Can there be Limited Liability in a Free Market?

[erowe1]

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.

But what would it take to have an unlimited liability environment? A state enforced ban of limited-liability contracts?

And it is important to recognize that corporations can, and inevitably would, exist in a free market. They are not just creations of the state.

 

[Bohner]

But what would it take to have an unlimited liability environment? A state enforced ban of limited-liability contracts?

And it is important to recognize that corporations can, and inevitably would, exist in a free market. They are not just creations of the state.

What?

How do you break a contract that has never been signed or agreed to?

The reasoning behind unlimited liability is to address the problem of non-consenting 3rd parties who never signed a contact being harmed while the parties responsible are shielded from any responsibility for their decisions via the corporate veil.

That's the only thing that changes with unlimited liability... Nothing else.

 

[erowe1]

What?

How do you break a contract that has never been signed or agreed to?

The reasoning behind unlimited liability is to address the problem of non-consenting 3rd parties who never signed a contact being harmed while the parties responsible are shielded from any responsibility for their decisions via the corporate veil.

That's the only thing that changes with unlimited liability... Nothing else.

I never said anything about breaking any contracts.

But the possibility of contracts that limit liability exists. I don't see how to eliminate that possibility unless the state bans such contracts.

So, if you're not talking about banning limited-liability contracts, then what do you mean "unlimited liability"?

Do you just mean that, in addition to limited liability situations, there will be other situations that do not limit liability? Because of course that is the case. But where some people are coming from is that they don't think limited liability should exist at all.

 

[Bohner]

I never said anything about breaking any contracts.

But the possibility of contracts that limit liability exists. I don't see how to eliminate that possibility unless the state bans such contracts.

So, if you're not talking about banning limited-liability contracts, then what do you mean "unlimited liability"?

Do you just mean that, in addition to limited liability situations, there will be other situations that do not limit liability? Because of course that is the case. But where some people are coming from is that they don't think limited liability should exist at all.

Two people can enter a contract that limits each others liability to one another. That doesn't change. But what happens when a 3rd party gets harmed who never signed any kind of agreement with the parties responsible? The contract between the two parties has no weight on the third party who was harmed because that third party never signed or agreed to anything.

 

[erowe1]

Two people can enter a contract that limits each others liability to one another. That doesn't change.

Ergo, there can be limited liability in a free market. That's what the poll question is.

 

[Bohner]

Ergo, there can be limited liability in a free market. That's what the poll question is.

Sure... But LLCs can't.

 

[erowe1]

Sure... But LLCs can't.

The definition of LLC that prevails now is a legal one that is based on all the state-based laws that define what an LLC is as far as the state is concerned.

Without that state involvement, there would still be corporations (although they would not be defined with the same state-based legal definition for "corporation"), and there would still be corporations that have limited liability.

It's kind of like marriage (which is really just a type of corporation). There is a legal definition for "marriage" that prevails right now, in which the state's involvement in marriage is essential. But if we took the state out of the equation, there would still be marriage, it just would not have that same legal definition.

 

[Bohner]

The definition of LLC that prevails now is a legal one that is based on all the state-based laws that define what an LLC is as far as the state is concerned.

Without that state involvement, there would still be corporations (although they would not be defined with the same state-based legal definition for "corporation"), and there would still be corporations that have limited liability.

It's kind of like marriage (which is really just a type of corporation). There is a legal definition for "marriage" that prevails right now, in which the state's involvement in marriage is essential. But if we took the state out of the equation, there would still be marriage, it just would not have that same legal definition.

Owners of a company in a free market cannot shield themselves from liability with regard to non-consenting third parties.

 

[helmuth_hubener]

Owners of a company in a free market cannot shield themselves from liability with regard to non-consenting third parties.

What does it mean to be an owner, Bohner? Is ownership just one thing, or is it a bundle of multiple things?

 

[Bohner]

What does it mean to be an owner, Bohner? Is ownership just one thing, or is it a bundle of multiple things?

It can be either.

