3 ms·

Actually corporations (companies) are a legal structure invented to allow multiple investors to contribute capital towards a certain goal and have rights guaran

by cynusx 6y ago

Actually corporations (companies) are a legal structure invented to allow multiple investors to contribute capital towards a certain goal and have rights guaranteed by law rather than purely contractually. The limited liability is also to protect investors. Concentrating capital to achieve big projects that founders wouldn't be able to fund themselves is clearly beneficial for economic growth

dragonwriter 6y ago
> Actually corporations (companies) are a legal structure invented to allow multiple investors to contribute capital towards a certain goal and have rights guaranteed by law rather than purely contractually. The limited liability is also to protect investors. Untrue; the law of partnerships, which is older than corporations, already allowed people to contribute capital to a goal and have their respective rights governed by law. The legal arrangements are different in a corporation, those differences centering around the limitation of liability—the freedom from accountability—provided to the investors. That freedom from accountability is the central focus of the corporate form. And it's arguably an aberrant path dependency; had we had limited partnerships first, the idea of business form where no one is ultimately accountable for the liabilities of the business—rather than one to which investors could contribute with limited liability while the active principals remained fully accountable—might never have seemed like a good idea, even to the investor class.
- cynusx 6y ago
  Goh, limited partnerships could work. You still don't have a legal instrument (a share) that you can freely transact and has attached rights. It's maybe important to realize that when the amounts get bigger and the projects riskier that the personal liability becomes meaningless. What happens if you are personally liable for a 10 million eur debt... well your life is over, but also nobody is going to actually get their money back from you cause you are not able to pay that. I think it's quite rational for a society to say that you will lose everything you have in that business, but the investors/debtors can only pursue you up-to this point. Especially when taking on riskier projects that require lots of capital.

by cynusx 6y ago

dragonwriter 6y ago

> Actually corporations (companies) are a legal structure invented to allow multiple investors to contribute capital towards a certain goal and have rights guaranteed by law rather than purely contractually. The limited liability is also to protect investors. Untrue; the law of partnerships, which is older than corporations, already allowed people to contribute capital to a goal and have their respective rights governed by law. The legal arrangements are different in a corporation, those differences centering around the limitation of liability—the freedom from accountability—provided to the investors. That freedom from accountability is the central focus of the corporate form. And it's arguably an aberrant path dependency; had we had limited partnerships first, the idea of business form where no one is ultimately accountable for the liabilities of the business—rather than one to which investors could contribute with limited liability while the active principals remained fully accountable—might never have seemed like a good idea, even to the investor class.

cynusx 6y ago
Goh, limited partnerships could work. You still don't have a legal instrument (a share) that you can freely transact and has attached rights. It's maybe important to realize that when the amounts get bigger and the projects riskier that the personal liability becomes meaningless. What happens if you are personally liable for a 10 million eur debt... well your life is over, but also nobody is going to actually get their money back from you cause you are not able to pay that. I think it's quite rational for a society to say that you will lose everything you have in that business, but the investors/debtors can only pursue you up-to this point. Especially when taking on riskier projects that require lots of capital.