Can there be Limited Liability in a Free Market?

[helmuth_hubener]

If a group of people wants to hold certain resources in common, I'm OK with this. But if someone commits a crime (Meaning, an act of aggression against another human being) then THEY are responsible. So I oppose limited liability.

This is not what limited liability means. A limited liability corporation is not limited in its responsibility to make whole the victims of its aggression. Rather, the stockholders disclaim any liability from the actions of the company.

 

[Christian Liberty]

This is not what limited liability means. A limited liability corporation is not limited in its responsibility to make whole the victims of its aggression. Rather, the stockholders disclaim any liability from the actions of the company.

What is a "company" though. A company isn't a person. Only individuals can commit crimes. So, who committed the crime? That person should be personally responsible.

I don't understand how corporations being people is anything but a convenient legal fiction, which, quite honestly, seems designed to make genuine free markets look bad by association.

 

[Christian Liberty]

Okay, so say your terms as a shareholder are those of limited liability. Someone wants to sue the corporation and make you wholly responsible, even though that is not what the contract dictates. Obviously, each side has their interest in who wins the claim.

Contract between who. I don't see how a contract between a "corporation" and an individual could possibly be binding in any way.

This is why minarchists support government enforcing contracts. That way a party just can't say, "well it's a free market and I don't honor their contract, who is going to make me".

I too support contract enforcement. Personally I'd stand with Rothbard and say only actual property titles can be traded, so I wouldn't say a contract where someone sells themself into slavery should be enforced (I understand some folks stand with Block and would say such a contract is enforceable, that's fine and not the hill I'm gonna die on) but as far as actual titles go, of course. I don't see why "government" needs to do it though. Of course, governments will just abuse their power and not enforce the law against "its" people so I don't see how minarchy actually solves any problem that you describe.

I am not against enforcing contracts. It is not a special privililege-government should enforce contracts for all. I am against OTHER things which constitute special privileges.

I don't support the State, but I agree with what you're saying beyond that. If the same law applies to every person without exception, its not a special privlege. The problem sets in where you have people making contracts with each other to be able to hurt people and not being held responsible because of a fictional "person" that is really an abstract concept and not an actual person. That's a different issue than contract enforcement in general.

So no-corporations might not exist in a free market. But that wouldn't be a good thing from an economic growth perspective at all.

Why not?

 

[helmuth_hubener]

What is a "company" though.

One or more persons who have organized themselves into an organization of some sort.

A company isn't a person. Only individuals can commit crimes. So, who committed the crime? That person should be personally responsible.

Depending on the contractual terms and agreements of all the involved parties, it may be more complicated than that. But basically, you are right.

I don't understand how corporations being people is anything but a convenient legal fiction, which, quite honestly, seems designed to make genuine free markets look bad by association.

People deal with each other using abstractions and fictions all the time, many times highly complex and sophisticated one. So long as they do so voluntarily: no foul.

 

[angelatc]

What is a "company" though. A company isn't a person. Only individuals can commit crimes. So, who committed the crime? That person should be personally responsible.

.

Corporate officers are often jailed for corporate crimes. It is a liberal myth that they aren't. Worldcom, Tyco, Enron - people indeed went to jail over the things those corporations did.

Here is the deal - the debtors (primarily the bankers) could not come after the personal assets of those shareholders when the debts defaulted as the companies fell apart. People who hate corporations in essence want to give the people who hold debt even more collection powers.

 

[angelatc]

I don't understand how corporations being people is anything but a convenient legal fiction, which, quite honestly, seems designed to make genuine free markets look bad by association.

The reason you don't understand it is that it is a liberal talking point, and therefore isn't exactly true.

Corporate personhood only allows the corporation to enter into contracts. Suppose you contracted with Bill, of Bob and Bill Roofing, to fix your roof. You gave him a $2500 deposit. The next day, Bill accidentally falls off another roof and dies. In your corporate-free world, Bob would have absolutely no obligation to perform as per the contract. After all, you had a deal with Bill, and that deal died along with him.

But because we actually have a corporate entity, in reality your deal wasn't with Bill. Bill signed the contract on behalf of the corporation. Meaning that Bob has to not only fix your roof, he even has to do it at the price Bill agreed to.

 

[idiom]

A commonly cited abuse of limited liability is a shell corporation set up to lease an oil tanker and transport oil around.

If it spills, the shell corporation has no assets to pay out with, goes bankrupt and that's it.

 

[angelatc]

A commonly cited abuse of limited liability is a shell corporation set up to lease an oil tanker and transport oil around.

If it spills, the shell corporation has no assets to pay out with, goes bankrupt and that's it.

How would that be different if a person, as opposed to a corporation, was hired to transport the oil?

 

[osan]

Limited liability is BULLSHIT. It is a mechanism by which one attempts to secure all the benefits of operation without all of the costs. I believe in full liability corporations.

Those in favor of LL want something for nothing and that is NEVER a good way to go. Exempting anyone from freedom's concomitant responsibilities is evil.

Period.

If you want the thrill and power of flight, you must bear the risk and consequences of falling.

 

[Christian Liberty]

The reason you don't understand it is that it is a liberal talking point, and therefore isn't exactly true.

Corporate personhood only allows the corporation to enter into contracts. Suppose you contracted with Bill, of Bob and Bill Roofing, to fix your roof. You gave him a $2500 deposit. The next day, Bill accidentally falls off another roof and dies. In your corporate-free world, Bob would have absolutely no obligation to perform as per the contract. After all, you had a deal with Bill, and that deal died along with him.

