Books

Frank H. Easterbrook & Daniel R. Fischel, THE ECONOMIC STRUCTURE OF CORPORATE LAW (1991).

Abstract (from Amazon Product Description): The authors argue that the rules and practices of corporate law mimic contractual provisions that parties would reach if they bargained about every contingency at zero cost and flawlessly enforced their agreements. But bargaining and enforcement are costly, and corporate law provides the rules and an enforcement mechanism that govern relations among those who commit their capital to such ventures. The authors work out the reasons for supposing that this is the exclusive function of corporate law and the implications of this perspective.

Anthony Mancuso, THE CORPORATE RECORDS HANDBOOK: MEETINGS, MINUTES & RESOLUTIONS (2010).

Product Description (from Amazon):  Provides forms you need to keep your corporation valid in the eyes of the IRS and courts. If you've taken the time to turn your business into a corporation, chances are you'd like to see it stay that way. Your business card may say "incorporated," but if the courts and the IRS think differently, its closing time. Because meeting minutes are the primary paper trail of a corporation's legal life, it's important to know when and how to prepare these minutes.

Joseph A. McCahery & Erik P.M. Vermeulen, CORPORATE GOVERNANCE OF NON-LISTED COMPANIES (2008).

Abstract (from product description at Amazon.com):  Studies of corporate governance traditionally focus on the governance problems of large publicly held firms, and policymakers' recommendations often focus on such firms. However most small firms, and in many countries, even many large companies, are closely held. This book provides a comprehensive account of closely held businesses and their particular governance problems. It explores current discussions and reforms in Europe, the United States, and Asia providing a state of the art account of the law and the economics.  The governance of closely held companies has traditionally been concerned with protecting investors and creditors from managerial opportunism. However, the virtual elimination of the distinction between partnerships and corporations means that an effective legal governance framework must also offer mechanisms to protect shareholders from the misconduct of other shareholders. This volume examines policy and economic measurements to develop a framework for understanding what constitutes good governance in closely held companies. The authors examine how control is gained in the various types of closely held firms and explore the mechanisms that contribute to the development of a modern and efficient governance framework for these companies. The book concludes with an exploration of how the closely held firm is likely to stimulate growth and extend innovation and development.

Michael Spadaccini, Entrepreneur Magazine's Ultimate LLC Compliance Guide (2011).

Abstract (adapted from description on Amazon.com): Mindful of the complications and numerous requirements that surround LLCs, Entrepreneur and Michael Spadaccini walk you through the details of what you need to know about your state's LLC act as well as the procedures for dealing with the extensive rules and regulations.

Turn to this go-to guide for complete definitions and explanations of all concepts surrounding LLCs and even a breakdown of the roles and responsibilities of owners and managers. You'll learn about LLC legal formalities, internal governance, record-keeping, vital LLC mechanics and more--all critical information that will allow you to spend less time researching procedures and more time running a successful business! Plus, use sample documents, checklists, resources, and forms to get a better grasp of the LLC process.

 

Articles

Cassady V. ("Cass") Brewer, A Novel Approach To Using LLCs For Quasi-charitable Endeavors (a/k/a "Social Enterprise"), 38 Wm. Mitchell L. Rev. 678 (2012).

Abstract (adapted from author): This article sets forth a hypothetical social enterprise project in need of capital. It summarizes the principal advantages and disadvantages of using either a nonprofit entity or a for-profit entity to pursue the project. Finally, the article describes a new, proposed "contract hybrid" LLC structure that potentially reconciles the competing for-profit and nonprofit capital and other demands of the project.

Brian J. Broughman, The Role of Independent Directors in Startup Firms, 2010 Utah L. Rev. 461 (2010). 

Abstract (from author): This Article develops a new theory to explain the widespread use of independent directors in the governance of startup firms. Privately held startups often assign a tie-breaking board seat to a third-party independent director. This practice cannot be explained by the existing corporate governance literature, which relies on diffuse ownership and passive investment-features unique to the publicly traded firm. To develop an alternative theory, I model a financing contract between an entrepreneur and a venture capital investor. I show that allocating a tie- breaking vote to an unbiased third party can prevent opportunistic behavior that would occur if the firm were controlled by its entrepreneur or VC investor. Rather than monitoring management, independent directors in a startup firm "arbitrate" disputes between entrepreneurs and investors. Consistent with my theory, empirical data from Silicon Valley startups illustrate several mechanisms entrepreneurs and VCs use to select an unbiased independent director. My analysis has implications for corporate law, as it suggests that heightened fiduciary protections could undermine the role of the independent director in startup firms.

