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Reinier H. Kraakman & Henry Hansmann, The Essential Role of Organizational Law, 110 Yale L.J. 387 (2000).

Abstract: The answer we offer is that organizational law goes beyond contract law in one critical aspect, permitting the creation of patterns of creditors' rights that otherwise could not practicably be established. In part, these patterns involve limits on the extent to which creditors of an organization can have recourse to the personal assets of the organization's owners or other beneficiaries--a function we term "defensive asset partitioning." But this aspect of organizational law, which includes the limited liability that is a familiar characteristic of most corporate entities, is of distinctly secondary importance. The truly essential function of organizational law is, rather, "affirmative asset partitioning." In effect, this is the reverse of limited liability: It involves shielding the assets of the entity from the creditors of the entity's owners or managers. Affirmative asset partitioning offers efficiencies in bonding and monitoring that are of signal importance in constructing the large-scale organizations that characterize modern economies. Surprisingly, this crucial function of organizational law--which is essentially a property-law-type function--has largely escaped notice, much less analysis, in both the legal and the economics literature.