DO THE OBJECTIVIST ETHICS APPLY TO CORPORATIONS?
“It is only to a living entity that things can be good or evil.” –Galt’s speech, Atlas Shrugged.
A corporation is not a living entity and its self-interest is not based on the same facts of reality as ours is. A corporation, by design, operates under different standards that are decidedly less friendly to individual liberty.
“The standard of value of the Objectivist ethics – the standard by which one judges what is good or evil – is man’s life, or: that which is required for man’s survival qua man.” --Galt’s speech, Atlas Shrugged.
By the same token, the standard of value of corporate ethics is that which is required for the survival of a corporation.
A corporation is a legal entity that can be brought into existence only by an act of a government, and its continued existence depends on obeying whatever rules that government sees fit to impose on it. Thus, the conditions that govern the survival of a corporation differ from the conditions that govern the survival of a human being. It follows that their respective ethical systems cannot be identical, and in some cases will be at odds with one another.
A corporation is not a living entity and its self-interest is not based on the same facts of reality as ours is. A corporation, by design, operates under different standards that are decidedly less friendly to individual liberty.
“The standard of value of the Objectivist ethics – the standard by which one judges what is good or evil – is man’s life, or: that which is required for man’s survival qua man.” --Galt’s speech, Atlas Shrugged.
By the same token, the standard of value of corporate ethics is that which is required for the survival of a corporation.
A corporation is a legal entity that can be brought into existence only by an act of a government, and its continued existence depends on obeying whatever rules that government sees fit to impose on it. Thus, the conditions that govern the survival of a corporation differ from the conditions that govern the survival of a human being. It follows that their respective ethical systems cannot be identical, and in some cases will be at odds with one another.
said human is an owned corporation in maritime law. I am no expert on that specific angle , but I have heard it discussed for many years.
None of us has been offered informed consent to contract in SSA as adults. Our parents ignorantly enrolled/sold us into Corporate Slavery. And then there are those who ignorantly volunteered without asking of the conditions of The Contract.
Covenant or Contract? ....Hmmm.....Geddes?
Since governments can't grant rights and don't - even to corporations - you are AGAIN confusing the two. Contracts are NOT rights for either party. They are obligations. VERY different things. It is your quintessential failure to grasp this which causes you to misapply every other related concept.
"Contracts are an exercise of the right to the use and disposal of one’s property." "At root, it’s an exchange of rights to control specific properties in specific ways."
Again, no. Go look in ANY legal dictionary. Contracts are primarily trade agreements. Once property has changed hands, ownership also changes. Permanently. The former owner no longer has any claim to that property. What are shares? Shares are a legal agreement outlying partial ownership in decisions on the part of the company and profits (usually in the form of dividends) in exchange for investment, but the investment moneys become the property of the company. There is no clause for the investor to re-exchange their "share" for money from the company because the investor has no further claim on that money.
"and the judge/arbiter must follow the terms of the contract"
You misunderstand the role of the arbiter/judge. First, they determine the validity and extent of the claims, i.e. damages and proposed remuneration. Then they look to the contract to see if the contractual provisions are enforceable or if there are extenuating circumstances like bad faith, false advertising, appropriate use, criminal action, etc. Only after this is reviewed does the judge rule on the enforcement. But the contract in no way controls or limits the actions of the judge per se.
" I never said a transaction is immoral when done through a corporation"
STOP changing the argument. -1000 Your argument - repeatedly given - is that it is immoral for corporations to shield private assets in lawsuits. THAT is the argument YOU made. THAT is the argument you MUST defend. It is a logical consequence of "outlawing" corporations and therefore central to any argument prohibiting them (aside from Association). It is a consequence you can NOT ignore without conceding the entire debate. Since I have asked you at least FIVE times and you have not answered, I will assume that you concede.
"I’ve demonstrated how the corporate system is incompatible with the Objectivist moral and ethical position."
You have almost every single concept or definition fundamentally wrong - as I have to keep explaining each and every one of them to you. You've invented for yourself workarounds, ignoring the simplicity and elegance corporations bring. You ignore the explosion of entrepreneurial endeavors incorporation enabled in the mid-1800's in the United States which in turn allowed the United States to quickly become a world economic power. You can't show that corporations inherently are immoral nor can you show them as inherent sources of graft or corruption.
Congratulate yourself if you want. I leave it to any other reader of this thread to judge for themselves who has laid out the more compelling argument.
That’s why I put the word “rights” in quotes. Government grants privileges to corporations.
Contracts are NOT rights for either party. They are obligations.
I never said contracts are rights or obligations. Most of them are agreements to exchange one set of rights or obligations related to a specific good or service for another.
Contracts are primarily trade agreements. Once property has changed hands, ownership also changes. Permanently.
Contracts can involve an exchange of one property for another, but don’t have to. Rental agreements, for example, are an exchange of property (money) for temporary use of a property owned by another person or persons.
Shares are a legal agreement outlying partial ownership in decisions on the part of the company and profits (usually in the form of dividends) in exchange for investment . . .
Shares are more than that, they represent partial (or full) ownership of a company itself. Otherwise wouldn’t a company (corporation or otherwise) have no owners?
. . . but the investment moneys become the property of the company.
Not in an unrestricted sense, in exchange for an investor’s money a company takes on a fiduciary duty to act in the best interests of the investor.
