Research Handbooks in Corporate Law and Governance series
Edited by Robert W. Hillman and Mark J. Loewenstein
Chapter 19: Casual convergence in unincorporated entity law
On the surface, the ocean looks like a big expanse of uniform blue, with a rhythmic roll of majestic tides. Yet one look below the surface reveals an underwater world much richer and more diverse than the unvarying surface suggests. Similarly, on the surface, the laws governing unincorporated entities such as partnerships and limited liability companies (LLCs) often superficially look the same from state to state. That is because many state partnership and LLC acts are drafted from the same uniform acts put forth by the National Conference of Commissioners on Uniform State Laws (NCCUSL). In fact, there is much momentum behind making these laws uniform. According to proponents, uniformity not only facilitates the convergence toward beneficial laws, but also brings about administrative savings (Goforth 2007; Bishop & Kleinberger 2007). Yet one look below the surface reveals that state unincorporated entity laws are quite divergent. In particular, in a qualitative study of state LLC acts, I found extensive divergences, even though those statutes were all based on the same uniform act—NCCUSL’s Revised Uniform Limited Liability Company Act (RULLCA). Those divergences are especially strong in provisions governing internal affairs as well as those governing the relationship of the LLC with the state. I also found, from interviews of members of LLC act committees charged with effecting new LLC acts, that the tide pulling toward uniformity is quite weak in most states.
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