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48 J. Corp. L. Digit. 1 (2022-2023)

handle is hein.journals/jcldgtl48 and id is 1 raw text is: Delaware Law for Non-Corporate Entities: A Commentary Peter Molk* I.A LTERN ATIVE E N TITIES ................................................................................................. 1 II.N O N PR O FIT S .................................................................................................................. 3 III.RECONCILING THE D IFFERENCES................................................................................. 4 IV.CONCLUSION ................................................................................................................. 7 Robert Rhee's Article, The Irrelevance of Delaware Corporate Law,1 poses provocative questions about why Delaware dominates the market for corporate law given the apparent irrelevance of state incorporation choice for companies' market valuations. He shows, first, that publicly traded companies incorporated in Delaware have similar valuations to companies incorporated in other states over time, and second, that market actors do not exhibit a preference to reincorporate existing firms in Delaware. Rhee analyzes exclusively the realm of publicly traded corporations, which is understandable given that his analysis is necessarily limited to publicly available data. Publicly traded corporations are undeniably economically significant, yet they constitute only one method of carrying out economic activity that, arguably, is shrinking in importance over time.2 When one considers the space of non-publicly traded corporations, a different picture emerges. This response considers that space below and then offers some thoughts on how these competing pictures might be reconciled. I. ALTERNATIVE ENTITIES The alternative entity space-LLCs and different types of partnerships-has exploded in importance in recent years. In Delaware, the prominent player in this space, the number of alternative entities now stands at over three times the number of corporations.3 As with corporations, alternative entities can organize under the laws of whichever state they choose, thereby adopting that state's laws for matters involving the internal governance of those entities. Is Delaware law irrelevant for these entities as Rhee claims it is for publicly traded corporations? There are reasons to think not, as a matter of both theory and empirics. First, as a matter of theory, state law governing alternative entities is neither as old nor as well-settled as corporate law. Alternative entities did not achieve practical economic * John H. and Mary Lou Dasburg Professor of Law, University of Florida Levin College of Law. 1. Robert J. Rhee, The Irrelevance ofDelaware Corporate Law, 48 J. CORP. L. 295 (2023). 2. See, e.g., Peter Molk & D. Daniel Sokol, The Challenges of Nonprofit Governance, 62 B.C. L. REV. 1497, 1498-99 (2021) (discussing the large-scale impact and recent developments of nonprofits); Elisabeth de Fontenay, The Deregulation of Private Capital and the Decline of the Public Company, 68 HASTINGS L.J. 445, 452-61 (2017) (discussing declines in the public equity markets); Peter Molk, How Do LLC Owners Contract Around Default Statutory Protections?, 42 J. CORP. L. 503, 504-05 (2017) (addressing LLCs' rising popularity). 3. Peter Molk, Uncorporate Insider Trading, 104 MINN. L. REV. 1693, 1710 (2020).