Uncorporations and the Delaware Strategy
University of Illinois Law Review
The emergence of limited liability companies and other so-called uncorporate business entities raises a number of interesting questions. This essay argues that federal regulation often follows or competes with state regulation, rather than arising in a vacuum, and that both sources are apt to produce regulation in response to crises. States have enabled uncorporations, but these creations have been followed by state regulation. It is to be expected that federal regulation will follow, so that uncorporate law will be a mix of state and federal law, as is presently the case for corporate law. In turn, this essay predicts that the regulatory gap between corporate and uncorporate law will narrow. The essay goes on to suggest that Delaware can be thought of as pursuing a distinct strategy with respect to corporations and uncorporations. This strategy is in transition. In order to extend its dominant position from the market for corporate law into that for uncorporate law, Delaware must first welcome uncorporate forms. In time, however, we can expect some revenue extraction at the state level, as well as federal intervention. The critical competition is between Delaware and the federal government.
Saul Levmore, "Uncorporations and the Delaware Strategy," 2005 University of Illinois Law Review 195 (2005).