Jaclyn Cherry, Charitable Organizations and Commercial Activity: A New Era Will the Social Entrepreneurship Movement Force Change? 5 J. Bus. Entrepren. & L. 345 (2012).

Abstract (by author): It is no longer a new trend for charitable organizations to become involved in commercial activities. Thousands of nonprofit organizations have embraced the social entrepreneurial concept and have either created “commercial” type ventures as part of their nonprofits, have created spin-off organizations or subsidiary organizations, or have moved into the new area of hybrid organizations. Because there are no clear rules or guidelines for dealing with this issue, the third sector finds itself with rogue components and a spin-off group of hybrid organizations being loosely termed “social entrepreneurs.” Though these groups have grown in numbers in recent years, they have faced their own trials and tribulations, and success has been mixed. The purpose of this article is to take a broad look at where we are now as a result of the continuing confusion regarding the “commerciality doctrine”, the test being used by courts to interpret the operational test of IRC § 501(c)(3), which has pushed many an organization into these murky waters. It will focus on three areas influencing and defining organizations that are struggling with the law in this sector: 1) it will briefly define commercial activity in terms of social entrepreneurship and provide examples of organizations that have entered this hybrid sector as L3C Organizations and B Corporations; 2) it will give an overview of the law that has developed as the “commerciality doctrine”; and 3) it will discuss the unrelated business income tax and suggest that this test needs to be utilized by courts in conjunction with the “commerciality doctrine” for there to be any semblance of order. Finally, this article concludes by suggesting that changes within the system are overdue and proposes a three-part analysis to be used going forward.

Christen Clarke, California's Flexible Purpose Corporation: A Step Forward, A Step Back, or No Step at All? 5 J. Bus. Entrepren. & L. 301 (2012).

Abstract (by author): The roads of social welfare and commercial enterprise have come to an intersection in recent years. Laws governing corporations are expanding to make room for new forms of business entities that seek to satisfy both social and financial goals. The two most prominent “hybrid” business forms are the Low Profit Limited Liability Company and the Benefit Corporation. The newest hybrid entity to take effect is the Flexible Purpose Corporation, which was introduced in California at the beginning of 2012. With the existence of hybrid organizations that already fit into the mold of Corporations and Limited Liability Companies, is there really a need for this new Flexible Purpose Corporation entity?

 

Michael Dennis & José Manuel Pliego Ramos, Simplified Company: Creating an Enabling Legal Environment for Micro-, Small-, and Medium-Sized Enterprises: Simplified Incorporation and Registration, 33 Ariz. J. Int'l & Comp. Law 71 (2016).

Abstract (adapted from authors): Micro-, small-, and medium-sized enterprises (MSMEs) are engines of economic growth and job creation throughout the world. Yet, the vast majority of MSMEs in developing countries remain in the informal sector, despite the need for a formal legal status to operate and enter into contracts. Unfortunately, traditional formal business formation models are unsuitable for MSMEs because they are prohibitively expensive to set up, they result in high compliance costs to meet complicated regulations, and they expose entrepreneurs to personal liability. Several international organizations, including the World Bank and United Nations Commission on International Trade Law (UNCITRAL), have identified best practices that provide a core framework for simplified business registration and incorporation.

An enabling legal environment incorporating these core elements creates an effective gateway through which businesses can enter the formal economy. In turn, legal recognition gives micro and small businesses greater access to affordable credit and with it, to a growth mode characteristic of the formal business sector. As the World Bank has found, economies with modern business registration and incorporation grow faster, promote greater entrepreneurship and productivity, create jobs, boost legal certainty, and attract larger inflows of foreign direct investment.

Claire Moore Dickerson, Informal-Sector Entrepreneurs, Development and Formal Law: A Functional Understanding of Business Law, 59 Am. J. Comp. L. 179 (2011).

