Why Delaware LLCs?
For years, scholars have debated why parties choose to incorporate under Delaware law companies that operate businesses in other states — since different answers to this question lead to different normative assessments of the practice. Traditionally, this debate focused on public corporations and ignored private firms and non-corporate forms of business. The exploding use of limited liability companies (LLCs) instead of corporations, and the formation of LLCs under Delaware law to operate businesses outside Delaware, call for expanding this discourse to ask “Why Delaware LLCs?”. This article adds to the recent literature seeking to answer this question empirically. It critiques recent studies that looked for statistically significant correlations between state of formation choices for LLCs and differences in state LLC statutes and legal infrastructure. Finding this methodology suffers from inherent limitations, this article presents results from a different approach. I interviewed business attorneys whose clients have formed LLCs and asked them a battery of questions designed to ascertain why their clients formed LLCs in Delaware. The results of this survey provide important insights into the aspects of Delaware’s substantive LLC law and its legal infrastructure that motivate formation of Delaware LLCs, and thereby serve as an important complement to the existing statistical studies.
Dictum in Alternative Entity Jurisprudence and the Expansion of Judicial Power in Delaware
The liberal use of dictum by the Delaware courts to address matters unnecessary to the resolution of the disputes with which they are presented is a celebrated facet of the state’s rich corporate law tradition. Indeed, academics, practitioners and jurists alike have praised the judicial practice as a distinctive and invaluable feature of Delaware corporate law — a vital reason for the state’s success in attracting corporate charters. Less noticed, however, is dictum’s role in Delaware’s burgeoning unincorporated alternative entity jurisprudence. As this chapter shows, when one probes Delaware’s limited partnership and limited liability company decisions, one sees the same judicial hallmarks of dictum familiar to the state’s corporate law precedents. This use of dictum, in both the corporate and alternative entity contexts, in turn represents only one facet of a larger legal system that has evolved in Delaware to empower the state bench to act as the chief regulator of all Delaware businesses.
State Regulation of Electronic Commerce
There is a widespread belief that regulation of electronic commerce by individual states is unworkable because firms doing global business on the Internet easily can evade state regulation or, conversely, because firms are subject to excessive regulation due to states' overlapping jurisdiction. Instead, it is believed that electronic commerce is best regulated at the federal or even global level, and that any state regulation should be pursuant to uniform laws. This article challenges this conventional wisdom. It shows that regulation of electronic commerce by individual states has several advantages over federal or uniform state laws and that the problems of state regulation have been exaggerated. First, state regulation provides variety, evolution and competition that is especially well suited to the dynamic nature of electronic commerce. Second, courts can minimize jurisdictional overlaps by enforcing choice-of-law and choice-of-forum contracts. Third, markets alleviate concerns that enforcing contractual choice would lead to a "race-to-the-bottom" in state Internet regulation. Any remaining problems with state regulation should be analyzed in comparison with those that would result under federal or uniform state law.