Are We Teaching Business Associations Backwards?

Should we flip the way we teach Business Associations?

Last week I asked whether law schools are teaching the law of securities regulation, particularly Securities Act exemptions, backwards. I proposed that the current rule-by-rule approach be flipped to a more topical approach. This week, I'm asking the same question about Business Associations, but I'm much less sure of the correct answer.

The basic Business Associations course at most law schools today includes much more than the law of corporations. Most Business Associations courses cover partnerships and limited liability companies, and often limited partnerships and agency law as well. 

The leading publishers offer a number of business associations casebooks, but their basic organizational structure is the same: each entity is covered separately. A typical casebook might, for example, begin with partnership law, then cover the law of corporations, then limited liability companies. The topics covered for each entity are similar: formation, management, fiduciary duty, the liability of investors, exit rights, and so on. 

Why not flip this organizational structure and organize business associations courses by substantive topic rather than by entity? We could begin with a chapter on formation that discusses how all of the entities are created. A chapter on management would discuss how all of the entities are managed. A chapter on fiduciary duties would discuss the fiduciary duties of agents, partners, limited partners, corporate officers and directors, and the members and managers of LLCs. And so on, topic by topic.

This alternative approach would eliminate a lot of repetition, and foster discussion of the policies underlying the rules: Why are the fiduciary duties of partners different from the fiduciary duties of shareholders? Why do partners have the right to participate in the management of the business, but not shareholders? Much that can be said about, for example, corporate opportunity would also apply to business opportunities in the partnership and the LLC. The law may differ from entity, and often for good reason, but wouldn’t the policy reasons for those differences become more apparent if we discussed all the entities at the same time?

This approach would also make choice-of-entity concerns more apparent. Students would see how choice of entity does or does not matter with respect to each topic.

There would, however, be drawbacks, which is why I’m not sure of the correct answer. For one thing, it’s much easier pedagogically to deal with one entity at a time than to bounce around from statute to statute. And an entity-by-entity organization allows instructors to focus more on the relationships among the rules affecting a particular entity—for example, the relationship between the limited liability of shareholders and their limited participation in control.

In short, I’m not surprised that some authors choose to organize by entity. What surprises me is that all of the leading authors choose to organize by entity. Even if many professors prefer the entity-by-entity approach, surely there’s a market for at least one book that takes the alternative approach. But perhaps not. If my memory serves me, the late Larry Ribstein’s business associations book was at one time organized along topical lines, but he eventually changed to an entity-by-entity organization.