Abstract: This article argues that to truly support informal-sector entrepreneurs, a government must create and enforce laws that lead to predictable, stable business environment beyond laws that just regulate contract and business entities.Daniel S. Kleinberger, Sorting Through the Soup: How do LLCs, LLPs, and LLPs Fit Within the Regulations and Legal Doctrines?, Bus. L. Today 15, (Nov./Dec. 2003).

Ross B. Emmett, Frank H. Knight on the "Entrepreneur Function” in Modern Enterprise, 34 Seattle U. L. Rev. 1139 (2011).

Abstract (from author): Frank Knight’s theory of the entrepreneurial function in modern enterprise is explored in two contexts. The first is the dismissal of the neoclassical theory of business enterprise by Berle and Means in The Modern Corporation and Private Property, and their subsequent call for measures that would ensure corporations acted in the social interest. The second context used to explore Knight’s theory of entrepreneurship is his later arguments regarding the problem of intelligent control in a democratic society. Underlying all of Knight’s work are his concerns about freedom and moral judgment in the midst of uncertainty, with the attendant problems commonly referred to today as the principal-agent problem and moral hazard. Knight argues that the entrepreneur personally absorbs these problems through his responsible direction of the modern enterprise; seen this way, profit is not just the return for bearing the risks of unknown consequences, but specifically for the courage to take up the challenge of organizing productive resources in the face of principal-agent and moral hazard problems. In the latter part of Risk, Uncertainty, and Profit, Knight argues that social functionaries are not entrepreneurs, and hence that democratic action will be plagued by principal-agent and moral hazard problems; a conclusion that much vexed him in his later ruminations on the fate of liberal democratic society. Were the authors to apply Knight’s insights to Berle and Means’ call for social control of the modern corporation, one could turn their argument around and ask: control by whom, for whose interest?

Eric H. Franklin, A Rational Approach to Business Entity Choice, 64 Kan. L. Rev. 573 (2016).

Abstract (adapted from author): Selecting the appropriate legal entity is only the first step in a long and difficult path to success for the entrepreneur. It is not easy to create a successful business, and most businesses will fail within five years of formation. Many reasons for this difficulty are expected and other obstacles remain unforeseen by most entrepreneurs. For example, entrepreneurs must decode annual state and local filing requirements, federal and state tax exposure, and licensing obligations from all levels of government. It may therefore not be surprising that we have managed to complicate the very first step of business formation: legal entity choice.

Forming a business in the United States was once a reasonably simple decision. Now, rather than simply choosing between a corporation or a partnership, an entrepreneur in most states will have over a dozen different legal entity forms from which to choose. Making matters more complicated, state legislatures continue to add new business entity forms to the already crowded slate of available forms on a near-annual basis. Such entities, like the low-profit limited liability company (L3C) and the benefit corporation contribute to an increasingly complex array of business entity options for potential business owners. What was once a relatively straightforward decision has become remarkably complex. The entity rationalization movement peaked in the late 1990s and presented three potential avenues for the creation of a simple and uniform slate of business entity forms. This article reinvigorates the entity rationalization movement and will ultimately argue that there are only three necessary entity options: corporations, partnerships, and nonprofit organizations.

Ryan J. Gaffney, Hype and Hostility for Hybrid Companies: A Fourth Sector Case Study, 5 J. Bus. Entrepren. & L. 329 (2012).

Abstract (by author): The traditional three-sector ownership model of society grows outmoded. The prevalence of quasi-governmental agencies, public-private partnerships, and government bailouts blurs the line between the public and private sectors. Of concern to this article, however, is the blurring between the private and nonprofit sectors. The cross-pollination is so widespread that a call stands to amend the existing model with an “emerging fourth sector.” The social entrepreneurs attempting to bridge the gap between sectors face limitations from the outset of their venture; legislators did not design traditional legal entities for a “double bottom line” that includes social impact as well as profit. Because the demand exists, and because a lethargic legislative response will not hinder the entrepreneurial spirit, these pioneers have attempted to form hybrids under existing legal frameworks. Complexity and cost, however, significantly deter this avenue of social enterprise. Consequently, state legislatures have begun to address the need for legitimate hybrid alternatives. The two business forms attracting the most legal, legislative, and media attention are the Low-profit Limited Liability Company (L3C) and the Benefit Corporation (B Corporation). The L3C, a Limited Liability Company (LLC) hybrid, exploits the LLC's organizational flexibility, while attracting capital for the actual enterprise through Program Related Investments. The B Corporation is a corporation hybrid that permits a company's board and management to contract around the rule of profit-maximization. While both frameworks have merit, they are at once competing for the same share of public-consciousness and legislative attention. The author contrasts the two against the backdrop of theWorldOne case.

