In a recently published article, Unconscious Classism: Entity Equality for Sole Proprietors,11 U. Pa. J. Const. L. 215 (2009), Mitchell F. Crusto (Loyola) argues that sole proprietorships are discriminated against in that they are not afforded entity treatment. To remedy this, he proposes a Uniform Sole Proprietorship Act (USPA) modelled on the UPA and the RUPA. Id. at 268 app B.
Crusto’s USPA largely follows the structure of the UPA. For example, he would not follow RUPA sections 203 and 502 and make the sole proprietorship the owner of property. Rather, under Section 16(a),
“A sole proprietor is the sole owner of specific sole proprietorship property holding as an “owner in sole proprietorship.”
USPA § 16(a).
USPA section 16 differs from UPA section 25 in two major respects. First, there is no requirement that the sole proprietor can use firm property only for firm purposes. Second, the sole proprietor’s rights in specific property of the sole proprietorship are assignable, USPA § 16(b), but can be attached or executed against only for claims against the sole proprietorship, USPA § 16(c).
I assume the rationale is that the sole proprietor’s consent may be presumed. Yet, in USPA Section 5 tracks UPA Section 9 in limiting the apparent authority of a sole proprietor to acts “apparently carrying on in the usual way the business of the sole proprietorship”. USAP § 5(1) & 5(2). Oddly, though, the USPA would give the sole proprietor authority to take the extraordinary acts listed in UPA Section 9(3). USPA § 5(3).
More importantly, strict asset segregation is the hallmark of the modern view of an “entity.” Without that there is little chance of limited liability for firm obligations. Although Crusto at times argues for that, id.at 262, USPA Section 9 makes the sole proprietor fully liable for firm obligations. In Crusto’s view, granting general entity status is “an essential first step toward a limited liability sole proprietorship statute (“LLSP”). Id. at 263. But not without strict asset segregation.
Sole Proprietorships as Entities?
Thursday, August 13th, 2009In a recently published article, Unconscious Classism: Entity Equality for Sole Proprietors,11 U. Pa. J. Const. L. 215 (2009), Mitchell F. Crusto (Loyola) argues that sole proprietorships are discriminated against in that they are not afforded entity treatment. To remedy this, he proposes a Uniform Sole Proprietorship Act (USPA) modelled on the UPA and the RUPA. Id. at 268 app B.
Crusto’s USPA largely follows the structure of the UPA. For example, he would not follow RUPA sections 203 and 502 and make the sole proprietorship the owner of property. Rather, under Section 16(a),
USPA § 16(a).
USPA section 16 differs from UPA section 25 in two major respects. First, there is no requirement that the sole proprietor can use firm property only for firm purposes. Second, the sole proprietor’s rights in specific property of the sole proprietorship are assignable, USPA § 16(b), but can be attached or executed against only for claims against the sole proprietorship, USPA § 16(c).
I assume the rationale is that the sole proprietor’s consent may be presumed. Yet, in USPA Section 5 tracks UPA Section 9 in limiting the apparent authority of a sole proprietor to acts “apparently carrying on in the usual way the business of the sole proprietorship”. USAP § 5(1) & 5(2). Oddly, though, the USPA would give the sole proprietor authority to take the extraordinary acts listed in UPA Section 9(3). USPA § 5(3).
More importantly, strict asset segregation is the hallmark of the modern view of an “entity.” Without that there is little chance of limited liability for firm obligations. Although Crusto at times argues for that, id.at 262, USPA Section 9 makes the sole proprietor fully liable for firm obligations. In Crusto’s view, granting general entity status is “an essential first step toward a limited liability sole proprietorship statute (“LLSP”). Id. at 263. But not without strict asset segregation.
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