The Benefits and Burdens of Limited Liability
Transactions: The Tennessee Journal of Business Law, Vol. 22, pp. 313-24, 2021
12 Pages Posted: 3 Jun 2021
Date Written: June 1, 2021
Law students in business associations and people starting businesses often think the only choice for forming a business entity is a limited liability entity like a corporation or a limited liability company (LLC). Although seeking a limited liability entity is usually justifiable, and usually wise, this Article addresses some of the burdens that come from making that decision. We often focus only on the benefits. This Article ponders limited liability as a default rule for contracts with a named business and considers circumstances when choosing a limited liability entity might not communicate what a business owner intends. The Article notes also that when choosing an entity, you get benefits, like limited liability, but burdens (such as need for counsel or tax consequences) also attach. It's not a one-way street. The Article closes by urging courts to consider both the benefits and burdens of an entity choice, especially in considering whether to uphold or disregard an entity, to help parties achieve some measure of certainty and equity.
Keywords: LLCs, Corporations, Society, Business Judgment, PCV, veil piercing, equity, creditors, pro se, jurisdiction
JEL Classification: M1, M10, M13, M14
Suggested Citation: Suggested Citation