Zohar Goshen & Assaf Hamdani, Corporate Control and Idiosyncratic Vision, 125 Yale L.J. 560 (2016).

Abstract (adapted from authors): This article offers a novel theory of corporate control. It does so by shedding new light on corporate ownership structures and challenging the prevailing model of controlling shareholders as essentially opportunistic actors who seek to reap private benefits at the expense of minority shareholders. The authors’ core claim is that entrepreneurs value corporate control because it allows them to pursue their vision (i.e., any business strategy that the entrepreneur genuinely believes will produce an above-market rate of return) in the manner they see fit. The authors call the subjective value an entrepreneur attaches to their vision the entrepreneur's idiosyncratic vision. The authors’ framework identifies a fundamental tradeoff, stemming from asymmetric information and differences of opinion, between the entrepreneur's pursuit of her idiosyncratic vision and investors' need for protection against agency costs.

Concentrated ownership, therefore, should not be viewed as an unalloyed evil. Importantly, when the entrepreneur's idiosyncratic vision is ultimately realized, the benefits will be distributed pro rata to all investors. This framework provides important insights for investor protection and corporate law doctrine and policy. Controlling shareholders should balance the controller's need to secure her idiosyncratic vision against the minority's need for protection. While the existing corporate law scholarship has focused solely on the protection of minority shareholders, the authors show that it is equally important to pay heed to the rights of the controlling shareholders.

Roger M. Groves, New Age Athletes as Social Entrepreneurs: Proposing a Philanthropic Paradigm Shift and Creative Use of Limited Liability Company Joint Ventures, 11 Wake Forest J. Bus. & Intell. Prop. L. 213 (2011).

Abstract: This article examines how former professional basketball players have been able to fund philanthropic projects in their communities. Through the use of different business organizations and tax strategies, they have been able to maximize the return on their brand of social entrepreneurship.

J. Haskell Murray, Choose Your Own Master: Social Enterprise, Certifications, and Benefit Corporation Statutes, 2 Am. U. Bus. L. Rev. 1 (2012).

Abstract (by author): In the wake of the most recent financial crisis, interest in social enterprise         has increased exponentially. Disillusioned with the perceived shareholder wealth focus of corporate law, entrepreneurs, investors, customers, and governments have become more receptive to new paradigms. In the past four years, nineteen states have passed at least one of five different types of social enterprise statutes and many additional states are considering similar legislation. Focusing primarily on the benefit corporation form, this Article examines three main issues: (1) whether social enterprise statutes are potentially useful; (2) how social enterprise law can be improved; and (3) whether the social enterprise movement will be sustainable. First, regarding usefulness, this Article recognizes that the traditional legal framework already provides social entrepreneurs most of the flexibility they seek, but posits that the social enterprise statutes may better combat perceptions of a shareholder wealth maximization norm arising from existing for-profit corporation law (especially in Delaware). As a potential alternative to social enterprise statutes, this Article suggests that states like Delaware could simply amend their existing corporate codes to expressly allow for a societal-or environmental-focused objective in a corporation's charter. Second, regarding improvements to existing social enterprise law, the Article suggests: (i) statutorily requiring social entrepreneurs to choose their own primary master; (ii) recognizing modified versions of traditional corporate law concepts; (iii) lowering transaction and uncertainty costs; and (iv) eliminating or modifying certain mandatory rules. Third, regarding sustainability, this Article concludes that the most intensive social enterprise branding efforts should be left to the private sector organizations like B Lab; and social investors, perhaps using new vehicles like crowdfunding and Social Impact Bonds, must fill the funding gap left by hesitant traditional investors.

J. Haskell Murray & Edward I. Hwang, Purpose with Profit: Governance, Enforcement, Capital-Raising and Capital-Locking in Low-Profit Limited Liability Companies, 66 U. Miami L. Rev. 1 (2011).

