4 ms·

The idea that a corporation should be reduced to a contractual agreement strikes me as problematic. Since corporations necessarily have contracts with other en

The idea that a corporation should be reduced to a contractual agreement strikes me as problematic. Since corporations necessarily have contracts with other entities and a contract as an entity can't be a party to another contract, then your corporation would have to somehow specify a process for employees to hold contracts in proxy. Also, a corporation that's just a contract between individuals can't provide any protection from lawsuits by people who aren't employees or shareholders. Certainly there's a place for the kind of construct you're talking about, but it seems to be fundamentally incompatible with anything remotely similar to the way business is structured today.

misuba 17y ago
Corporations as they're structured today may not be contract-like, but they certainly aren't person-like either. I hope a high court or two finds the cojones to admit this and stop trying to do legal code by analogy.
bokonist 17y ago
Since corporations necessarily have contracts with other entities and a contract as an entity can't be a party to another contract, then your corporation would have to somehow specify a process for employees to hold contracts in proxy. That's exactly what a corporate charter is. It's the shareholders delegating the management and contracts associated with a piece of property to a process determined by the corporate charter. Also, a corporation that's just a contract between individuals can't provide any protection from lawsuits by people who aren't employees or shareholders. The contract can protect from lawsuits by creditors. When a creditor loans to a limited liability company, the creditor knows that he only has recourse to the funds pledged to the corporation. He can not claw back into the shareholders personal funds. Again, it's a matter of voluntary contracts. If the creditor wants that right, he can explicitly demand that the shareholders pledge their own assets as part of the terms of the contract. ( in fact, that's exactly what banks do when lending to very small businesses). But an LLC designation should not protect from criminal liability. Shareholders should be held to the normal standards of criminal culpability for the actions of the management. A shareholder who knowingly profits from the management committing criminal acts should be held to the same level of guilt as anyone who knowingly profits from criminal acts.

misuba 17y ago

Corporations as they're structured today may not be contract-like, but they certainly aren't person-like either. I hope a high court or two finds the cojones to admit this and stop trying to do legal code by analogy.

bokonist 17y ago

Since corporations necessarily have contracts with other entities and a contract as an entity can't be a party to another contract, then your corporation would have to somehow specify a process for employees to hold contracts in proxy. That's exactly what a corporate charter is. It's the shareholders delegating the management and contracts associated with a piece of property to a process determined by the corporate charter. Also, a corporation that's just a contract between individuals can't provide any protection from lawsuits by people who aren't employees or shareholders. The contract can protect from lawsuits by creditors. When a creditor loans to a limited liability company, the creditor knows that he only has recourse to the funds pledged to the corporation. He can not claw back into the shareholders personal funds. Again, it's a matter of voluntary contracts. If the creditor wants that right, he can explicitly demand that the shareholders pledge their own assets as part of the terms of the contract. ( in fact, that's exactly what banks do when lending to very small businesses). But an LLC designation should not protect from criminal liability. Shareholders should be held to the normal standards of criminal culpability for the actions of the management. A shareholder who knowingly profits from the management committing criminal acts should be held to the same level of guilt as anyone who knowingly profits from criminal acts.