STOP changing the argument. -1000 Your argument - repeatedly given - is that it is immoral for corporations to shield private assets in lawsuits. THAT is the argument YOU made.
Really? Show me where I said that. My argument - repeatedly given - is that it is immoral on the part of the government to create corporations with special privileges. As I said earlier (verbatim), “The system that requires this is clearly immoral. Equal treatment under the law is a bedrock principle of a free society. If today’s system of limited liability for corporations is extended to unincorporated businesses, then I have no problem with that.
Congratulate yourself if you want. I leave it to any other reader of this thread to judge for themselves who has laid out the more compelling argument.
So do I.
I think the essay so profound that I use it as my primary resource in evaluating my personal and business practices. I've 35 years of small business ownership and not yet reached age 60. I have never had more than 5 full time employees and keep as far from regulated market as I can.
My assertions: (many concur with yours) and formulated prior your post
A corporation is an immortal entity. It can have no values, therefore no morals or ethics that are objective to Life.
Limited liability shields malfeasance of the mortals who direct the operations. Remove this privilege.
No business may own another as a "fiction" of the primary.
No Not-For-Profit entities. Any human participating in such entity that earns more than 'sustenance' of Life makes profit. simple as a screwdriver
All principal owners, directors, shareholders are to hold equal liability under conditions of malfeasance. Should the "business" be liable for loss of property or life/limb the scale of loss of the petitioner should be the scale of loss of all leadership and investment personalities. "I didn;t know" is not a reason. Force due diligence on a personal basis.....make every decision a "mortal" one. Where there is due diligence, and reasonable oversight or accident occurs, there is scale of forgiveness.
Take responsibility, must be the natural Life-Value based moral and ethically expressed condition of Law.
Applying the above precludes much of the economy of scale we are used to in these days. However, it promotes more active "entities" of similar trade, in competition for market share.
Small is beautiful.
What do corporations do, then? First, they provide a legal apparatus which allows entrepreneurs to separate their private assets from their business assets. This provides a measure of security that if their business venture doesn't work out (and 2 out of 3 private ventures fail within the first 3 years) that they won't be reduced to debtors prison (except in egregious cases of criminal malfeasance).
Second, corporations provide for an easy method of controlling business ownership. Corporations - including their products, services, and intellectual property - may be bought and sold by investors.
Third, corporations provide opportunity for entrepreneurs. Prior to corporations existing, businesses were typically passed down within families from father to son. That made for a lot of wealthy children without business understanding - or interest - and the perpetuation of an aristocracy of the elites. Corporations allow for the hiring and promotion - and eventual management - of those most capable not just those most connected.
Fourth, corporations provide wealth opportunities to the common man. Prior to the existence of corporations and general share offerings, there were few opportunities for the lower and middle class to invest and see a return on that investment. Those not part of the elite class (the investor class) had little opportunity to build wealth.
Now that is not to say that the individuals running a corporation are they, themselves, of good moral character. That is why the purchase offering for Twitter by Elon Musk has been so entertaining: all of a sudden the Jack Dorsey's and their stooges are going to have their bad characters laid bare for the world to see. There would be not even a hint of this without corporations.
All modern economies have specific sets of rules for corporations — rules that are distinct from and often opposite to those for individuals and other types of organizations. These rules violate free-market norms in two major ways: they require corporations to submit to intrusive government oversight and regulation of their activities, and they give corporations special privileges that are denied to unincorporated firms or individuals.
Corporations are brought into existence by legislative permission. They can be snuffed out of existence just as easily through government revocation of their charters. This gives governments tremendous power to regulate corporations as they see fit, and encourages corporate decision makers to seek the “friendship” of powerful government agencies and do their bidding. The result is a toxic blend of crony capitalism and a “mixed” economy, within which the marketplace is anything but free.
Chief among corporate special privileges is “limited liability,” designed to shield owners of corporations from financial risk relating to corporate negligence or misbehavior. By granting limited liability to owners of corporations and denying it to unincorporated firms, the government is creating a double standard in the marketplace, one that favors corporations over individuals.
These government-conferred competitive advantages permit corporations to grow larger than they would in a free market, “crowding out” other types of business organizations in the process. Eventually we arrive at an economic landscape dominated by corporate executives and their regulators, at the expense of everyone else’s freedom.
Suing a corporation is a difficult, expensive and time-consuming process — much more so than suing another person. A corporation can easily dissolve or go bankrupt, even as its owners continue to prosper. Since corporations can own, buy, and sell one another, a privilege rightly denied to individuals, it is easy to establish a chain of corporate ownership to conceal the identity of the true owners, by setting up the controlling corporations in different domestic jurisdictions or in other countries.
A basic Objectivist principle is that governments should not interfere with anyone’s peaceful activities, provided those activities do not violate the rights of others. This principle applies not only to individuals, but also to groups of individuals — and a corporation is simply a group of individuals who share an interlocking set of contractual relationships.
A consistent application of this principle leads to this conclusion: any activities that are legally and morally legitimate for corporations should be equally legitimate for all other private, voluntary groups of people. Conversely, activities that violate the rights of others should be prohibited to all such groups. When it comes to legal rights and responsibilities, a free society should not treat corporations any differently from the way it treats any other privately organized groups.
This leads to the further conclusion that there is no need or justification for “corporation” as a legal concept at all. An unincorporated business should have exactly the same standing under the law as an incorporated business in matters such as liability, reporting requirements, and recognition of contracts. Aside from protecting the rights of third parties, governments should have no say regarding any firm’s form of organization, purpose, or method of operation. Legal protections extended to corporations should be equally available to all other groups.