Abstract (adapted from authors): This article begins by considering the growing social enterprise movement, the limitations of existing legal forms in accommodating social enterprise, and the potential benefits of new legal entities to carry out simultaneous for-profit and nonprofit missions. It also examines how the Low-profit Limited Liability Company (L3C) legal form is structurally designed to overcome existing legal deficiencies and work within the existing business and legal landscape. Moreover, it addresses the concerns of the most strident faultfinders of the L3C and the policy implications of the continued adoption of L3C legislation. The article next compares and contrasts the seemingly conflicting fiduciary duties in the for-profit and not-for-profit areas, before moving on to propose a blended fiduciary framework for hybrid business forms, such as L3Cs. It submits that a company can have multiple purposes, but can have only one primary master. While deviations from the path should be allowed under the business judgment rule, the authors submit that managers of L3Cs should focus primarily on the organization's “charitable purpose.” Similar to the rights of members of profit-focused LLCs, the authors believe that members of L3Cs should have standing to sue for a breach of fiduciary duty by the entities' managers. Finally, the article examines the capital-raising and profit-payout puzzles faced by L3Cs and largely unaddressed by early commentators on the L3C form. The article concludes that while traditional profit-focused investors may not be well suited for investment in L3Cs, the L3C form is still viable.

Christopher D. Hilton, Low-Profit Limited Liability Companies (L3cs): Many Traps for the Unwary Social Entrepreneur, 87 Tul. L. Rev. 169 (2012).

(Abstract by author): Amid a sluggish economy and fiscal challenges at every level of government, the low-profit limited liability company (L3C) has spread rapidly over the past four years, promising a way to spur investment in small businesses and achieve socially beneficial goals with minimal governmental expense or oversight. The L3C's calculated and focused marketing campaign has convinced eight states, including Louisiana, to adopt this new business structure, but the substance of this corporate form leaves much to be desired. Although the L3C is designed to combine investment capital from nonprofit foundations and private investors, the current L3C laws fail to deliver on that promise. The L3C business form, with its distortion of tax policy, inherently conflicting goals, and intractable governance problems, offers nothing but pitfalls and obstacles to the socially beneficial, hybrid enterprises that it purports to help.

Jeffrey M. Hirsch, Employee or Entrepreneur?, 68 Wash. & Lee L. Rev 353 (2011).

Abstract (from author): This comment on Micah Jost’s Note, Independent Contractors, Employees, and Entrepreneurialism Under the National Labor Relations Act: A Worker-by-Worker Approach, 66 Wash. & Lee L. Rev. 311 (2011) was part of the Washington and Lee Law Alumni Association Student Notes Colloquium. In his Note, Jost addresses an increasingly problematic aspect of NLRA law: The ability and willingness of employers to exclude workers from coverage under the statute by classifying them as independent contractors. This problem has existed since the early days of the NLRA, but is worsening as a result of changes in the modern workplace. Adding fuel to this fire, and creating the impetus for Jost’s Note, is the D.C. Circuit’s new test that makes mere entrepreneurial opportunity the cornerstone of the employee/independent contractor analysis. This test defies both well-established precedent and the policies of the NLRA. Moreover, as Jost demonstrates, the common-law analysis - although superior to the D.C. Circuit’s formulation - is in dire need of reform itself. Ideally, this reform would be substantial, either through legislation or a new willingness by the Supreme Court to abandon a strict compliance with the common-law analysis. The result would hopefully produce a more flexible, policy- oriented definition of employee that - especially in combination with increased audits and penalties for misclassification, as well as more attempts to provide workers with the information and tools needed to challenge misclassifications - would better capture the type of employees that the NLRA was intended to cover. Only through such a change will the NLRA maintain relevance for a growing number of workers who look like employees but are now treated as independent contractors by their employers.

Kennan Khatib, The Harms of the Benefit Corporation, 65 Am. U.L. Rev. 151 (2015).

