A Jurisdictional Approach to Collapsing Corporate Distinctions

Abstract

This article challenges our persistent path dependence on defunct distinctions between corporations and certain limited unincorporated associations. Recent federal tax regulations have inspired proposals for consolidated treatment of all limited business organizations through uniformly based or universally applicable statutes. I contend these proposals are preoccupied with how hybrid organizations such as the limited liability company and the limited liability partnership amalgamate, and thus implicitly preserve, traditional dichotomies between corporations and partnership categorizations as well as entities and aggregate theories. The continued use of these schemes compromises the legal basis for such proposals.

By critically examining certain jurisdictional principles, this article reveals inconsistencies that can serve as an entry point for effecting collapse of distinctions between corporations and certain limited unincorporated associations. Specifically, United States citizens domiciled abroad are "stateless" and so cannot sue or be sued in federal courts under the alienage jurisdiction statute. Under the prevailing jurisdictional test, unincorporated associations with stateless members inherit this incapacity to access federal courts for alienage purposes while corporations do not. These radically different outcomes are the product of outmoded and untenable common law and statutory schemes. As a solution, I propose implementing a citizenship test based on domicile for both stateless individuals and unincorporated associations. Such a test would rectify these schemes and provide a framework that can support uniform treatment of all limited business organizations.