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I. Introduction
The law of modem business entities is poorly understood from a comprehensive perspective.1 This area of law has changed radically in the last several decades in ways that have gone largely unnoticed. The lack of attention is unfortunate because developments in the law of business-entity governance have radical implications for many other areas of law, far beyond what are normally conceived as business-law subjects.
Modern organizational statutes create something new to the legal system: a legal entity that is governed only or mainly by an operating agreement and that is capable of holding basic legal rights and forming fundamental legal relationships (like entering contracts or owning property). Effectively, the result is that "a contract" (or at least something closely akin to a contract) can act as a legal entity. This capability may sound mundane, but the flexibility of modern business entities enables them to provide immediate "workarounds" to many restrictions in other areas of the law, such as contract law, property law, and family law. Modern business entities are a hyper-flexible transactional tool that can lead their organizers to achieve goals that other areas of law have not contemplated, ranging from the capabilities of legal personhood for those who otherwise lack it (such as nonhuman computer systems and humans that the law deems incapable of contracting, such as children or those with mental illnesses) to circumvention of many of the traditional restrictions in property law.
One animating principle of business law over the last thirty years has been "freedom of contract"-so much so that it has become something of a slogan for LLCs among courts and commentators and has been enacted into the Delaware statutes.2 on the surface, this principle seems narrow and relatively unremarkable: people forming a business ought to be able to structure the internal governance of the business in ways that suit their needs-at least, apart from increasingly exceptional mandatory rules, such as fiduciary duties that the parties cannot eliminate by private agreement.3 So, for example, the organizers of a corporation might choose to eliminate the board of directors,4 or general partners might decide to pre-commit to unusual restrictions on their own powers.5
Through most of the 1900s, the story of the development of business entities was simply one of...