Abstract (adapted from author): The benefit corporation cannot be ignored. To date, thirty states, including Delaware and the District of Columbia, have enacted benefit corporation legislation, signifying that the new legal status is here to stay. Largely established to quell the fears of entrepreneurs pursuing social and environmental objectives and profit, the benefit corporation appears to put an end to the legal uncertainty linked to the consideration of other constituencies irrespective of whether such consideration ultimately promotes shareholder value. While many legal commentators have analyzed the initial impact and advantages of the benefit corporation, few have explored the ability of the existing traditional for-profit legal framework to accommodate for-profit, mission-driven companies. This Comment argues that, due to the increasingly accepted notion that profitability and the pursuit of social and environmental impact are no longer mutually exclusive concepts, the traditional for-profit framework permits social entrepreneurs to consider other constituencies in most contexts and that social entrepreneurs can effectively circumvent the contexts that bar such considerations when adequately counseled. This Comment also analyzes the new corporate form's potential for abuse, suggesting that one of the core impetuses for the creation of the benefit corporation - abating greenwashing - may actually be exacerbated. While seemingly innocuous, the benefit corporation fosters a harmful dichotomy with traditional for-profits that encourages consumers to evaluate companies based on legal status instead of business practices.

Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer & Robert W. Vishny,Law and Finance, 106 J. Political Economy 1113 (1998).

Brett McDonnell, Benefit Corporations and Strategic Action Fields or (The Existential Failing of Delaware), 39 Seattle U. L. Rev. 263 (2016).

Abstract (adapted from author): This article analyzes the creation and growth of benefit corporations from the perspective of strategic action field theory in an attempt to shed some light upon both the subject and the methodology. It considers how the new legal field of benefit corporations responded to weaknesses in the existing fields of business and nonprofit corporations. Benefit corporations attempt not only to allow entrepreneurs to seek goals other than profits, but also to commit to doing so, thus enticing outside investors and employees to become involved.
In explaining how the new legal form arose out of the gap created by these weaknesses, this article stresses the role of B Lab as what strategic action field theory calls an internal governance unit. B Lab both internally regulates the field and acts as an external champion through creating and lobbying for model benefit corporation legislation. So far, benefit corporation legislation has passed in over half of the states, and around 2,000 companies have adopted benefit corporation status. This article explores the possibility of the successful widespread adoption of this field by considering the role that B Lab, social networks and organizations, transactional lawyers, and courts could play in responding to many major identified challenges.

Charles R. T. O’Kelley, Coase, Knight, and the Nexus-of-Contracts Theory of the Firm: A Reflection of Reification, Reality, and the Corporation as Entrepreneur Surrogate, 35 Seattle U. L. Rev. 1247 (2012).

Abstract (adapted from author): Scholars routinely credit R. H. Coase and his first seminal work -- The Nature of the Firm -- as the progenitor of the nexus-of-contracts theory of the corporation. This articles argues for a different understanding of Coase's theory of the firm and its implications for legal research into the nature of the modern corporation. An argument is made that nexus-of-contracts scholars' claims to Coase's lineage are based on a misapplication of Coase's central insights and the pursuit of a very different research project that underlay The Nature of the Firm. Coase's insights must be understood as an extension of Frank Knight's grand opus -- Risk, Uncertainty, and Profit -- and as an extension of Knight's theory of the entrepreneur. This article takes a fresh look at the evolution of the theory of the firm and then details how a new account of the incorporated firm is warranted. The article outlines the research agenda that dominated mainstream economic accounts of the firm prior to Knight and Coase and sketches Knight's seminal account of the entrepreneur. Coase's theory of the firm is described, placing it in the context of Knight's earlier work and highlighting Coase's important identification of the law's place in a real world theory of the firm. The article also explores the implications of Coase's seminal insights for corporation law scholars working on understanding the modern corporation and the theory of the corporation that Coase's work suggests for that work.

Keren G. Raz, Toward an Improved Legal Form for Social Enterprise, 36 N.Y.U. Rev. L. & Soc. Change 283 (2012).

Abstract (by author): Lawyers, policymakers, and social entrepreneurs are engaging in a vigorous debate regarding new legal forms for social enterprise. Some argue that commercial activity in the non-profit sector is not new and does not require a new legal form; others argue that new legal forms, including the Low-profit Limited Liability Company (L3C) and the Benefit Corporation, can meet the needs of social enterprise; and still others argue that new legal forms are needed. This debate has suffered, however, from a fractured understanding of foundational issues related to the meaning of “social enterprise” and the limitations of existing legal forms in facilitating it. This paper seeks to repair our fractured understanding of social enterprise by (1) clarifying what social enterprises are and how they differ from other organizations; (2) revealing what social enterprises require from a corporate form; (3) explaining how existing corporate structures, including the L3C and the Benefit Corporation, fall short in meeting those requirements; and (4) briefly considering the characteristics of a new legal form for social enterprise that will better facilitate the growth and success of these promising organizations.