Such a set of reforms, if applied consistently, would have far-reaching effects. It would do away with any reason to treat corporations as privileged legal entities. It would remove the need for a body of corporate law, separate from individual and contract law. It would render irrelevant the legal fiction of corporate personhood, along with the torturous logic needed to justify such a concept. It would bring more consistency and fairness to government policies regarding liability and secrecy. It would ensure that any legal protections given to corporate owners and agents would also extend to unincorporated individuals and groups. Taken together, these reforms would constitute a major step toward a more free economy.
I'm going to wait to see if you enumerate these because I'm dying to know what they are...
"This gives governments tremendous power to regulate corporations... The result is a toxic blend of crony capitalism..."
post hoc ergo propter hoc fallacy. You are arguing that one is necessarily a result of the other. Rather, "crony" capitalism - favoritism - has been happening all through time regardless the presence of corporations. The introduction of corporations in no way hindered or expanded this. In the end, it still comes down to individual politicians giving favors to benefit individual interested parties.
"Chief among corporate special privileges is “limited liability,” designed to shield owners of corporations from financial risk relating to corporate negligence or misbehavior."
Fundamentally false. Corporations are given the privileges I outlined above but incorporation does not shield corporate decision-makers from any of a wide variety of criminal punishments including fraud, embezzlement, etc. One absolutely can sue an individual executive for negligence, etc., and (after proving personal malfeasance) sue for remuneration from that individual's personal assets through a process known as "piercing the corporate veil." The key, here, is in the separation of business duties from personal criminal behavior. The former can be somewhat shielded while the latter is not.
For more on why the formation of corporations favors entrepreneurship, see my comments above as well as the economic history of the United States - which was first to allow incorporation. The ability for entrepreneurs to take risks has been a bedrock staple of United States ingenuity since the mid-1800's when corporations began to take off.
"These government-conferred competitive advantages permit corporations to grow larger than they would in a free market,"
Not sure what "government-conferred" competitive advantages you are talking about here TBH. If you are referring to the aforementioned favoritism, again I must point out that favoritism has been a hallmark of government long prior to the United States and corporations.
As to the second inference that these advantages allow corporations to grow larger than in a free market, I would ask you to present any evidence to bolster your case here. I would argue correlation rather than causation. See also point 3 in my initial post regarding competency.
"Suing a corporation is a difficult, expensive and time-consuming process — much more so than suing another person."
Actually, corporations are sued far more often than individuals because of their deep pockets - not in spite of. In automobile accidents, who is the actual defendant? It is the insurance company - not the individual! I must also point out that most lawsuits are settled out of court - usually benefiting the plaintiff. You have your facts backwards here.
"A corporation can easily dissolve or go bankrupt, even as its owners continue to prosper."
Yes. This TREMENDOUSLY benefits entrepreneurs of all shapes and sizes.
"...it is easy to establish a chain of corporate ownership to conceal the identity of the true owners..."
Nonsense. Every corporation must file a Letter of Incorporation with the State in which it incorporates naming the owners - if private - or the stock symbol if public. Private corporations can not hide ownership inquiries. Public companies must disclose at least annually their primary stock owners, as well as corporate leadership including members of the Board. Corporations are also required to file taxes declaring much of this on a quarterly basis as well.
"A consistent application of this principle leads to this conclusion: any activities that are legally and morally legitimate for corporations should be equally legitimate for all other private, voluntary groups of people."
Inherently false. Rights are individual - not collective, i.e. rights may only be expressed (and thereby protected by government) at an individual level - not a "group" level. Activities which engage more than one person can not be considered rights but rather contractual agreements. And the "legitimacy" of contractual agreements, i.e. their enforceability, is subject to the laws of society. Contracts are in no way equivalent to rights and can not be logically tethered.
"This leads to the further conclusion..."
Except that once one proves A to be false in A -> B, B no longer holds.
"Legal protections extended to corporations should be equally available to all other groups."
I really don't think you understand corporations at all. If you substitute the word "association" in the First Amendment with "corporation" you'd be pretty doggone close. A corporation can be created for any purpose whatsoever. They can structure their leadership any way they so choose. They can determine their own membership and rules for admittance and dismissal. They can determine the character and nature of investments and any related dividends.
Religious charters are corporations. Non-profit organizations are corporations. Homeowners' associations are corporations. Labor unions are corporations. Even marriages in their basic sense are corporations.
What you really want to complain about - and which I will agree with you on - is the lack of morals in those who commonly aspire to governance - whether that be a government board or a corporate one.
"Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports. In vain would that man claim tribute to patriotism who should labor to subvert these great pillars of human happiness -- these firmest props of the duties of men and citizens. . . . reason and experience both forbid us to expect that national morality can prevail in exclusion of religious principles."
- George Washington
Let’s stop right there for a moment, because what you just said invalidates any justification for corporations to exist and be legally recognized.
Who grants these privileges to corporations? Governments.
What is the basis, under Objectivist principles, for a government to grant special privileges to anyone or any group? There is none. The purpose of government is to protect individual rights, not grant privileges.
A free market can exist without corporations. A government can fully protect individual rights without the need for corporations. All the alleged economic “benefits” of corporations can be achieved through voluntary contracts, without the need for any special “privileges”.
