February 4, 2010
The Unnatural Separation of Liability and Control
Prof. Ribstein has put up an interesting post about the "series LLC" and the "protected cell company". His post made me think about a writing project that continues to gather dust in my "future projects" bin--"The Unnatural Separation of Liability and Control and Its Implications". I think one could fairly easily argue for a natural law of liability following control. In fact, one can view the corporation as operating in accordance with that law by separating ownership from control and thereby limiting the liability of the owners. But to the extent that one believes in such a natural law, we clearly trampled on it a long time ago and seem fascinated with coming up with better and better ways to crush it to dust. What I am curious about is what the theoretical justification for the separation of liability and control is. Obvious candidates include efficiency and the fattening of state budgets--but what are some others?