Modern business entities, such as LLCs, are increasingly created and deployed to accomplish customized transactions and evade legal restrictions. Rather than acting as traditional business enterprises, entities serve as tools to facilitate complex commercial transactions and surmount limitations presented by existing bodies of law. One limitation constrains the ways that private parties can agree to divide property rights – a doctrinal limitation sometimes referred to as numerus clausus. This Article shows that such limitations on the customizing of property rights by private agreement now can be surmounted by virtue of modern business entity law. After describing the key features of modern business entities, this Article provides a preliminary assessment of their logic and limits.
Modern business law permits an asset or set of assets to be placed into separate business entities with carefully tailored structural and governance features. It allows parties to customize their property rights in the asset(s) however they wish, with surprisingly few limits. Entities can be formed and maintained cheaply with virtually no meaningful public disclosure required. Participants in the operation of the entity need undertake very few duties toward each other or the entity itself. The advent of flexible, powerful, and cheap entities under this body of business law renders limitations on the division of property rights increasingly obsolete. Large, complicated businesses already use webs of entities to divide rights in their assets and subsidiaries for financial, operational, and other reasons (such as regulatory arbitrage). Costs and convenience are now so low as to open the door to smaller scale participants in commerce …
Bradley, Christopher G, Artworks as Business Entities: Sculpting Property Rights by Private Agreement (January 1, 2020). Tulane Law Review, volume 94, no 2, 2021.