Yes, Virginia, There Is A Limited-Liability Corporation (At Least In Case Law And Statute)
Wednesday, October 17, 2018
Twenty years ago, limited liability companies were a novelty. Today, they are common, but courts often conflate LLCs with corporations by referring to "limited liability corporations". For example, the Court of Appeal in Hotels Nevada, LLC v. Bridge Banc, LLC, 130 Cal. App. 4th 1431, 1434 (2005) advised "Defendant is a California limited liability corporation with its office in Los Angeles". See also Swissmex-Rapid S.A. de C.V. v. SP Systems, LLC, 212 Cal. App. 4th 539, 542 (2012) ("SP is a California limited liability corporation . . . .") and People v. Noori, 136 Cal. App. 4th 964, 971 (2006) ("Mehdipanah's company, Sarafi International, was registered with the California Secretary of State as a limited liability corporation."). This is truly an odd construct because one of the hallmarks of the corporate form is limited liability.
Legislatures also suffer from the same confusion. California Government Code Section 65863.11 refers to a "managing member of a limited liability corporation". When the Legislative Counsel's office recommended technical corrections to various code provisions, including Section 65863.11, it failed to correct the reference. See SB 1289.
Nevada's legislature has been similarly confused. NRS 639.575 and NRS 639.580 each refer to "limited-liability corporations".
Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...