If you read my comments, I note that the right to Association - and therefore to form associations, i.e. corporations - is stated in the text of the First Amendment as a protected, God-given right - not one "bestowed" by government. Unless one argues that the right to Association does not exist as an innate right, one finds that an argument against corporations is immediately and critically imperiled.
"All the alleged economic “benefits” of corporations can be achieved through voluntary contracts, without the need for any special “privileges”.
What do you think a corporate charter is other than a voluntary contract? Who is it that arbitrates contractual disputes in society? The default is government unless specifically provided for and agreed upon in the contract (a special arbiter). Therefore government becomes the de facto enforcement arm of any given contract - not just a corporate charter. Thus to claim that just because a corporation is recognized by the government, i.e. the courts, hardly amounts to any "special" privilege. Unless you can provide an example I haven't already explained...
”What do you think a corporate charter is other than a voluntary contract?”
A corporate charter is not a voluntary contract. States can modify or revoke corporate charters at will. Corporation owners cannot.
I agree with you that “government becomes the de facto enforcement arm of any given contract.” Another reason why corporations are unnecessary. All the alleged economic “benefits” of corporations can be achieved through voluntary contracts, without the need for corporations.
I think if you check, every single "association" you can think of has incorporated. If they handle money they pretty much have to.
With respect to liability, you form a limited liability corporation rather than remain a sole proprietorship because then your business is insulated from your personal wealth. I'm really curious why anyone here would be offended by that or think that's not a good idea. Seriously. The formation of limited liability corporations is what enables entrepreneurism. I reiterate: 2 out of 3 entrepreneurial ventures FAIL within the first 3 years. The best way to kill the spirit of the entrepreneur is to punish them personally just because their business venture doesn't work out.
Now you argue that such a law is immoral. Defend such a claim - if you can. Explain to me how it is moral to punish and personally bankrupt any of the 21% of restaurants which went out of business during the pandemic - most of them small mom & pop diners. None of them broke the law. So how do you justify what I consider a cruel and sadistic policy to attach liens against their personal lives? You are making that argument. Try to defend it at your own logical and human peril.
And with respect to "preferential tax treatment," please cite any law whatsoever which shows that you don't have to pay business taxes just because you are unincorporated. Show me a law which says that you get to pay lower tax rates simply because you are incorporated. They don't exist. You pay taxes based on being in business and then you hire good accountants and tax attorneys to take advantage of all the loopholes. Are the corporations to blame for the loopholes? NO, the politicians are. (And just FYI, I'm against corporate taxation at all for the simple fact that those taxes get passed along to consumers in price increases. That's Accounting 101 - which I took as part of my MBA.)
"A corporate charter is not a voluntary contract. States can modify or revoke corporate charters at will. Corporation owners cannot."
0 for 3 there. I've helped create a corporate charter and your charter exactly lays out the type of corporation (S corp, LLC, etc.), its governance mechanism (board, president, etc.), segregation of duties within said governance mechanism, initial allotment of shares, etc. It is 100% voluntary. You file it with the State in which you incorporate and pay a small fee.
Additionally, States CAN NOT - absolutely CAN NOT - "modify or revoke corporate charters at will." That's complete nonsense. It's called tortious interference in legal terms and its grounds for the corporation's officers to sue the State. The only time the government can do such is after first showing that corporation officers are disobeying a law. (Remember, it usually falls on government courts to enforce contractual agreements!) A classic example of this was the State attempting to prosecute Hobby Lobby for failing to provide abortifacients to its employees.
Furthermore, corporations absolutely can - and do - change their bylaws. They provide how to do so when they create the corporate bylaws in the first place. It's no different than the Constitution dictating its initial laws and saying that if you want to change it to pass an Amendment. That's why corporations have Boards of Directors - they are usually the ones put in place by the Shareholders to make changes to corporate bylaws and policies just like the Legislative Branch of government.
PLEASE, PLEASE, PLEASE!!! There are many legal materials available to anyone who cares to look which covers all of this. You can have a corporation set up in 15 minutes on LegalZoom - it's that simple. But let's stop making the tool the problem. Just like with firearms or money, it is the individual wielding it - and their personal ethics - who are at the heart of any moral controversy.
I think if you check, every single "association" you can think of has incorporated. If they handle money they pretty much have to.
Really, have to? Who requires it, the government or the free market?
With respect to liability, you form a limited liability corporation rather than remain a sole proprietorship because then your business is insulated from your personal wealth.
Why is this true only for corporations? Governments could do this for ALL businesses. Governments don’t, because creating corporations gives them more control.
I'm really curious why anyone here would be offended by that or think that's not a good idea. Seriously.
If it’s such a good idea, why isn’t limited liability the default option for all businesses? My objection is not to limited liability itself, my objection is that unincorporated businesses are not given equal treatment.
The formation of limited liability corporations is what enables entrepreneurism.
What it enables is cronyism. Entrepreneurism was alive and well in the U.S. long before the proliferation of corporations.
I reiterate: 2 out of 3 entrepreneurial ventures FAIL within the first 3 years. The best way to kill the spirit of the entrepreneur is to punish them personally just because their business venture doesn't work out.
The best way to kill the spirit of entrepreneurs is to saddle them with bureaucratic requirements, fees and interference, and to punish them if they don’t comply. If you want limited liability, it should be extended to all businesses.
