Limited Liability Companies and Technology Transfer

This paper provides an introduction to a new organizational form of business in the United States, the Limited Liability Company (LLC), and explores the potential use of LLCs for technology-transfer arrangements. Favorable characteristics of LLCs are limited liability for all equity holders, avoidance of corporate double taxation, flexibility of organizational form and distributions of profit, and few restrictions on membership. An unfavorable characteristic is that shares in an LLC cannot be publicly traded. The paper argues that, overall, the LLC form promotes certain types of strategic alliances, including those dealing with technology transfer. In particular, LLC characteristics lend themselves well to strategic alliances that form to share risk, exploit complementary assets, reduce transactions costs, overcome investment barriers, exchange technology, speed innovation and development, and make international expansions. The paper also points out why technology-transfer arrangements can and will continue to take on other forms as well.