How can entities law be so confusing? In the United States there are 50 states, and each state has its own laws governing corporations and other entities. That means there are 50 corporation statutes, 50 partnership statutes, 50 LLC statutes, 50 nonprofit corporation statutes, etc.
However, many states have adopted laws similar to those of other states. Bar associations, law schools and other astute organizations have come up with draft laws called model and uniform acts. You might have heard of Model Corporation Acts and Uniform Partnership Acts. These acts are not laws (only legislatures can pass laws, remember), but they often become laws when adopted by state legislatures. They have been around for a long time because we now have Revised Model Corporation Acts and Revised Uniform Partnership Acts that have been adopted in many, if not most, states.
Of course, some state laws differ more than others. Especially Louisiana, whose law is based on French law. The law of other states was based on English common law, which is generally considered to be the law in effect in England in 1776. Yes, 1776. Over 200 years ago.
There were not many corporations back then. That’s why most of entity law is statutory law–based on statutes passed by legislatures instead of case law created by the precedent of legal opinions issued by courts deciding disputes between real parties.
So, there are 50 states with 50 entity laws adopted and revised by 50 legislatures interpreted by 50 states’ courts. It is no wonder entity law is confusing, and no wonder it takes a lawyer to decipher it.
By the way, this article is not legal advice; it’s a history lesson. Each state has its own laws governing corporations, partnerships, LLCs and other entities.
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