Academic

Wecome to the second week of the Conglomerate Junior Scholars Workshop.  Today we are delighted to be discussing a recent paper byMohsen Manesh, a new assistant professor at the University of Oregon School of Law, entitled Delaware and the Market for LLC Law:  A Theory of Contractability and Legal Indeterminacy."  Leading our discussion will be our experts Bob Lawless,Larry Ribstein and Gordon Smith.  We also hope that you will join in the fun either by commenting on this post or on one of the other posts, which should appear above this one.  Remember, no anonymous comments.

Here is the abstract:

Incorporating in Delaware can be expensive. Corporations pay up to $180,000 annually for this simple privilege ? a figure that is substantially higher than incorporation in any other state. In their controversial article, Price Discrimination in the Market for Corporate Law, Professors Marcel Kahan and Ehud Kamar show that Delaware?s ability to charge a premium for incorporations, in the form of its annual franchise tax, is evidence of Delaware?s market power in the jurisdictional competition for corporate charters. Beyond simply charging a premium, however, Professors Kahan and Kamar show that Delaware further increases its profits by engaging in price discrimination ? tailoring its premium according to the value each firm attributes to the privilege of incorporating in Delaware. The ability of Delaware to charge a premium and to further price discriminate leads Professors Kahan and Kamar to conclude that in the competition for corporate charters, ?it is evident that Delaware possesses substantial market power.?

This Article projects Professors Kahan and Kamar?s analysis onto the world of limited liability companies (?LLCs?). To assess Delaware?s market power in the jurisdictional competition for LLC charters, this Article examines the LLC analog of the corporate franchise tax. Instead of a franchise tax, every Delaware LLC is charged a flat annual tax of $250. As this Article will show, unlike its corporate franchise tax, Delaware?s LLC tax does not represent a premium. Nor does it price discriminate.  (Continue reading here. . .)