The law of modern business entities is poorly understood from a comprehensive perspective. This area of law has changed significantly in the last several decades in ways that have gone largely unnoticed. The lack of attention is unfortunate because developments in the law of business-entity governance have implications for many other areas of law, beyond what are normally conceived as business-law subjects.
Modern organizational statutes create something new to the legal system: a legal entity that is governed only or mainly by an operating agreement and that is capable of holding basic legal rights and forming fundamental legal relationships (like entering contracts or owning property). Effectively, the result is that ‘a contract’ (or at least something closely akin to a contract) can act as a legal entity. This capability may sound mundane, but the flexibility of modern business entities enables them to provide immediate ‘workarounds’ to many restrictions in other areas of the law, such as contract law, property law, and family law. Modern business entities are a hyper-flexible transactional tool that can lead their organizers to achieve goals that other areas of law have not contemplated, ranging from the capabilities of legal personhood for those who otherwise lack it (like nonhuman computer systems and humans that the law deems incapable of contracting, such as children or those with mental illnesses) to circumvention of many of the traditional restrictions in property law.
Bayern, Shawn J, Business Law Beyond Business (April 15, 2021). 46 Journal of Corporation Law (forthcoming).