Does The California Legislature Really Believe In the Existence Of Limited Liability Corporations?
Wednesday, May 17, 2023
A clipboard outside of California

The California Corporations Code includes provides for the formation of corporations as well as limited liability companies.  However, it does not provide for the formation of limited liability corporations.  Oddly, however, the California legislature seems to believe in the existence of limited liability corporations.  In fact, three different legislators have introduced bills referring to limited liability corporations - AB 221 (Ting), AB 1604 (Bonta), and SB 72 (Skinner).   Perhaps these authors can be forgiven because there are already three different California statutes that refer to limited liability corporations - Health & Safety Code § 17030.10, Insurance Code § 926.1, and Government Code § 65863.11.  The California judiciary, moreover, evidences a belief in limited liability corporations even when describing statutes that refer to limited liability companies.  See, e.g., Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 946 (2008).

Given that shareholders are not generally liable for corporate obligations, it might be asseverated that limited liability is a feature of all corporations and thus may be accurately referred to as "limited liability corporations".  However, that would not explain the tautology.