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Unconscious Classism: Entity Equality for Sole Proprietors

62 Pages Posted: 4 Feb 2010  

Mitchell F. Crusto

Loyola University New Orleans College of Law

Date Written: January 1, 2009

Abstract

Through the lens of unconscious classism, this Article argues that sole proprietorship law should be reformed to recognize the sole proprietorship as a legal entity, separate from its owner, codifying its entity status in a Uniform Sole Proprietorship Act (“USPA”). In promoting the legal entity nature of the sole proprietorship, this Article seeks to achieve what is hereinafter referred to as “entity equality,” placing sole proprietors on equal footing with owners of other business enterprises — partners, shareholders, and limited liability members.

Some critics will see this as another unwanted development in the proliferation of legal entities, supporting the call for entity unification. To the contrary, entity equality is consistent with the views of business law scholars who challenge the call for entity rationalization or simplification, arguing that form should follow function. Most importantly, entity equality looks to “considerations of fairness, justice, or policy.”

Part I of this Article demonstrates the need to view the theory of the firm from the sole proprietorship perspective and to develop a critical class theory of constitutional law, as well as provides the thesis and an overview. Part II demonstrates that the law currently views the sole proprietorship solely as the alter ego of its owner (the “solitary alter ego” view), how the solitary alter ego view legally disadvantages sole proprietorships by treating them as individuals under common law principles, and why the solitary alter ego view is antiquated and ripe for reform. Part III analyzes the value of legal entity status, presents case law examples of the sophisticated nature of and probing issues surrounding modern sole proprietorship law, and proposes that the sole proprietorship should be treated as a legal entity for some purposes, as is the law for all other business forms. Part IV argues that current constitutional law principles are inadequate to remedy unconscious and institutional classism against sole proprietors. Part V makes the public policy case for expanding constitutional rights theory to redress the law’s unequal treatment of sole proprietors. Part VI discusses the opposition to treating the sole proprietorship as a legal entity and shows why the opposition is wrong. Part VII concludes that the law should establish entity equality for sole proprietors by statutorily granting the sole proprietorship legal entity status for some purposes in addition to alter ego status for other purposes. Appendix A is a chart of the current entity features of a sole proprietorship compared to those proposed in this Article. Appendix B proposes the legal entity status features of a model sole proprietorship statute, the Uniform Sole Proprietorship Act (“USPA”), following the example of the National Conference of Commissioners on Uniform State Laws (“NCCUSL”). And Appendix C is a chart entitled “Distribution of Sole Proprietors and Their Gross Receipts by Size of Proprietorship, Tax Year 2003.”

Keywords: unconscious classism, classism, entity, equality, sole proprietors, proprietorship

Suggested Citation

Crusto, Mitchell F., Unconscious Classism: Entity Equality for Sole Proprietors (January 1, 2009). University of Pennsylvania Journal of Constitutional Law, Vol. 11, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1546632

Mitchell Crusto (Contact Author)

Loyola University New Orleans College of Law ( email )

7214 St. Charles Ave.
Campus Box 901
New Orleans, LA 70118
United States
504-861-5743 (Phone)

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