The explanation in the article leaves out a key piece of the whole rationale for the law. The person spearheading the change says that "[t]he original intent was to educate the public that an entity has been formed." This is only part of the story. The real purpose is to give the public notice that a limited liability entity has been formed.
Historically, limited liability has not been the default, but rather has been the exception. Thus, it was considered important to give the public, including service providers and potential vendors, notice of the existence of a new limited liability entity. This way, the public, in contractual dealings with the entity, knows that their legal right to sue is circumscribed to suing only the entity itself, not the people who own and control the entity. This is a real consideration for, e.g., manufacturers that provide inventory on credit.
Of course, in the internet age it's easy for any vendor to quickly check the status of a potential customer with an internet search. Also, limited liability has basically become the default for business entities, so potential service providers and vendors are always wary of the issue. And of course: nobody reads newspapers anymore. But people saying that the law is "corrupt" are way off the mark. There was a very legitimate purpose behind such notice requirements, which have long been a part of the process of creating limited-liability entities.
> Historically, limited liability has not been the default, but rather has been the exception. Thus, it was considered important to give the public, including service providers and potential vendors, notice of the existence of a new limited liability entity. This way, the public, in contractual dealings with the entity, knows that their legal right to sue is circumscribed to suing only the entity itself, not the people who own and control the entity. This is a real consideration for, e.g., manufacturers that provide inventory on credit.
My understanding is that there is no difference, with respect to liability, between LLCs and traditional corporations. Thus, how can you justify this requirement applying only to LLCs?
LLCs were actually quite controversial when they were introduced, because they offer the limited liability of a corporation without a lot of the procedural protections to the public of the corporate form. A corporation is "less dangerous" because those procedural formalities create greater separation between corporations and their owners, reducing the risk that they will be used to simply limit liability that should rightfully be borne by the proprietor.
Unfortunately, no—by the statute the company’s name must include the string ‘Limited Liability Company’ or ‘LLC’ [1]. Practically speaking it would be impossible for anyone dealing with the entity to be unaware it has limited liability when the entity’s very name has to include the words ‘limited liability’.
The general history is right, but the timing is off. NY LLC law was passed in the mid-1990s. Unlimited liability partnerships and sole proprietorships were long since out of style by then.
Historically, limited liability has not been the default, but rather has been the exception. Thus, it was considered important to give the public, including service providers and potential vendors, notice of the existence of a new limited liability entity. This way, the public, in contractual dealings with the entity, knows that their legal right to sue is circumscribed to suing only the entity itself, not the people who own and control the entity. This is a real consideration for, e.g., manufacturers that provide inventory on credit.
Of course, in the internet age it's easy for any vendor to quickly check the status of a potential customer with an internet search. Also, limited liability has basically become the default for business entities, so potential service providers and vendors are always wary of the issue. And of course: nobody reads newspapers anymore. But people saying that the law is "corrupt" are way off the mark. There was a very legitimate purpose behind such notice requirements, which have long been a part of the process of creating limited-liability entities.