Delaware for Small Fry: Jurisdictional Competition for Limited Liability Companies

Larry Ribstein —  26 January 2011

My article with Bruce Kobayashi, previously available as a working paper, has just been published in 2011 University of Illinois Law Review 91 with the above new title .  The published version has been posted on SSRN. Here’s the revised abstract:

Most of the work on jurisdictional competition for business associations has focused on publicly held corporations and the factors that have led to Delaware’s dominant position in attracting out of state firms. Is there an analogous jurisdictional competition to attract formations by closely held firms? Limited liability companies (LLCs) offer a good opportunity to examine this question. Most LLC statutes have been adopted and changed rapidly during the past 20 years. Unlike general and limited partnerships, which have been shaped by uniform laws, LLC statutes vary significantly, and states have devoted a lot of effort to drafting their individual statues. This variation provides an opportunity to test the statutory provisions and other factors that influence LLC’s choice of where to organize. We find little evidence that firms choose to form outside their home state in order to take advantage of variations in statutory provisions. Instead, we find evidence that large LLCs, like large corporations, tend to form in Delaware, and that they do so for the many of the same reasons – that is, for the quality of Delaware’s legal system.

Larry Ribstein


Professor of Law, University of Illinois College of Law