[shawnbayern]

I'm the law professor who developed the ideas discussed in the quoted article. A friend just brought this thread to my attention. The full arguments, which address most of the concerns laid out in these comments, are available here:

(1) https://ssrn.com/abstract=2366197 (2) https://ssrn.com/abstract=2758222

(The article at the top of this thread, by Prof. LoPucki, is a response to these two articles.)

I'm happy to answer questions if that would be useful, although of course I can't give legal advice. In general, there's a tremendous amount of misunderstanding about LLCs and about the law of legal organizations, both in the US and elsewhere -- even among lawyers! It's fair to say that US organizational law tends to be more flexible than similar laws in other countries, and my point in these articles it that it's flexible enough to do surprising things.

In the articles, I specifically discuss RULLCA (the basis for the LLC laws in something like 17 US states, with that number growing), as well as NY's LLC law, and I show why a lot of people's instinctive comments here (and elsewhere!) are legally mistaken. For example, the statutes in these states specifically contemplate memberless LLCs, and indeed memberless LLCs are not a crazy or unconventional possibility. In various wealth-management contexts, they are routine. That LLCs could persist without members for indefinite periods is more controversial, but my articles explain why the current statutes do permit them.

Of course, legislatures could stop all this if they wanted to. The LLCs statutes are just statutes. But you need just one jurisdiction to allow my technique for it to enable AIs to interact with the legal system in quite significant ways. Also, it's not entirely clear what it would mean to stop an LLC from doing what I propose, or whether judges would practically wish to do that. For example, suppose you follow my technique and then your AI buys a house. What would it mean to say that the LLC isn't legally "valid"? Would the original owner get the house back and also keep the purchase money? (There wouldn't necessarily be anyone to return it to.) Developing sound institutional solutions to complex questions about legal organizations is not an easy problem.

The common-law judges have always been keen to permit new structures when they are useful. One-person legal companies were themselves controversial not too long ago, but they're commonplace today. In my articles, I give reasons supporting the usefulness of zero-person LLCs.

[mmealling]

A couple of questions:

Have you responded to the to Matt Scherer's critique that starts here: http://www.lawandai.com/2017/05/14/is-ai-personhood-already-...

From my understanding of Conflict of Laws issues there is a great deal of case law suggesting that even if the memberless LLC were created that the first court to see one would immediately declare it dissolved regardless of what the Operating Agreement said because it violates the intent of the legislation. Or, to use Scherer's words, "courts recognize that “some things ‘go without saying'” in legislation just as they do in everyday life, and legislatures thus legislate “against the backdrop of certain unexpressed presumptions.” Bond v. United States, 134 S. Ct. 2077, 2088 (2014)."

It also seems that both FATCA and the OECD Common Reporting Standards treaty supersedes state incorporation rules concerning reporting of Ultimate Beneficial Owner for an entity that pays taxes in any 'acceptable' jurisdiction. One could probably create a memberless LLC in Somalia but have zero luck accessing a modern legal jurisdiction.

Take the Series LLC that can be setup in Delaware. No one outside the US recognizes the individual series as being separate from the others and thus combines all of the assets of the parent LLC, rendering the form useless outside the US. Just because one State creates a memberless LLC obligates no one to recognize it.

[shawnbayern]

Thanks -- these are great questions.

I haven't responded in print yet to Matt Scherer's critique, but I'm aware of it. I had been under the impression he was planning to turn his blog posts into a longer article and was waiting to respond to that. I responded briefly in this podcast; the interviewer spoke with him too: https://player.fm/series/drone-law-today/ghost-in-the-llc. I do also address some of his thoughts (but not comprehensively) in a chapter in an upcoming book called "Research Handbook on the Law of Artificial Intelligence."

My quick response for now is (1) the statutes already clearly contemplate zero-member LLCs, and some even explicitly give operating agreements the power to vary their duration; and (2) judges don't have a clear policy reason, or a clear vision of legislative intent, to invalidate zero-member LLCs. I have more technical responses, but they'd probably be better for a different forum. It's worth saying that the history of business-organizations law is driven partly by the development of new structures that were once considered crazy. Nobody wrote limited-partnership statutes with the idea that a corporation could be a general partner; nobody even imagined one-person companies until relatively recently.

To elaborate my second point above concerning legal policy, who's going to complain about an LLC that operates without members, and how would the courts implement an appropriate remedy? I suggested this problem in my earlier comment: Say I follow the transactional technique I've outlined in my articles, and then the resulting zero-member LLC buys a house two years later with money that it has earned in otherwise unobjectionable transactions that nobody challenges. The former owner of the house is offended that a robot has purchased her house. She sues, asking for the LLC to be dissolved. Why would a judge favor her over the LLC in that transaction? What would it mean to say that the LLC's internal-governance structure is invalid? If a judge did return the house to the original owner, what would we do with the money used to purchase it? To be clear, I have absolutely no problem with, and would encourage, expanded provisions for administrative dissolution of zero-member LLCs if individual ones do become problematic. What I object to is the declaration that all are problematic simply as a matter of form.

I'm not an expert on international taxation or money-laundering regulations, but I don't see any problems from FATCA for a zero-member LLC taxed as a corporation. I'm not aware of anything in the Convention on Mutual Administrative Assistance in Tax Matters (the background legal framework for the Common Reporting Standards) that would "supersede" or preempt state organizational law. At most, the Common Reporting Standards might eventually make it incrementally harder for zero-member LLCs to open accounts with some financial institutions. I applaud attempts to stop money laundering and support better reporting requirements, but it's an open question whether these regulations will be able, practically speaking, to unravel the complexity of conventional business arrangements, much less novel ones. Most people (and even most lawyers) don't understand quite how flexible LLCs really are. (Several years ago I wrote a legal textbook called "Closely Held Organizations" that explains this flexibility in more detail.) Moreover, the world is not static; if existing entities, validly constituted under one or several countries' laws, prove to be useful, banking norms and treaties can easily change.

In any case, you just need one bank to hold your money; you can do a lot without exceeding the reporting requirements (and why would anyone go after you if you're not in fact laundering money or committing crimes?); and, these days, you don't even need a bank account to hold and transfer significant wealth. And holding a bank account is just one capability afforded by legal personality. Using my technique, AIs can effectively own other forms of property, make contracts, be a legal agent, be a legal principal, and so on.