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Suffolk University Law School was founded in 1906 and is located in the heart of downtown Boston. The school is dedicated to educating students of all backgrounds and circumstances, helping them to thrive in an increasingly diverse, global and technologically dependent society. The school's Business Law & Financial Services Concentration emphasizes teaching and scholarship not only in traditional corporate structures, but also in alternative non-corporate forms of organization that are becoming the norm in small businesses, emerging high-tech industries, and financial services. Its faculty members include nationally regarded experts in limited liability company, partnership, tax, and securities regulation, including Carter G. Bishop, a reporter for four separate uniform business organization law projects sponsored by the National Conference of Commissioners on Uniform State Laws, and Jeffrey M. Lipshaw, co-author with the late Larry E. Ribstein of Unincorporated Business Entities, 4th Edition (LexisNexis, 2009).


Table of Contents

Teaching LLCs Through a Problem-Based Approach

Michelle M. Harner, University of Maryland Francis King Carey School of Law
Robert J. Rhee, University of Maryland - Francis King Carey School of Law, University of Florida Levin College of Law

Unwinding the Ceiling Rule

Leigh Osofsky, University of Miami - School of Law

Contractual Innovation in Venture Capital

John F. Coyle, University of North Carolina School of Law
Joseph M. Green, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

Corporate Payout Policy in Founder and Family Firms

James Lau, Macquarie University
Jorn H. Block, University of Trier - Faculty of Management, Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)


CORPORATE LAW: LLCS, CLOSE CORPORATIONS, PARTNERSHIPS,
& OTHER PRIVATE ENTERPRISES eJOURNAL
Sponsored by: Suffolk University Law School

"Teaching LLCs Through a Problem-Based Approach" Free Download
Washington and Lee Law Review, Vol. 71, 2014, p. 489-
U of Maryland Legal Studies Research Paper No. 2014-16

MICHELLE M. HARNER, University of Maryland Francis King Carey School of Law
Email:
ROBERT J. RHEE, University of Maryland - Francis King Carey School of Law, University of Florida Levin College of Law
Email:

Case studies and case simulations can be used to teach LLCs with an eye toward training business lawyers. These tools can be used in the traditional four-credit Business Associations (BA) course to supplement traditional teaching materials with mini-case studies that accent and apply analysis of primary legal sources. Alternatively, case studies and case simulations can be the centerpiece of a specialized course on LLCs. We discuss both approaches in this short essay.

"Unwinding the Ceiling Rule" Free Download
Virginia Tax Review, 2014 Forthcoming

LEIGH OSOFSKY, University of Miami - School of Law
Email:

As is widely known, the so-called “ceiling rule,? which applies under the traditional method for section 704(c) allocations, can create the wrong tax result. Specifically, the ceiling rule can result in misallocations of income, gain, loss, and deduction to both a partner contributing property and to the noncontributing partners. Notwithstanding these predictable misallocations, the Treasury Department still permits application of the ceiling rule under section 704(c). This Article challenges longstanding assumptions regarding the operation of the ceiling rule in the context of section 704(c). Historically, Congress and partnership tax experts assumed that the ceiling rule is perfectly unwound on liquidation or sale of a partnership interest. This assumption still operates to some extent today. The assumption glosses over a significantly more complicated reality. This Article closely examines the history of section 704(c) and the interaction between the ceiling rule and the rules regarding sales and liquidations of partnership interests. Doing so reveals that when and to what extent the perfect unwinding assumption holds depends (perhaps to a surprising degree) on (1) a variety of relatively arbitrary facts regarding the assets held by the partnership on liquidation or sale, and (2) the unintended interactions of inordinately complicated partnership tax rules. In reaching this conclusion, this Article displays that the ceiling rule, which has always been part of the section 704(c) regime, is even worse than it is commonly thought to be.

Fully appreciating the extent to which the ceiling rule can perpetuate mistaxation long after the liquidation or sale of a partner’s interest in the partnership is important. As explained in this Article, the ceiling rule creates enormous complexity and planning opportunities that unjustifiably accrue to the well informed. The ceiling rule creates this complexity and these planning opportunities not in order to tax taxpayers appropriately. Instead, when it applies, the ceiling rule creates uncontrovertibly incorrect tax results. The ceiling rule thereby unnecessarily creates a mess of the fundamentally important section 704(c) partnership tax rules governing allocations with respect to contributed property. Despite the mess it makes of the section 704(c) regime, the ceiling rule has remained part of it for decades in part because of the mistaken and oversimplified assumptions regarding the unwinding of the ceiling rule, and the resulting perceptions of the limited impact of the ceiling rule. By debunking these long-held assumptions, this Article displays there is no reasonable justification to continue to retain the ceiling rule.

"Contractual Innovation in Venture Capital" Free Download
Hastings Law Journal, Forthcoming

JOHN F. COYLE, University of North Carolina School of Law
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JOSEPH M. GREEN, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
Email:

Scholars agree that contractual innovation, though sometimes slow to occur, can and will take place if certain conditions are met. The Article argues that the evolution of certain venture finance contracts over the past decade constitutes a prime example of such innovation.

