In Business Associations a few weeks ago, as we wrapped up our discussion of partnerships, I mentioned LLPs and observed that, as we moved to limited liability forms like the corporation and LLCs, one trend would be the need, in the title of the organization, to highlight its limited liability status. Hence statutory requirements that a limited liability business organization's name contain "Corp.", "Inc.", or "LLP" : businesses need to put the public in general, and creditors in particular, on notice that the assets of the owners won't be available for their benefit.
A few days later a student posed a question: he'd been getting interviews with various law firms, and they all dutifully notified the world of their limited liability status. You're familiar with these markers: Sullivan & Cromwell LLP, Latham & Watkins, LLP, Wilson Sonsini Goodrich & Rosati, PC (my firma mater). Those capital letters after the fancy names put clients and creditors alike on notice that the firm has opted out of the general partnership default, where each partner is jointly and severally liable for the debts of the firm.
So the student had been in talks with Jones Day and noticed the absence of any limited liability suffix. I was puzzled: how could Jones Day be evading this basic requirement? A little poking around on the law firm website provided the answer:
Jones Day is organized as a true partnership, and it operates as such, not as an LLP or LLC or some other quasi-corporate entity. We see ourselves as a global legal institution based on a set of principles to which a large number of men and women can commit – principles that have a social purpose and permanence, that transcend individual interests. While this may well be a more sociological description than you would see on most law firm web sites, and no doubt is subject to a skeptical reaction from many when they first read or hear it, we believe it accurately describes one important aspect of what makes Jones Day the client service organization that it is.<7
Update: Larry Ribstein reminds me that Scott Baker and Kim Krawiec have already written about this. In 2005 they performed an empirical study of NYC law firms and predicted that the GP law firm was on its way out:
...it is apparent that unlimited liability is generally considered burdensome, and it is the authors’ prediction that, at some point in time, nearly all the firms in their sample will choose to file as limited liability partnerships. The general partnership form, with its unlimited liability, will operate only as a penalty default that punishes parties who fail to sufficiently define their organization, forcing firm members to reveal relevant information to courts and interested third parties.
I guess we're not there yet.
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