Now you argue that such a law is immoral.
I argue no such thing. Let’s drill down. By “limited liability”, I mean that it’s limited compared to the liability that can be incurred by business that choose not to incorporate. My argument is that the government is setting up a two-tiered system of justice by sponsoring such a system. The only reason for a person to incorporate a business is to reap the legal advantage that incorporation provides. The system that requires this is clearly immoral. Equal treatment under the law is a bedrock principle of a free society. If today’s system of limited liability for corporations is extended to unincorporated businesses, then I have no problem with that.
And with respect to "preferential tax treatment," please cite any law whatsoever which shows that you don't have to pay business taxes just because you are unincorporated. Show me a law which says that you get to pay lower tax rates simply because you are incorporated. They don't exist.
Seriously? Just compare the corporate income tax code to the personal income tax code, especially the top brackets. I never said “you don’t have to pay business taxes”, I said that corporations (aside from LLCs) get preferential tax treatment. And they do.
You pay taxes based on being in business and then you hire good accountants and tax attorneys to take advantage of all the loopholes. Are the corporations to blame for the loopholes? NO, the politicians are. (And just FYI, I'm against corporate taxation at all for the simple fact that those taxes get passed along to consumers in price increases. That's Accounting 101 - which I took as part of my MBA.)
Who buys these politicians with campaign contributions? Predominantly corporations! Politicians vote to please their biggest contributors, so they can be re-elected and maintain their power. (That’s Economics 101 – which I took as part of my Master’s Degree in Economics.)
"A corporate charter is not a voluntary contract. States can modify or revoke corporate charters at will. Corporation owners cannot."
0 for 3 there. I've helped create a corporate charter . . .
So have I.
. . . and your charter exactly lays out the type of corporation (S corp, LLC, etc.), its governance mechanism (board, president, etc.), segregation of duties within said governance mechanism, initial allotment of shares, etc. It is 100% voluntary.You file it with the State in which you incorporate and pay a small fee.
It's 100% mandatory. All of the above charter requirements are mandated by the state. If you don’t comply you don’t get to incorporate.
Additionally, States CAN NOT - absolutely CAN NOT - "modify or revoke corporate charters at will." That's complete nonsense. It's called tortious interference in legal terms and its grounds for the corporation's officers to sue the State. The only time the government can do such is after first showing that corporation officers are disobeying a law.
Absolutely states CAN "modify or revoke corporate charters at will." See:
https://www.allenmatkins.com/real-ide...
“For example, Article IV, Section 31 of California's 1849 Constitution authorized the formation of corporations under general laws and provided that general laws could be altered from time to time or repealed. This provision continues to the present day in Article 20, Section 5 of the current California Constitution. When the California legislature enacted current General Corporation Law in 1975, it included in the very first section of that law an express statement that it could be amended or repealed at any time.”
Furthermore, corporations absolutely can - and do - change their bylaws.
Bylaws are not part of the content of a charter, the so-called contract with the state.
PLEASE, PLEASE, PLEASE!!! There are many legal materials available to anyone who cares to look which covers all of this. You can have a corporation set up in 15 minutes on LegalZoom - it's that simple. But let's stop making the tool the problem. Just like with firearms or money, it is the individual wielding it - and their personal ethics - who are at the heart of any moral controversy.
The tool is the problem. Corporations are enablers for cronyism and big government. Their existence gives rise to moral conflicts that would otherwise be easily avoided. They have no place in a free-market economy.
Don't put words in my mouth. -1 I said it was a really good idea, but not a requirement. Government as of the passage of the Sixteenth Amendment has been empowered with collecting income taxes both from private individuals who work for themselves and those who work for others. In order to comply with those provisions, the wise business owner sets up a corporation and files taxes under that corporation. They don't have to, but most choose to.
From the free market perspective, it is still wise to set up a corporation. I've already listed the benefits and would again refer you to them. I AM, however, going to press you AGAIN to defend your contention that separating one's business assets from one's personal assets is somehow immoral. You have yet to explain that one and it is CORE to this argument. Don't deflect. Answer the question or concede the argument.
"If it’s such a good idea, why isn’t limited liability the default option for all businesses?"
Consider: where does liability get adjudicated? In a court of law - usually by a State-authorized judge. Now if you fail to construct your business contracts in such as way as to specify a private arbiter, you default to the State and thereby fall under their rules for arbitration. Then you have to go to all the trouble to demonstrate that you keep two sets of books and that you haven't broken any laws which would make your private assets vulnerable. Those who have already incorporated have completed those steps! Incorporation puts the burden of proof on the plaintiff rather than the business owner. Incorporating is a pro-active legal measure - one no one is required to perform but which the wise ones do.
"Just compare the corporate income tax code to the personal income tax code, especially the top brackets. I never said “you don’t have to pay business taxes”, I said that corporations (aside from LLCs) get preferential tax treatment. And they do."
Ummm... Business owners have to pay taxes twice: once on their business and a second time on their personal income. If you want to call that "preferential" treatment that's up to you. But you're also trying to make an apples and oranges comparison: corporations are not individuals. And that's not to mention that there isn't an income tax system in existence which is "fair." You're tilting at windmills. Have fun with that.
"Why is this true only for corporations? Governments could do this for ALL businesses."
Consider this from the perspective of your own argument: if there is no separation of personal from business assets as you seem to claim, it isn't even POSSIBLE. It also enables government to come after your personal assets in order to pay business taxes. (BTW - I'm still waiting for an answer on the moral justification of prohibiting separation of personal and business assets.)
