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38 Creighton L. Rev. 35 (2004-2005)
The Silent LLC Revolution - The Social Cost of Academic Neglect

handle is hein.journals/creigh38 and id is 57 raw text is: THE SILENT LLC REVOLUTION-THE SOCIAL COST OF ACADEMIC NEGLECT HOWARD M. FRIEDMANt The law of Business Associations usually develops slowly. The business forms that dominated the business landscape until the end of the 20th century have been in existence for hundreds of years.1 How- ever, in the last decade a revolution has taken place. The Limited Liability Company (LLC) has become the dominant form for newly- created small businesses in a clear majority of the states, and is rival- ing corporations for that distinction in several more. Nationwide, over 45% of new businesses are LLCs.2 Yet reading the legal literature, one would never suspect this. Several years ago, Professor John W. Lee published a study com- paring the number of corporations formed between 1995 and 1998 with the number of limited liability companies formed in the same time period. He concluded that in those years, in all but one state new corporation formations.., outnumber new LLC formations-usu- ally by a margin of 2:1 or 3:1 or greater.3 As the statistics discussed in this article demonstrate, at least by 2002, the picture changed dramatically. The LLC revolution has not only occurred with lightening speed; equally interesting is the fact that the revolution has been carried for- ward primarily by practitioners.4 Law schools, law professors, law publishers, bar examiners and others usually responsible for dissemi- nating cutting edge developments have been surprisingly absent from the playing field much of the time. In 2004, they remain in denial, acting as if the general partnership were still the chief rival to the corporation. In the 21st century, they still live in the 1990's. In Part t Distinguished University Professor of Law and Director of Cybersecurities Law Institute, University of Toledo. The author appreciates the input received from a Faculty Workshop at the University of Toledo. Also thanks to Robert Jacoby and Jen- nifer Drane for assistance with compiling data, and to Bonita B. Harvieux for furnish- ing the 2004 IACA Report. 1. See THoMAs LEE HAZEN & JERRY W. MARKHAM, CORPORATIONS AND OTHER Bus- INESS ENTERPRISES 1-4 (2003). 2. See Section I, infra. 3. John W. Lee, A Populist Political Perspective of the Business Tax Entities Uni- verse: Hey the Stars Might Lie But the Numbers Never Do, 78 TEX. L. REV. 885, 887 (2000). 4. For theoretical analysis of why lawyers are a powerful force in seeking LLC legislation, see Larry E. Ribstein, Statutory Forms for Closely Held Firms: Theories and Evidence from LLCs, 73 WASH. U. L.Q. 369, 392-94, 400-01 (1995).

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