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Copyright (c) 2002 Northwestern School of Law of
Lewis & Clark College
The Journal of Small and Emerging Business Law

ARTICLE: CITIZENSHIP OF LIMITED LIABILITY COMPANIES FOR DIVERSITY JURISDICTION

Fall, 2002

6 J. Small & Emerging Bus. L. 435

Author

by Debra R. Cohen*

Excerpt



I. INTRODUCTION
 
For over a century, the law of business organizations has struggled to create a hybrid organization that combines the liability shield of a corporation with the tax status of a partnership. The limited liability company ("LLC") succeeds where previously created hybrid organizations did not. 1 It is "the best of all worlds." 2

The first LLC was created only a quarter century ago. 3 Today, all fifty states have LLC statutes and the LLC is rapidly growing in popularity. 4 Some commentators have suggested that the LLC will become the entity of choice and will replace partnerships and closely held corporations. 5 Time will tell. In the interim, the growing number of LLCs has resulted in a growing number of lawsuits in which LLCs are named parties. 6 Not surprisingly, many of these lawsuits are filed in federal district court and, as they are based on state law claims, assert diversity as a basis for subject matter jurisdiction. 7

When determining whether these actions qualify for diversity jurisdiction, the citizenship of the LLC is essential information. However, because of its hybrid nature, the citizenship of a LLC presents a difficult question. Should the citizenship of a LLC be determined like the citizenship of a corporation, in which case it has "entity" citizenship, or like the citizenship of a partnership, an aggregate association, in which case its citizenship is determined by looking through the LLC to the "persons composing" it?

Initially, case ...
 
 
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