And to answer your question: again it comes down to adjudication. You can wait until you get sued or you can be proactive. But it isn't the government - the judge precisely - who is responsible for the business owner's decisions.
"It's 100% mandatory. All of the above charter requirements are mandated by the state. If you don’t comply you don’t get to incorporate."
You asked if it is voluntary to incorporate. It is. Now you're changing the question to ask if one can avoid the requirements in the documentation. -1 But the contract isn't with the government, however. You're confusing the terms, parties, and roles. You file the incorporation papers to give notice to the government of the arrangement and to notify them of who the arbiter of any contractual dispute is going to be, since usually it is the government-appointed judges.
"For example, Article IV, Section 31 of California's 1849 Constitution..."
It is also why very few corporations incorporate in California. Most choose Delaware. The fact that you have to go to the most dysfunctional State in the Union to find your example shows just how weak your argument really is. In most other States - States actually friendly to business and entrepreneurism - they have no such ability to interfere. Again see tortious interference.
"Bylaws are not part of the content of a charter, the so-called contract with the state."
I never said bylaws were part of the charter. But the process for changing the bylaws IS. And again - incorporation is NOT a contract with the State as a party.
"The tool is the problem. Corporations are enablers for cronyism and big government."
That's your opinion but it is an opinion you haven't been able to substantiate on moral grounds. And as anyone who reads history can attest to, political cronyism has been present in every age of history - with or without corporations.
According to the census bureau, 99.7% of businesses are "small" businesses employing fewer than 500 employees. (https://sbecouncil.org/about-us/facts....) I would note that this number explicitly relies on those businesses being incorporated in order to be counted. Small businesses constitute the engine of entrepreneurism in this nation and the vast bulk of all business dealings. The attempt to paint "corporations" as boogeymen follows the exact same dishonesty that gun control enthusiasts exhibit when they blame the guns for the crimes of their wielders. They ignore the 99.9% of lawful use and focus only on the .1%.
I don't argue that cronyism doesn't happen. But again, that cronyism is between individual politicians and the individual business decision-makers. It would be an overt fallacy of inclusion to say that every employee within a corporation is A) either a beneficiary of or b) in agreement with - let alone has knowledge of - any such preferential arrangement. The true argument (the one I would join you in) should center around the immorality of the respective business owner as judged by their decisions/actions.
Yes most states do, including your favorite corporation state, Delaware:
TITLE 8
Corporations
CHAPTER 1. General Corporation Law
Subchapter XVIII. Miscellaneous Provisions
DEL. CODE ANN. tit. 8, § 394: Reserved power of State to amend or repeal chapter; chapter part of corporation’s charter or certificate of incorporation.
This chapter may be amended or repealed, at the pleasure of the General Assembly, but any amendment or repeal shall not take away or impair any remedy under this chapter against any corporation or its officers for any liability which shall have been previously incurred. This chapter and all amendments thereof shall be a part of the charter or certificate of incorporation of every corporation except so far as the same are inapplicable and inappropriate to the objects of the corporation.
I AM, however, going to press you AGAIN to defend your contention that separating one's business assets from one's personal assets is somehow immoral. You have yet to explain that one and it is CORE to this argument. Don't deflect. Answer the question or concede the argument.
Show me one instance where I contended that separating one's business assets from one's personal assets is somehow immoral. You can’t, because I didn’t. To reiterate what I did say, the government is setting up a two-tiered system of justice by sponsoring such a system. The only reason for a person to incorporate a business is to reap the legal advantage that incorporation provides. The system that requires this is clearly immoral. Equal treatment under the law is a bedrock principle of a free society. If today’s system of limited liability for corporations is extended to unincorporated businesses, then I have no problem with that.
You asked if it is voluntary to incorporate. It is. Now you're changing the question to ask if one can avoid the requirements in the documentation. -1 But the contract isn't with the government, however. You're confusing the terms, parties, and roles.
No I’m not. A corporate charter is a contract between a corporation and the government that brings that corporation into existence. The U.S. Supreme Court has explicitly said so. In Dartmouth v. Woodward (1819), the Court ruled that amending a corporate charter by a unilateral act of government was an impairment of contract. Following this decision, most states (including Delaware) got around this stipulation by putting “reservation clauses” into their constitutions or laws, reserving the power to modify or repeal their corporation laws at will.
And as anyone who reads history can attest to, political cronyism has been present in every age of history - with or without corporations.
I said that corporations are enablers for cronyism and big government. Their existence makes cronyism easier, more profitable, and more difficult to remedy. Just because cronyism existed in the past doesn't mean that we should promote policies that encourage it.
This whole issue can be resolved by applying Objectivist first principles. The sole purpose of government is to protect individual rights. To the extent that shielding personal assets from business assets is a right, the government should enforce that right for all its citizens. One should not have to register with the government to implement that right, any more than one should have to register with the government to implement the right to own a handgun. Protect this right for all citizens on equal terms, and the issue goes away.
You make it a core aspect of your entire argument. -1 You repeat it in every response (to me) as a core contention, such as when you state "The sole purpose of government is to protect individual rights. To the extent that shielding personal assets from business assets is a right, the government should enforce that right for all its citizens.".
