

partnership.

General Partnership

Liens and Judgments affecting Partnership

- A partnership is subject to creditors of the partnership,

but NOT to creditors of individual partners.

Limited Partnership

- Governed by The Uniform Limited Partnership Act 15

Pa.C.S. §8501- et. seq.

- A partnership formed by two or more persons having

one or more general partners and one or more limited

partners.

Limited Partnership

- General Partner(s)

- Control of the partnership vests in the General Partner(s)

- Cannot do anything contrary to the Certificate or the ordinary

course of business

- Cannot confess judgment against the partnership without the

consent of the Limited Partners

Limited Partnership

Requirements to Insure

- Certificate of Limited Partnership as filed with the Department of State,

and any amendments thereto

- Limited Partnership Agreement, and any amendments thereto

- Certification as to the names of all general partners of the partnership

- Insured documents to be executed by all general partners of the

partnership

- Certificate of Good Standing from the state of registration

Corporation

- Governed by the Pennsylvania Business Corporation

Law of 1988, as amended; 15 Pa.C.S. §100 - et. seq.

- A corporation incorporated for a purpose or purposes

involving pecuniary profit, incidental or otherwise, to its

shareholders or members.

- Every corporation must have at least three officers:

President, Secretary and Treasurer; one person may

serve in all three capacities.

Corporation

- Requirements to Insure

- Articles of Incorporation and any amendments thereto

- Filed with the Pennsylvania Department of State

- Bylaws and any amendments thereto

- Not required to be filed publicly

- Are used to control the operations within the organization

- Certificate of Good Standing from the state of incorporation

- Corporate Lien Certificate indicating payment of all corporate

taxes

- Corporate Resolution authorizing the transaction

Limited Liability Company

- Governed by 15 Pa.C.S. §8901- et. seq.

- Defined as an association that is a limited liability

company organized and existing under this chapter.

Limited Liability Company

Requirements to Insure

- Certificate of Organization and any amendments thereto filed with the Pennsylvania

Department of State

- Operating Agreement and any amendments thereto

- The Operating Agreement will state who has the authority to bind the entity; manager(s) or member(s) or both.

- Certificate of Good Standing from the state of registration

- Corporate Lien Certificate indicating payment of all taxes

- Insured documents must be executed by manager(s)\managing member(s) in

accordance with the terms of the Operating Agreement

Limited Liability Partnership

- Governed by Governed by 15 Pa.C.S. §8201- et. seq.

- May be used for any business that a general or limited

partnership may otherwise conduct.

- Principal benefit of a LLP is that a partner is not

individually liable for any obligation to the partnership

arising from any negligent or wrongful acts or the

misconduct committed by another partner or other

representative of the partnership.

Limited Liability Partnership

Requirements to Insure

- Proof of Registration of the Limited Liability Partnership and any amendments

thereto

- Operating Agreement of the Limited Liability Partnership and any amendments

thereto

- Insured documents must be executed pursuant to the Operating Agreement

- Certificate of Good Standing from the State of Registration

Professional Corporation

- Governed by 15 Pa.C.S. §2901- et. seq.

- Requirements to Insure:

- Proof of Registration and any amendments thereto

- Operating Agreement and any amendments thereto

- Insured documents must be executed pursuant to the terms of

the Operating Agreement

- Certificate of Good Standing

Foreign Entities

15 Pa.C.S. §4121

(a) General rule.--A foreign business corporation, before

doing business in this Commonwealth, shall procure a

certificate of authority to do so from the Department of

State, in the manner provided in this subchapter.

- Simply owning real property does not constitute doing

business in Pennsylvania.

Nonimputation Endorsements

PA 1160 (ALTA 15-06) Nonimputation – Full Equity Transfer

PA 1170 (ALTA 15.1-06) Nonimputation – Additional Insured

PA 1180 (ALTA 15.2-06) Nonimputation – Partial Equity Transfer

- These endorsements insure that the Insurer will not deny liability to certain

incoming parties as a result of the Insured having knowledge imputed to it

in partnership, corporate, or limited liability company transactions.

- May only be issued to endorse an owner’s policy

- Prohibited when insuring a 1-4 family residential property.

Nonimputation Endorsement

Underwriting Requirements:

- We require the following in order to issue this endorsement to an Owner's Policy: We require

execution of the Stewart Non-Imputation Affidavit by those persons (Affiants) whose knowledge,

action or inaction is covered by the endorsement.

- We require financial disclosures by the Affiants showing the financial strength of those parties.

- We require an explanation of the transaction and reasons for the endorsement. The transaction

may, for instance, suggest other issues, such as creditor's rights.

- Stewart Underwriting Personnel must approve issuance of the Endorsement.

- The existing insured must sign the endorsement, evidencing approval of issuance of the

endorsement (15.1)

Entity Related Claims

- Invalid Entity Name

- Lack of Authority

Questions