Tuesday, January 2, 2018

Winning?: Incorrect References to "Limited Liability Corporations" Down to 1666 (from 1898) in 2017

I did my annual Westlaw check-up on the use of "limited liability corporation" in place of the correct “limited liability company.”  I did a similar review for 2015 and 2016 about this time, and revisiting the same search once again showed consistency (not in a good way). I keep hoping for major improvement, but some noticeable reductions in a few areas is a positive sign. 

Since January 1, 2017, Westlaw reports the following using the phrase "limited liability corporation":









Trial Court Orders




Administrative Decisions & Guidance




Secondary Sources




Proposed & Enacted Legislation




Modest improvement by courts (yay, judges and clerks!), a little worse showing for trial court orders in trial court orders (boo, judges and clerks!), and sizeable reductions showed up in administrative decisions and on the legislative front, and a modest reduction appeared in secondary sources. 

Hard to say what the cause of any of this is, and I am inclined to think that the legislative number is far more focused on the types of bills being proposed than anything else. That is, all of the other areas have recurring and consistent interest, in some sense, with entity type.  Legislation is more fickle.  (Side note: grammar suggestion is for “fickler,” but I can’t go there.)  

My prediction is that we will see a lot more references to “limited liability corporations” with the passage of the recent tax bill.  Why do I think this?  Let’s take a look at some recent news coverage. From Forbes, for example:

The change would allow real estate investors to take advantage of a new break that provides a 20 percent deduction on taxable income for pass-through companies. A pass-through is a special type of corporate structure, popular among small business owners.

Cue Bill the Cat: Ack! 

“A pass-through” is a tax status. The entity choosing pass-through taxation could be a “corporate structure,” most notably the S-corp (which is an entity I rather hate, but that’s for another day), but it is not necessarily so. LLCs and limited partnerships, for example, are not corporate structures.

 Mother Jones provides an example of how the tax bill might work, somewhat ironically in an article titled, Tax Lawyers Are Getting Ready to Exploit All the Mistakes in the GOP Tax Bill:

Take a New York law firm. Under the final bill, Kamin says, if a law firm lets their associates spin off into a separate limited liability corporation that provided services to the main firm, the associates’ company could then be considered a pass-through business. The associates’ firm could contract with their original firm, and as long as they restrict income to less than $157,500 for an individual and $315,000 for a married couple, the associates can take advantage of the pass-through deduction.

I will skip (for now) the merits of the example, but these kinds of misstatements are likely to be a recurring issue. 

Okay, I’ll leave it there for now.  I hope your 2018 has started well, and I wish you the very best, even if you’re a “limited liability corporation” offender.  I sincerely hope you’ll get on board and try to mend your ways, of course, but I nonetheless, wish you well. Happy New Year!



| Permalink


I used to threaten to lower the grade of any student who used "limited liability corporation" on an exam. I told them I would take off a disproportionate number of points for the use of the word "corporation" when talking about LLCs. I saw a dramatic decrease in these mistakes. These graduates go on to clerkships in state and federal courts and to serve as business lawyers in the community. Perhaps if we really harp on it in the classroom, we will have a new generation of lawyers who will use the correct terminology and gently correct their judges and bosses. One can only hope!

Posted by: Marcia Narine Weldon | Jan 3, 2018 4:42:47 AM

Agreed. As you might imagine, this is a thing in my classroom, as well. Now a significant number of exams even note "limited liability company, NOT corporation." So far, I have had no references to "limited liability corporations," nor did I last year, but I have had one reference to LLC "shareholders" and the "corporate veil of an LLC." That is the worst exam so far, though the problems are not limited to such references.

Posted by: Joshua Fershee | Jan 3, 2018 5:30:05 AM

Post a comment