Fallacies aside (contracts != rights), you claim it to be THE KEY ASPECT of your "clearly immoral" evaluation regarding corporations. You rail that "it isn't fair" that corporations get to do this and unincorporated individuals don't - even though I've already debunked your assertion on every front. Now, I'll repeat AGAIN: why is this key "advantage" of incorporation immoral in your mind? Two questions to explore in your response.
1. Why is embezzlement a moral offense - let alone a criminal one?
2. Why would you subject a sole proprietor to debtor's prison by confiscating their personal assets to pay business debts?
No I don’t. Shielding personal assets from business assets may very well be a right – I didn’t address that issue at all. If it’s a right, the government is obligated to enforce it for all its citizens; if not, the government is not entitled to create such a “right” out of thin air for those people willing to submit to its dictates. That is clearly immoral on the part of the government, not the person who decides to incorporate in self-defense. Giving certain entities additional rights, or enhanced means of enforcing their existing rights, impairs the rights of every other citizen.
If the issue is only about shielding personal assets from business debts, this can easily be accomplished by inserting the appropriate language into contracts between a business and its suppliers and customers. No corporation is necessary. And debtors’ prisons no longer exist.
I notice you had nothing to say about the other points I brought up. Many of your assertions turned out to be not the case:
Show me a law which says that you get to pay lower tax rates simply because you are incorporated. They don't exist.
Additionally, States CAN NOT - absolutely CAN NOT - "modify or revoke corporate charters at will." That's complete nonsense.
And again - incorporation is NOT a contract with the State as a party.
If you still stand by these statements, I’m more than willing to listen to what you have to say.
We're not talking about rights! I don't know how many times I have to repeat this. You keep confusing rights with the legal rulings of government courts when it comes to resolving bankruptcy claims. Since you don't have a single aspect of the process correct, let me spell it out VERY clearly using an example.
I go into business. I invest in my corporation $1000 which I then log on my corporate balance sheet as an asset. I also log on my corporate balance sheet 1000 shares (in my name) as a liability and to indicate who has control of my corporation. I then use that $1000 to purchase supplies for my business. Let's say part of it is to apply for a corporate loan from my bank. Part of it is to file my letter of incorporation as an LLC with my State office. (It notifies them of my corporate contract with myself as the only creditor and the only partner.) Let's say I also make a payment on a property which I will make into my office.
After three months, I'm not making enough money to keep my head above water (reason doesn't really matter). But the landlord still wants rent for the next month. I inform him that I am not able to pay. I vacate the property, but because my corporation has no money, I have nothing with which to pay. The owner sues for past rent and takes me to court.
The landowner wins the suit. My corporation declares bankruptcy because there are no corporate assets with which to pay the overdue rent. In bankruptcy court, I (as the business owner listed on the charter) then show the bankruptcy judge my ledgers. He compares those to the claims against my business such as the one from the landowner. The judge then takes the remaining $1.30 in assets from the business and assigns that as payment. The corporation is declared defunct and the matter is over.
Take away the corporation. Now that creditor can come after my personal assets. And instead of being a failed entrepreneur, I'm now destitute and doomed to work for another person while I pay off liens for the rest of my life. That's YOUR world. That is YOUR morality. It's YOUR argument. Defend it - if you can.
"I notice you had nothing to say about the other points I brought up. "
That's because I'm still waiting for you to address my counterargument. Your claim that corporations enable cronyism above all other entities has no support. Your claim that corporations don't pay "fair" taxes was thoroughly debunked. You keep confusing rights and contracts. You keep asserting that people have the right to create contracts but not corporations when a corporation is nothing more than a specific type of contract. I am a State-certified debate judge. I'm looking at the debate scorecard here and seeing a big zero on your side. You answer THIS one and I'll give you my answers for the others.
"If the issue is only about shielding personal assets from business debts, this can easily be accomplished by inserting the appropriate language into contracts between a business and its suppliers and customers. No corporation is necessary."
You completely misunderstand what contracts are. You misunderstand what agents of businesses are. If you want to go down the road you're suggesting, try taking your proposal to an actual lawyer and asking them to draw up such a contract. Please! Go do it and let me be a fly on the wall as you do!
First, every contract has to have a minimum of two parties. It can be two individuals. It can be two corporations. It can be one of each. Each party has to be specifically named. Then, the contractual provisions have to be drafted which lay out what business is being transpired, i.e. which products and/or services are being offered and the agreed-upon price and payment terms being offered in exchange. There may be a "fitness" or express warranty clause inserted which lays out the acceptable use cases for the products/services so named. Then there is the enforceability clause which designates where any contractual disputes are to be resolved - usually naming a specific governmental jurisdiction such as the State of incorporation. And you want to do this every time you sell a gallon of milk or a package of cheese? Good luck with that!
(Also note that the government is not a party to the transaction. The government's only role is a conditional one in the event of breach of contract.)
Incorporating allows significant flexibility for both parties in a contract. First, it allows the corporation and its employees to fulfill the terms of the contract rather than a single person. It means that if I'm an excellent milk delivery truck driver, I can hire my friend and have him deliver milk under my corporate name rather than be forced by the terms of my contract to fulfill those responsibilities personally. Same thing the other way for payment - I'm not personally on the hook to write that check. Incorporation allows me to hire specialized employees in Sales, manufacturing, IT, etc. without worrying about how that's all going to be spelled out in my contractual obligations with my clients. We could also go into any employees I might have and how those explicit contracts - because they will have to have their specific names on them - will be locked into their job with me! I can go on and on...
