In a recent post, I stated that a corporation was the essence of government intrusion, and that it is hypocritical to claim that you do not want the government intruding in the affairs of your business when you founded the entire business on government intrusion by forming a corporation. A person responded by stating that a corporation is just a contract. This is a mistaken understanding of the law.

The word corporation comes from the latin word corpus, literally meaning “body.” To incorporate means to create a body.

A corporation is a legal entity that is created under the laws of a state designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members. A corporation can own property, it can be sued, and despite not being a natural person, corporations are recognized by the law to have rights and responsibilities like natural persons (“people”).

Although corporate law varies in different jurisdictions, there are four core characteristics of the business corporation:

* Legal personality
* Limited liability
* Transferable shares
* Centralized management

Legal personality is the characteristic of a non-human entity regarded by law to have the status of a person. The concept of a legal person is a fundamental legal fiction. (A legal fiction is a fact assumed or created by courts which is then used in order to apply a legal rule which was not necessarily designed to be used in that way.)

Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors. In this way, the investors hide behind the legal person that is the corporation, and are shielded from liability for the actions taken on their behalf. In other words, they use the government as a shield.

A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in the company becomes one of the owners of the company, and is thus insulated from liability by the corporate person through the concept of limited liability.

So claiming that you do not want the government to interfere in your property rights and control your business has no traction with me when you are supporting the very essence of government interference, the corporation.

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