What Is the Correct Name to Put on a Michigan UCC Financing Statement When the Debtor is a Michigan General Partnership?
Does anyone conduct business through general partnerships anymore? As hard as it may be to believe, yes they do. Even though the the usefulness of this business form has long since passed, unsophisticated folk who do not take advantage of competent legal counsel still occasionally opt to run their businesses in this manner.
If you make a secured loan to a general partnership, it is critical that the right name be put on the UCC financing statement in order for it to be enforceable. Some people assume that since general partnerships are registered on the local level with the county register of deeds and not with the state, a UCC financing statement should contain the names of the partners, not the name of the partnership itself.
They reach this conclusion because business "dba's" for sole proprietorships are also registered on the local level and UCC financing statements for loans made to sole proprietorships must list the name(s) of the individual business owners (not the business's dba) in order to be effective.
However, it is important to remember that a general partnership is not the equivalent of a sole proprietorship with a dba. Rather, it is a registered business entity. As such, it is the general partnership name that should be listed on the UCC financing statement and not the names of the individual partners.
MCL 440.9503 governs how the name of a debtor should be listed on a UCC financing statement. The relevant part of this statute provides as follows:
Sec. 9503.
(1) A financing statement sufficiently provides the name of the debtor if it meets all of the following that apply to the debtor:
(a) If the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor’s jurisdiction which shows the debtor to have been organized.
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(d) In other cases, satisfies 1 of the following:
(i) If the debtor has a name, only if it provides the individual or organizational name of the debtor.
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MCL 440.9503(1)(Emphasis added).
There is no question that a Michigan general partnership is not a “registered organization” as that term is defined in the statute. Comment 2 to MCL 440.9503 makes it clear that “registered organizations” ordinarily include entities that are formed on the State level, such as corporations, limited partnerships, and limited liability companies. Thus, the operative part of MCL 440.9503(1) is subsection (d)(i), which is quoted in bold above.
Comment 2 to MCL 440.9503 states that the definitional part of the statute (MCL 440.1201(28)) defines the term “organization” “very broadly, to include all legal and commercial entities as well as associations that lack the status of a legal entity.” MCL 440.1201(28) itself specifically defines an “organization” as including “a corporation, government, or governmental subdivision or agency, business trust, estate, trust, partnership or association, 2 or more persons having a joint or common interest, or any other legal or commercial entity.” (Emphasis added.)
In this regard, Comment 2 further states as follows: “Thus, the term includes corporations, partnerships of all kinds, business trusts, limited liability companies, unincorporated associations, personal trusts, governments, and estates. If the organization has a name, that name is the correct name to put on a financing statement. If the organization does not have a name, then the financing statement should name the individuals or other entities who comprise the organization.” (Emphasis added.)
Since Michigan general partnerships are unincorporated associations, the financing statement should list the name of the partnership and not the name of the individuals comprising the partnership.
