Harmonization, Rationalization, and Uniformity

Forthcoming in Elgar Handbook on Alternative Entities (Mark Lowenstein and Robert Hillman, Edward Elgar Publishing 2014)

20 Pages Posted: 6 Nov 2014 Last revised: 16 Jun 2015

Date Written: November 3, 2014

Abstract

In the United States, business organization law has changed dramatically over the past forty years. This change has been reflected in modification of the traditional forms of business organization (such as partnerships, corporations, and limited partnerships), the introduction of variants on the traditional forms (such as the limited liability partnership and limited liability limited partnership) and the introduction of entirely new forms (the best example of which is the limited liability company). Each form may be considered as a collection of “characteristics” that provide for the nature of the organization and its property and liabilities and the rights and duties of the organization, its owners, its managers among themselves (internal characteristics) or that provide for the relationship between the organization and its constituents on the one hand and those who deal with the organization and the governmental authorities that recognize and regulate it on the other (external characteristics). The proliferation and changes in the forms of business organization have resulted in a corresponding change and increase in the characteristics of the forms and fostered a desire to bring some order and consistency to the statutes under which the organizations exist. This desire has been reflected in three statutory movements: harmonization (the attempt to eliminate unintentional distinctions among the characteristics), rationalization (a desire to eliminate intentional distinctions among the forms seeking to select the “best” characteristics from among the traditional and new forms and impose that characteristic on all forms), and pursuit of uniformity (the movement to conform the statutes of the various jurisdictions governing a particular form to each other). While harmonization, if limited to eliminating inadvertent inconsistencies in the underlying statutes, is useful, providing benefits at little policy costs, rationalization and uniformity create pernicious results to the extent they are used to arrest the flexibility and variety of forms in an attempt to dictate that all forms have the common characteristics that those controlling the statutory drafting think preferable. Determining and mandating these uber characteristics through a process that purports to be devoted to harmonization by creating a “Frankencluster” (a statute that is drafted in an attempt to change fundamental characteristics and harmonize them at the same time) is both disingenuous and inefficient. The pretense of simply eliminating unintentional variations but actually making all statutes into the form believed to be the superior will be ineffective without accomplishing even harmonization, and, at worst, will result in statutes that are hopelessly confused having internally inconsistent characteristics and policies.

Suggested Citation

Keatinge, Robert R., Harmonization, Rationalization, and Uniformity (November 3, 2014). Forthcoming in Elgar Handbook on Alternative Entities (Mark Lowenstein and Robert Hillman, Edward Elgar Publishing 2014), Available at SSRN: https://ssrn.com/abstract=2518875

Robert R. Keatinge (Contact Author)

Holland & Hart ( email )

555 Seventeenth Street Suite 3200
Denver, CO 80202-3979
United States

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