Drawing upon interviews with some of the leading venture capital attorneys in the United States, it chronicles how two types of venture finance contracts — the convertible note and convertible preferred stock — evolved in response to technological advances that greatly reduced the cost of launching a start-up technology company. Prior to 2005, individuals who invested in early-stage technology companies would typically invest alongside the founder of the new venture by purchasing shares of common stock. Venture capital funds, which invested more substantial amounts of capital at later stages in a company’s development, would typically receive convertible preferred stock. And in situations in which a company needed a loan from its current investors to keep it afloat until a new infusion of capital could be raised — a so-called bridge loan — investors would typically receive promissory notes that were convertible into equity at a future date. Each of these types of investment contracts reliably matched up with a particular mode of financing transaction.

Around 2005, however, this stable contractual infrastructure began to change. A number of technological developments — including, most significantly, the rise of cloud computing — led to a dramatic decline in the costs of launching a technology company. In the wake of these changes, the contracts used by investors to structure their investments in these ventures evolved in two important ways. First, convertible notes, previously used primarily in the context of bridge financing, were increasingly used to provide capital to these companies. Second, investors in early-stage technology companies increasingly turned to much simplified versions of traditional convertible preferred stock documents to structure their investments. While these changes have fundamentally reshaped the contractual infrastructure of early-stage venture finance in the United States, they have attracted scant attention in the legal literature to date. This Article aspires to fill that gap.

The Article then draws upon this account of evolution and change in the venture capital space to develop insights into the process of contractual innovation more generally. It argues that current theories of contractual innovation only partially explain the changes to these venture finance contracts over the past decade. It argues that while attorneys can and do serve to drive the process of contractual innovation, the success of these efforts is highly dependent upon partnerships that they develop with the end users of these contracts. Finally, the Article suggests that the substitution of one type of contract for another — using equity instead of debt, for example — is itself an innovation that has gone largely unappreciated in the contractual innovation literature.

"Corporate Payout Policy in Founder and Family Firms" Free Download

JAMES LAU, Macquarie University
Email:
JORN H. BLOCK, University of Trier - Faculty of Management, Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)
Email:

This paper investigates the tax and agency explanations of corporate payout policy by investigating the likelihood, the level and the method of payout in founder and family firms. Controlling founders and families are both subject to the tax disadvantage of dividends arising from their substantial shareholdings, but family firms are arguably subject to more severe agency conflicts than founder firms due to their susceptibility to wasteful expenditure and the adverse effects of intra-family conflicts. Results indicate that founder firms on average are less likely and pay a lower level of dividends than family firms. Moreover, founder firms prefer share repurchase over dividends as the main method of payout whereas family firms prefer dividends over share repurchase. Overall, our findings are consistent with the agency explanation of corporate payout policy.

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About this eJournal

Sponsored by: Suffolk University Law School

This eJournal distributes working and accepted paper abstracts related to LLCs, close corporations, partnerships, and other private enterprises. This includes the law, economics, history and policy of closely-held corporations and non-corporate firms, including partnerships, limited liability companies, limited partnerships, limited liability partnerships, joint ventures, and similar entities both in the US and around the world. Specific topics include private law matters such as governance, fiduciary duties, formation, litigation, arbitration, choice of law, exit, dissolution, transfer, creditors' rights, and limited liability. They also include public law matters such as bankruptcy, employment discrimination, securities regulation, competition law, and professional regulation. Articles may also focus on types of businesses or other relationships that commonly organize as limited liability companies, close corporations, partnerships or other unincorporated business entities, including venture capital, professional services, real estate, finance, family firms, domestic relationships and public-private enterprises.

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Directors

CORPORATE, SECURITIES & FINANCE LAW EJOURNALS

BERNARD S. BLACK
Northwestern University - School of Law, Northwestern University - Kellogg School of Management, European Corporate Governance Institute (ECGI)
Email: bblack@northwestern.edu

RONALD J. GILSON
Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
Email: rgilson@leland.stanford.edu

Please contact us at the above addresses with your comments, questions or suggestions for LSN-Sub.

Advisory Board

Corporate Law: LLCs, Close Corporations, Partnerships, & Other Private Enterprises eJournal

BARRY E. ADLER
Professor of Law, New York University School of Law

STEPHEN MARK BAINBRIDGE
William D. Warren Professor of Law, University of California, Los Angeles (UCLA) - School of Law

HENRY HANSMANN
Augustus E. Lines Professor of Law, Yale Law School, Fellow, European Corporate Governance Institute (ECGI)

ROBERT WILLIAM HILLMAN
Fair Business Practices Professor of Law, University of California, Davis - School of Law

KIMBERLY D. KRAWIEC
Professor of Law, Duke University - School of Law

SAUL LEVMORE
William B. Graham Professor of Law, University of Chicago Law School

ROBERT H. SITKOFF
John L. Gray Professor of Law, Harvard Law School

GORDON SMITH
Professor of Law, Brigham Young University - J. Reuben Clark Law School

LYNN A. STOUT
Distinguished Professor of Corporate and Business Law Jack G. Clarke Business Law, Cornell Law School - Jack G. Clarke Business Law Institute

THOMAS S. ULEN
Swanlund Chair, Director, Illinois Program in Law and Economics, University of Illinois College of Law