During the twenty-year period between 1977 and 1997, the legal and business communities in the United States experienced the passage of fifty state statutes creating LLCs. In 1977, Wyoming passed the first LLC statute, and the last state to make this statutory adoption was Hawaii in 1997.5 The climate of state statutory changes did not end with the proliferation of LLC provisions, as will be further discussed.

Now that all fifty states have adopted statutes creating LLCs, this form of business ownership should be attractive as the business structure of choice for new and existing businesses wishing to limit their personal liability and to be taxed as a partnership. As entrepreneurs make early start-up decisions regarding entity formation, they may soon realize that there are many possible forms from which they may choose. In addition to the corporation and the LLC, entrepreneurs can choose to start their business as a sole proprietorship, a general partnership, a limited partnership, or a limited liability partnership. Entrepreneurs, as well as those that advise them, should consider many factors before the entity selection is actually made by the business.

It is widely recognized that states compete for new businesses as a way of increasing state revenues. State revenues have increased due to the LLC registration fees, and some states have chosen to distinguish the LLC fee structure from that of the corporation fees structures in an attempt to increase revenues. Given the current state of the economy and budgetary cutbacks, states are considering new ways to generate revenues, including the creation of new entity formation choices.

To make the selection process somewhat more confusing, the LLC entity formation may also take the form of a “series LLC.” A series LLC statute allows for the establishment of a distinct series or cells that are internally created to form the limited liability company. Each series within the LLC entity has its own independent ownership and management, separate from the others within the same LLC entity. However, there are some uncertain legal areas involving series LLCs. An example of one area of concern is the issue of whether each unit in the series has to file a federal income tax return or whether just one return should be filed for the entire series LLC. While this article recognizes the uncertainty of the series LLC, the primary focus of this article is on the L3C entity. Is the L3C the next important and valuable label for those for-profit businesses seeking to be recognized as socially or environmentally responsible?

In Green Tree Financial Corp. v. Randolph, the United States Supreme Court left open the possibility of an arbitration agreement being invalidated because of prohibitive costs. However, the Green Tree Court did not comment on how detailed the showing of prohibitive costs must be in order to do so. Instead, Green Tree ultimately leaves examination of specific cost issues to the lower courts, and those lower courts must also decide the appropriate standard for invalidating an agreement.

The federal circuit courts take varying approaches on how to invalidate an agreement based on cost. One circuit holds any agreement that places significant costs on the party bringing the claim per se invalid. The majority of jurisdictions apply a case-by-case analysis in determining whether to invalidate an agreement. However, two main approaches exist in applying the case-by-case test. The first, adopted by the Court of Appeals for the Fourth Circuit, evaluates the cost impact of the agreement based on the individual party’s situation. The second test, used by the Court of Appeals for the Sixth Circuit, applies the case-by-case test by evaluating the cost impact to a similarly situated “group of plaintiffs.”

This article argues that the best method of assessing prohibitive costs is the Sixth Circuit’s case-by-case approach, which evaluates the cost to a similarly situated group of potential plaintiffs. Part II of this article provides background on arbitration costs as opposed to litigation costs, and examines the Green Tree opinion that set the stage for possibly invalidating arbitration agreements based on prohibitive costs. Part III explains the federal circuit split between the “group of plaintiffs” approach found in Morrison v. Circuit City Stores, Inc., and the “individual plaintiff” approach in Bradford v. Rockwell Semiconductor Systems, Inc. Part IV analyzes the specific advantages and disadvantages of the group-of-plaintiffs approach and the individual-plaintiff approach. Part V of this article concludes that the best method of analyzing prohibitive costs is the Morrison group-of-plaintiffs approach.

In general, the TBCA was enacted as an enabling statute and was written to conform to the standards of the Revised Model Business Corporation Act (“MBCA”), which was adopted by the Corporate Law Committee of the Business Section of the American Bar Association and is continually reviewed and updated. As a result, a large part of the language of the TBCA mirrors that of the MBCA.

In order to modernize the current TBCA and, in particular, to keep up with the changes to the MBCA and the General Corporate Law of the State of Delaware (“DGCL”), the Tennessee Bar Association (“TBA”) asked it Business Law Section to review the current TBCA and suggest changes. This effort was undertaken by the TBA’s Business Law Section as part of a larger project, the Business Entity Study Committee, which encompasses a review of all of Tennessee’s key business law statutes to develop helpful edits and additions (and to better coordinate those statutes). Over the past three years, sixteen lawyers in various practice settings from across the state of Tennessee collaborated to review existing provisions in the TBCA, develop recommendations for revisions to the TBCA, formulate a process for developing revisions to the current TBCA, and in fact, develop, draft, and successfully advocate for the adoption of those revisions by the state legislature. Representatives of the office of the Secretary of State, legislative staff, legislative committees, both houses, and the Governor were also involved in this revisionary process. The amendments to the TBCA represent a significant update to the current TBCA, rather than a complete overhaul, formulated and drafted with intent to modernize the current TBCA and allow Tennessee to remain an attractive competitor in the market for incorporations (and, thus, the markets for business development and investment). On May 21, 2012, Tennessee Governor Bill Haslam signed into law House Bill 3459, which revises multiple provisions of the TBCA effective on January 1, 2013.

This paper presupposes a general understanding of corporate law generally and the workings and implications of the current Tennessee Business Corporation Act specifically. The purpose of this article is to outline the most important 2012 revisions to the TBCA and identify their importance to attorneys—especially corporate counsel—practicing in Tennessee.

On April 5, 2012, President Barack Obama signed the bipartisan Jumpstart Our Business Startups Act (the “JOBS Act”). The JOBS Act now seeks to ease some of the restrictions brought about by Sarbanes-Oxley and the Dodd-Frank Act, and promote market participation. President Obama’s Startup America initiative and independent efforts to legalize crowdfunding as a method for raising early-stage equity-based financing were among the catalysts of the JOBS Act legislation, which includes a crowdfunding component.

Since many Americans are looking for jobs, “lawmakers looking for an edge on Capitol Hill are…labeling their proposals ‘jobs’ bills.” But, the JOBS Act is not fundamentally about the direct creation of jobs. The full name of the new legislation – the Jumpstart Our Business Startups Act – more accurately reflects its aim: encouraging small business capital formation by easing restrictions imposed by the federal securities laws. Although the Securities and Exchange Commission (“SEC”) has yet to implement the bulk of the JOBS Act provisions through required regulations this article describes and explores the changes to federal securities regulation promised through the JOBS Act and assesses their prospective impact on a preliminary basis.

This article will first consider the amended offering exemptions provided under Sections 3(b) and 4(2) of the Securities Act of 1933, as amended, generally, before addressing the new crowdfunding exemption under Section 4(6) specifically. Then, the article describes legislative changes to the initial public offering process before addressing amended threshold requirements for issuers registering a class of securities under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).