 

[thoughtomator]

Those running the company, spilling the oil, etc., are completely responsible for the aggression they do. But their passive investors? Not necessarily. Not if they have insulated themselves from liability.

Investment is not a passive action. If you knowingly put money into an operation which has the risk of doing things like destroy the Gulf of Mexico, you are helping to make it happen with your voluntary provision of funds. If investors don't have this protection, they can no longer offload what is rightfully their risk onto the public at large, or onto the corporation's victims.

 

[helmuth_hubener]

It can be either.

Either of what? What in the world does it mean to be an owner, Bohner? Help me out here.

 

[Czolgosz]

Voted yes. You have the right to contract, or not. If one party wants to limit their liability via contract, and you agree to it, there ya go.

 

[Bohner]

Either of what? What in the world does it mean to be an owner, Bohner? Help me out here.

I answered the second part of your question. Ownership can involve one thing or multiple things.

Just cut to the chase and tell me what you're getting at.

 

[helmuth_hubener]

Investment is not a passive action. If you knowingly put money into an operation which has the risk of doing things like destroy the Gulf of Mexico, you are helping to make it happen with your voluntary provision of funds. If investors don't have this protection, they can no longer offload what is rightfully their risk onto the public at large, or onto the corporation's victims.

And of course Skinner Anderson is helping to make poker games happen by renting his house to people who play poker. Taco Bell is helping to make marijuana use happen by selling late-night tacos to hungry users of marijuana. I am helping the government to torture, rob, and murder people worldwide by paying taxes to them.

We help other people in many, many ways all the time. Many of the actions of these other people is objectionable or illicit in some way. But our helping them does not make us responsible for the results. Wouldn't you agree?

 

[helmuth_hubener]

Just cut to the chase and tell me what you're getting at.

I have no idea what I'm getting at. How could I, when I do not know what it means to be an "owner" in your view?

You made a statement regarding certain moral absolutes which you feel are relevant and very important:

"Owners of a company in a free market cannot shield themselves from liability with regard to non-consenting third parties."

I do not understand your statement. I am trying to understand. I'm really not trying to be tedious. I'm just trying to understand.

 

[Bohner]

I have no idea what I'm getting at. How could I, when I do not know what it means to be an "owner" in your view?

You made a statement regarding certain moral absolutes which you feel are relevant and very important:

"Owners of a company in a free market cannot shield themselves from liability with regard to non-consenting third parties."

I do not understand your statement. I am trying to understand. I'm really not trying to be tedious. I'm just trying to understand.

With regard to a company... An owner would be anyone who owns assets in a company and takes part in its profits and losses.

 

[helmuth_hubener]

With regard to a company... An owner would be anyone who owns assets in a company and takes part in its profits and losses.

So, they have to meet both those qualifications? Both are necessary? That is, doing these two things:

1. Owning assets in a company
2. Taking part in a company's profit and losses

...is what it means to be an "owner"? Did I get that right?

Could you clarify, are those two qualfications also the only qualifications? That is, are they both necessary and also sufficient? Thanks!

 

[Bohner]

So, they have to meet both those qualifications? Both are necessary? That is, doing these two things:

1. Owning assets in a company
2. Taking part in a company's profit and losses

...is what it means to be an "owner"? Did I get that right?

Could you clarify, are those two qualfications also the only qualifications? That is, are they both necessary and also sufficient? Thanks!

I would say so yes.

 

[helmuth_hubener]

OK, thanks! Let's think out the implications.

So, if I simply own a table that the company has in its meeting room, or even if I own the CNC machine that is 100% of the capital equipment that the company uses and responsible for 100% of its production and revenue, I am not necessarily an owner of that company. Even though it's my CNC machine that cousin Jim-Bob is using to churn out defective land mines, and I gave him clear and explicit permission to do so, knowing full-well that they are defective and Jim-Bob is defrauding his customers, I am not an owner of the company as long as I do not do #2 and take part in the company's profit and losses. And thus, in your system, as a non-owner I am perfectly entitled to keep all of this at arm's-length and if the customers come to call, they can't touch me or my assets at all. Because I'm not an owner.

Am I correct in this analysis?