March 26, 2004
LLCs: What We Really Need to Know
Posted by Gordon Smith

Bainbridge. Hobbs. Ribstein. All blogging about limited liability companies. Not surprisingly, some of their thoughts are pretty provocative. Steve Bainbridge wants to abolish veil piercing in limited liability companies (and everywhere else!). Bill Hobbs is reporting increased usage of LLCs in Texas (and in many other states). His point in collecting this data: "The data from Texas gives further creedence to the notion that the federal government's monthly Employer Survey, which focuses on large corporations, is not providing an accurate picture of job growth in America today." And Larry Ribstein wonders "why are there still corporations?" While I value all of these commentators and their contributions to our understanding of LLCs, let me tell you the law professor's dirty little secret about the law governing LLCs: it's boring.

When I started teaching in the early 1990s, many of us were wondering whether LLCs would work a revolution in the law of business organizations. By and large, their effect on legal doctrine has been almost invisible. (This is known as an invitation to Larry Ribstein to prove me wrong.) As Bill is attempting to quantify and as Larry's comment implicitly acknowledges, the most important effect of LLCs is not doctrinal, but practical. People love this business form. What we really need to know about LLCs is how people are structuring their relationships. As I have suggested elsewhere, this sort of scholarship has been taken over by financial economists, and lawyers would do everyone a service by taking it back.

P.S. Message to Bill: How about a link for Venturpreneur on HobbsOnline? I know just the place: under "Business Blogs" with Business Pundit, Professor Bainbridge, Venture Blog, etc.

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