But because we actually have a corporate entity, in reality your deal wasn't with Bill. Bill signed the contract on behalf of the corporation. Meaning that Bob has to not only fix your roof, he even has to do it at the price Bill agreed to.

This could easily be done if Bob signed a contract with Bill allowing both of them to partner together in this way, in other words, if Bob gave Bill permission to contract on his behalf. I wouldn't call that "limited liability" though.

I don't really know exactly how "corporation" is defined, so I wouldn't call myself "Pro-corporation" or "anti-corporation." I'd rather stick with specific issues.

 

[idiom]

How would that be different if a person, as opposed to a corporation, was hired to transport the oil?

How do you structure it so that you still own the oil, but are not liable for it? If you go to full arms length it would be very difficult to stop them walking away with the Oil legally.

Or more simply, why is it that companies don't simply hire transport now?

 

[helmuth_hubener]

How do you structure it so that you still own the oil, but are not liable for it? If you go to full arms length it would be very difficult to stop them walking away with the Oil legally.

Or more simply, why is it that companies don't simply hire transport now?

Forget about ownership of the oil; you're confusing the situation. The essential element, as you presented it, is that there is a asset-less corporation, a "shell" corporation, which somehow has the full liability for any spills that may occur. So, if a spill occurs, the victims can only go after Broke, Inc., and not Exxon.

The same exact situation can be set up with a person. You find an asset-less person and set it up so he has the full liability for any spills that may occur.

Both incarnations of the "shell" dilemma are appoximately as easy to set up. The reasons a person can't/won't steal the oil are the same reasons that a shell corporation can't/won't.

 

[helmuth_hubener]

This could easily be done if Bob signed a contract with Bill allowing both of them to partner together in this way, in other words, if Bob gave Bill permission to contract on his behalf. I wouldn't call that "limited liability" though.

I don't really know exactly how "corporation" is defined, so I wouldn't call myself "Pro-corporation" or "anti-corporation." I'd rather stick with specific issues.

Well what exactly are the specific issues you have envisioned which have driven you to reject the entire concept of a corporation as not part of a free market?

 

[helmuth_hubener]

Limited liability is a mechanism by which one attempts to secure all the benefits of operation without all of the costs. I believe in full liability corporations.

No, it is not. It is, rather, a mechanism whereby individuals can voluntarily choose to take upon themseves some of the elements of ownership, selectively. They choose to associate with another group of individuals in a specific way, defined by contract. This is thus really a freedom of association issue.

Those in favor of LL want something for nothing and that is NEVER a good way to go.

No, they want something for something. A shareholder is different than a sole proprietor. The sole proprietor has many powers that the shareholder does not have. And vise versa. They are two different things. I see no reason to outlaw any form of association which does not inherently aggress against anyone. And limited liability corporations don't aggress against anyone.

Exempting anyone from freedom's concomitant responsibilities is evil.

Period.

Yes, but the existence of a responsibility, or potential responsibility, somewhere out there in the Universe does not obligate me to take on that responsibility. I'm not responsible for other people's children, for instance. Unless I choose to voluntarily take upon myself that responsibility; then I am.

If you want the thrill and power of flight, you must bear the risk and consequences of falling.

But can I choose to go down a waterslide and get a thrill from that, or do I only have the option of going down Niagara Falls? Is it somehow cheating to get a thrill and a rush without actually risking your life?

I don't think you've thought this through carefully.

If we believe in freedom of association, there is absolutely no way to ban limited liability corporations (a.k.a. massively multiplayer partnerships).

 

[erowe1]

I'm glad to see the results so far. Previous threads here led me to think it was swarming with people believing the myth that corporations and limited liability were solely creations of the state. I guess that was just a few of the louder and more repetitive voices.

 

[helmuth_hubener]

Bumparoo!

 

[roho76]

Limited liability is not free market. In a free market, the person who owns the means of producing a certain product, is liable for the safety and efficacy of their product. Not talking about being sued in court. The court of public opinion should judge your product and let the consumer decide if they want to keep purchasing it. Anything else, like government regulations or limited liability schemes, can and will be abused.

 

[Bohner]

The reason you don't understand it is that it is a liberal talking point, and therefore isn't exactly true.

Corporate personhood only allows the corporation to enter into contracts. Suppose you contracted with Bill, of Bob and Bill Roofing, to fix your roof. You gave him a $2500 deposit. The next day, Bill accidentally falls off another roof and dies. In your corporate-free world, Bob would have absolutely no obligation to perform as per the contract. After all, you had a deal with Bill, and that deal died along with him.

But because we actually have a corporate entity, in reality your deal wasn't with Bill. Bill signed the contract on behalf of the corporation. Meaning that Bob has to not only fix your roof, he even has to do it at the price Bill agreed to.

Not true... Even in an unlimited liability scenario, you signed a contract with Bill and Bob. Bill and Bob simply decided that Bill would carry out the task. That doesn't absolve Bob from his and Bill's obligation's to you even if Bill is unable to carry out the task.

 

[erowe1]

Not true... Even in an unlimited liability scenario, you signed a contract with Bill and Bob. Bill and Bob simply decided that Bill would carry out the task. That doesn't absolve Bob from his and Bill's obligation's to you even if Bill is unable to carry out the task.

Her point wasn't about limited liability, it was just about corporations more generally. What you describe, where Bob still has that obligation, is a corporation.

 

[Bohner]

Her point wasn't about limited liability, it was just about corporations more generally. What you describe, where Bob still has that obligation, is a corporation.

It's a moot point then. Companies can still exist in an unlimited liability environment. A company with 2 or more owners would simply be an agreement between those 2 or more persons to share assets, liabilities and responsibilities with regard to a specific setting.