Now one last time: what is the MORAL problem with corporations? No more avoiding the issue. Answer the two questions I posed above. If you do not - or can not - then this is over.
If we’re talking about morality, we certainly are talking about rights! This is explicitly an Objectivist forum. Objectivist morality is based on man’s rights, and the sole purpose of government is to protect them. If you disagree with the philosophy on this fundamental issue, so be it, but please say so.
As for your two questions: for the first, embezzlement is theft, a violation of the property rights of the owner; and for the second, as I said earlier, shielding personal assets from business debts can easily be accomplished by inserting the appropriate language into contracts between a business and its suppliers and customers, setting limits on the amount of the liability of the business. For suppliers, contracts already exist; all that needs to be added is boilerplate. Probably this boilerplate already exists in many such contracts. For customers, it would be no more difficult than publishing a “terms of service” notice like those that already exist for numerous services on the Internet and elsewhere. Liability insurance is also available for businesses. And unincorporated businesses can have employees to perform their duties, just as incorporated ones do. These are just off the top of my head. A truly free market (without corporations) would likely come up with vastly more efficient solutions to this alleged problem.
Now one last time: what is the MORAL problem with corporations?
You just said we’re not talking about rights. Morality consists, in great part, of recognizing and respecting people’s rights. If you’re not willing to talk about rights, what is your concept of morality based on?
I'm still waiting for you to address my counterargument.
Done. Please elaborate on the following statements of yours:
Show me a law which says that you get to pay lower tax rates simply because you are incorporated. They don't exist.
Additionally, States CAN NOT - absolutely CAN NOT - "modify or revoke corporate charters at will." That's complete nonsense.
And again - incorporation is NOT a contract with the State as a party.
Sole might be a bit over-the-top, but I agree in principle. The problem is that you keep fundamentally misconstruing what rights are. Rights are individual. They do NOT apply to groups of people!
Crimes are adjudicated in criminal courts because they deal with alleged violations of human rights. In criminal courts, the State takes on the role of prosecution on behalf of society itself under the theory that a violation of one individual's rights represents a direct threat to the individual rights of everyone else in society.
Contracts are agreements involving more than one person and therefore are not rights-centric issues. Contracts always involve - at a bare minimum - three parties: two involved in the agreement and one to serve as arbiter. Contract disputes are adjudicated in civil courts (or through designated arbitrators) rather than criminal courts because they deal with alleged violations of contractual agreements rather than civil rights. (For example, my rent payment is not a matter of rights, but of contractual obligation.) This is a CRITICAL distinction - one whose importance can not be understated or ignored!
"for the first, embezzlement is theft, a violation of the property rights of the owner"
But under your logic where there are no corporations, individual investors lose all "rights" to that money when they give it to the business owner! (I also note that even in your scenario, the agreement between the investor and the business owner is in its very nature a corporate contract! It ceases becoming a matter of rights when it becomes a voluntary, transactional exchange!)
"shielding personal assets from business debts can easily be accomplished..."
Aside from the fact that you're jumping through unnecessary/impractical hoops, you avoid answering the question yet again: why is this IMMORAL when it is done through a corporation? Your repeated failure to rebut this KEY point loses you the entire debate.
"setting limits on the amount of the liability of the business"
You forget that liability isn't determined by you, but by the judge/arbiter. Without a clear separation of funds (such as is inherently present in a corporation), you're going to find that one difficult to defend in court when someone sues you because damages are what they are - not what you wish them to be.
Look. For whatever reason, you've set your moral compass in stone that corporations are evil. That's your opinion and you're the only one who can control your own opinion. I've laid out the morality, logic, and practicality - as well as the end results which benefit entrepreneurism - for anyone to read regarding corporations. At this point, further conversation with you is just me repeating the same basic concepts over and over again and you trying to avoid justifying the logical consequences of your viewpoint. It's counterproductive. Adieu.
Rights are individual. They do NOT apply to groups of people!
I agree. And a corporation is simply a group of people who share an interlocking set of contractual relationships. Therefore a corporation itself has no rights, and any “rights” granted to a corporation by a government have no legitimate place in a free-market economy.
Contracts are agreements involving more than one person and therefore are not rights-centric issues.
Yes they are. Contracts are an exercise of the right to the use and disposal of one’s property. Without property rights, no contracts to exchange goods and services are possible.
But under your logic where there are no corporations, individual investors lose all "rights" to that money when they give it to the business owner!
No they don’t. Investors don’t “give” their money to a business owner, they exchange their money – by contract – for partial ownership of the business, or a share of the profits, or some other consideration. At root, it’s an exchange of rights to control specific properties in specific ways. This type of exchange was commonplace long before corporations became commonplace.
You forget that liability isn't determined by you, but by the judge/arbiter.
Limits on liability are frequently written into contracts (including corporate contracts), and the judge/arbiter must follow the terms of the contract when arbitrating a contract dispute.
why is this IMMORAL when it is done through a corporation?
I repeat, I never said a transaction is immoral when done through a corporation, I said it is immoral on the part of the government to create corporations with special privileges. It is not immoral for a person or persons to incorporate in self-defense. I’ve demonstrated how the corporate system is incompatible with the Objectivist moral and ethical position. If you agree that Objectivist morality is based on man’s rights, then my position on corporations logically follows.