Dana Reiser Brakman, The Next Big Thing: Flexible Purpose Corporations, 2 Am. U. Bus. L. Rev. 55 (2012), available at http://ssrn.com/abstract=2166474.

Abstract (by author): Over the past few years, jurisdictions across the country have enacted specialized organizational forms to house social enterprises. Social enterprises are entities dedicated to a blended mission of earning profits for owners and promoting social good. They are neither typical businesses, concentrated on the bottom line of profit, nor traditional charities, geared toward achieving some mission of good for society. Their founders instead see value in blending both goals. They believe their social enterprises will be superior to traditional businesses by considering and internalizing the social costs they produce. They believe social enterprises more efficiently produce social goods than traditional charities by applying business methods to this important work. Yet, these social entrepreneurs worry traditional organizational forms designed for either businesses or charities will constrain their ability to achieve the gains they see in blended mission enterprises. Legislatures have obviously been convinced. Since 2008, lawmakers in nearly one-third of U.S. jurisdictions have enacted enabling legislation providing one or more specialized forms designed to house social enterprises. Thus far, these specialized forms have taken three distinct types, the latest of which is the subject of this Article: the flexible purpose corporation.

Felicia R. Resor, Benefit Corporation Legislation, 12 Wyo. L. Rev. 91 (2012).

Abstract (adapted from author): When the Maryland Governor signed into law the nation's first benefit corporation legislation, state Senator Jamie Raskin remarked, “This is a great moment in the evolution of commercial life in Maryland and America. We are giving companies a way to do good and do well at the same time. The benefit corporations will tie public and private purposes together.” A benefit corporation is one of a handful of new business entities designed to accommodate businesses that aim to benefit society in more ways than traditional corporations can through contributions to shareholders, consumers, employees, and general economic growth. In a growing number of states, lawmakers have passed legislation creating various new business entities to house social enterprise and organizations that blend for-profit and not-for-profit purposes. Benefit corporations are best understood within the broader context of corporate social responsibility (GSR) and its more recent offshoots, social enterprise and organizations with hybrid purposes. The creators of the new legal form, the benefit corporation, explain that hybrid organizations use “the power of business to solve social and environmental problems.” Social enterprise and businesses with hybrid purposes can have a primarily for-profit or a primarily not-for-profit purpose, yet with either combination the organizations will incorporate social and environmental responsibility into their policies. This comment begins with a short background to introduce the primarily binary organizational system and its limitations on corporate social responsibility. The background also introduces three hybrid legal forms now available in various states: the benefit corporation, the flexible purpose corporation, and the low profit limited liability company (L3C). Next, the analysis section demonstrates how benefit corporation legislation addresses three problems that organizations with hybrid purposes face as traditional for-profit corporate entities: (1) the shareholder wealth maximization norm; (2) the lack of accountability standards; and (3) the lack of transparency standards. The analysis argues that because of a benefit corporation's features that address these problems, it is a better form for social enterprise than a traditional corporation. The analysis then describes how benefit corporation legislation can create economic opportunity in Wyoming and is consistent with Wyoming public policy. In conclusion, this comment argues the Wyoming legislature should adopt benefit corporation legislation to create more legal clarity, accountability, transparency, and economic opportunity.

 

Larry E. Ribsein, The Emergence of the Limited Liability Company, 51 Bus. Law. 1 (1995).

Abstract: Three years ago, The Business Lawyer published the first comprehensive survey of the law relating to limited liability companies (LLCs), The Limited Liability Company: A Study of the Emerging Entity. When that article was written, only eight states had passed LLC statutes. There was no settled model for the LLC, no settled tax treatment beyond the rudimentary partnership tax classification of some Wyoming LLCs, and no clear recognition of LLCs outside of their formation states. "Emerging" aptly described the LLC form.

Online Resources

Bill Mann, Dual-Class Shares, Second Class Investors, Motley Fool (Apr. 14, 2004).
http://www.fool.com/investing/general/2004/04/14/dualclass-shares-secondclass-investors.aspx