http://emergentchaos.com/archives/2007/10/bob-blakely-on-the-llp.html The Emergent Chaos Jazz Combo Wed, 01 Feb 2012 19:20:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://emergentchaos.com/archives/2007/10/bob-blakely-on-the-llp.html/comment-page-1#comment-4090 Ethan Preston Wed, 10 Oct 2007 11:40:43 +0000 http://emergentchaos.com/?p=2520#comment-4090 One problem I'd expect the LLP idea to run into is that LLP users may have difficulty finding commercial partners willing to transact with an LLP. At least as I understand it, the point of an LLP is to give a natural person the ability to limit the liability associated with a particular set of identity credentials. If one's commercial partners know that there are few or no assets available from a claim against an LLP, they will refuse to consumate the transaction because they will have no protection (against, for instance, fraud) if they are not able to identify and are able to collect assets from the LLP owner. That is, the risks of transacting with an LLP will be too high if the other party does not have access to the LLP owner's real identity credentials. This puts us back in the same place we were before: the LLP owner's commercial partners will have to store the LLP owner's real identity credentials. This plays out in real world transactions today. To give an example, banks do not loan money to smaller businesses without loan guarantors. Typically, those guarantors are the businesses' owners. Otherwise, the corporate owners could simply pay themselves the loan proceeds as a salary, and walk away from the business entity, leaving the bank with an bad loan. <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=7589" rel="nofollow">There's a lot more written about the efforts taken to insulate individuals from liability</a>. <a href="http://www.assetprotectionbook.com/fapt.htm" rel="nofollow">These efforts often play out very poorly in court</a>. The LLP idea is laudable, but does not directly (as I understand it) address the problem of revocable credentials that cannot be repudiated. I can see a system where only the SSA (or some other authority) and I know my SSN, but I can distribute an infinite number of hashes of my SSN that 1) I cannot repudiate because they could only be calculated with my SSN, but 2) I can revoke, providing prospective notice that a particular hash has been compromised and may be involved in fraud, and 3) I can distribute individual hashes to individual vendors, so I can detect where a particular hash came from, in the event of fraud. One problem I’d expect the LLP idea to run into is that LLP users may have difficulty finding commercial partners willing to transact with an LLP. At least as I understand it, the point of an LLP is to give a natural person the ability to limit the liability associated with a particular set of identity credentials. If one’s commercial partners know that there are few or no assets available from a claim against an LLP, they will refuse to consumate the transaction because they will have no protection (against, for instance, fraud) if they are not able to identify and are able to collect assets from the LLP owner. That is, the risks of transacting with an LLP will be too high if the other party does not have access to the LLP owner’s real identity credentials. This puts us back in the same place we were before: the LLP owner’s commercial partners will have to store the LLP owner’s real identity credentials.
This plays out in real world transactions today. To give an example, banks do not loan money to smaller businesses without loan guarantors. Typically, those guarantors are the businesses’ owners. Otherwise, the corporate owners could simply pay themselves the loan proceeds as a salary, and walk away from the business entity, leaving the bank with an bad loan. There’s a lot more written about the efforts taken to insulate individuals from liability. These efforts often play out very poorly in court.
The LLP idea is laudable, but does not directly (as I understand it) address the problem of revocable credentials that cannot be repudiated. I can see a system where only the SSA (or some other authority) and I know my SSN, but I can distribute an infinite number of hashes of my SSN that 1) I cannot repudiate because they could only be calculated with my SSN, but 2) I can revoke, providing prospective notice that a particular hash has been compromised and may be involved in fraud, and 3) I can distribute individual hashes to individual vendors, so I can detect where a particular hash came from, in the event of fraud.

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