Because it's less likely that the principal will be recovered. This is why (other things being equal) borrowers with poor credit histories pay higher interest & those with good credit histories pay lower interest.Originally Posted by PaulConventionWV
Last edited by Occam's Banana; 12-02-2012 at 07:43 PM.
Frederic Bastiat
When law and morality are in contradiction to each other, the citizen finds himself in the cruel alternative of either losing his moral sense, or of losing his respect for the law. - The Law Government is that great fiction, through which everybody endeavors to live at the expense of everybody else. - Government
Extremly decreased transaction costs. An economy without corporations wouldn't work very well. And corporations, as contractually created entities that can only voluntarily transact with other persons or entities, are absolutely possible in a free market. Even limited liability is totally compatible with free markets, as long as any contract partner knows about the liability status. This is obviously only true in cases of damage against contract partners, not against third parties.
In cases of damage against third parties the actual human person responsible for it would have to pay the compensation. However, this is largely already the case.
There are even cases, where the current form of liability might actually help third parties. Think about the Deepwater Horizon accident. If only the responsible managers would be liable for damage, they could never pay compensations worth billions of Dollars.
I agree that limited liability should not extend to people never agreeing a contract. However, that is by far not the only benefit of a corporation. Corporate personhood can also exist without limited liability in such cases.The argument for marriage in the free market is that is basically a contract between two consenting parties. The court only needs to recognize the contract between the two (or more) parties, and not necessarily the marriage itself.
The difference with a corporation is that the courts recognize it as a legal person, regardless of whether or not a contract was in place with the people harmed. One of the key free-market principles is that you are responsible for your actions. A corporation is basically a state-sponsored entity that effectively removes this responsibility.
Multi-national corporations are the most efficient form of organization for some forms of production. That's a great thing. And that would be absolutely impossible without any form of corporation.
Which doesn't mean that no marriage is compatible with free markets.How is a state sponsored entity compatible with the free market? Marriage in it's current form certainly isn't.
What are peoples thoughts on 2 individuals (or companies) coming to a mutual agreement of limited liability?
What if I, as a businessman with a product only sell my product to people with the clause that by purchasing said product, they are limited in the amount they could sue me for?
Is that not free market? Individuals are free not to purchase said product and if they do, they have agreed to a certain amount of liability placed with the seller/producer.
If we DONT allow that type of contract, do we have a free market?
When they do sue the corporation, rather than the actual human responsible, it's because of the amount of money they can get out of the corporation. Are we supposed to think that in addition to suing the human responsible, and the corporation the human works for, the plaintiff should be able to go after all of the corporation's shareholders?
I’m not a libertarian. I’m not advocating everyone run around with no clothes on and smoke pot.
Why do I care that Bain-type entities takes apart failing companies in the most profitable manner again? I keep forgetting. What fraud was committed, exactly?
And in fact, why do we keep using Bain as an example, when there are literally hundreds of companies that do the same thing? This sounds like a liberal talking point.
I've read the whole thread, and haven't seen anything that changes my mind about corporations and LLCs. I have no problem with the fact that corporations exist, I think they are necessary, and I think the problem is, as always, government.
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I blog at Red State Eclectic, I totally tweet here, I sell stuff here, and also here. Liberty rocks!
That's wrong. A group of individuals owned it. People who screech about corporations are, in my imho, saying that people shouldn't be legally allowed to join together for the purpose of engaging in joint business ventures.
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I blog at Red State Eclectic, I totally tweet here, I sell stuff here, and also here. Liberty rocks!
Ownership is exchanged for cash. That's the contract. Corporate executives go to jail for fraud on a fairly routine basis, and the profits of the owners are reduced by fines, fees and penalties on a routine basis. Obligations met.
So people can't own property jointly?But how can a corporation own real property?
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I blog at Red State Eclectic, I totally tweet here, I sell stuff here, and also here. Liberty rocks!
I believe there are some pretty bad ways of how corporations are currently handled by government.
However, I believe bankruptcy laws are were the real problem lies. Those laws do nothing but protecting debtors and screwing lenders. And that's true for corporate bankruptcy as well as for private bankruptcy (at least where I live, and I believe it's pretty much the same everywhere in the industrialized world).
That is fine. The problems begin when the government creates non-liability as the default without consent. Here's one of the reasons why the giant corporations of today could not exist without the government non-liability mandate:
When you buy stock in a corporation, you rely on being insulated from anything the corporation does. You rely on the government-created corporate shield limiting your losses to just the amount you invested. The stock is easy to buy and easy to sell. No liability passes to you when you buy it and when you sell it, the buyer doesn't need to woory about buying into a lawsuit or any other liability headaches. This creates an anonymous international market where literally hundreds of millions of people who don't know each other and don't know anything about the business can partake of profits without out being responsible for what the corporation does to get those profits.
In short, because stock holders never have to worry about being responsible for what the corporation does, the corporation can raise vast amounts of money without too many questions being asked. It can then use that vast capital to dominate small business and others in the marketplace.
If, on the other hand, limited liability had to be negotiated with each party with whom the corporation did business, the owners of the corporation would have to take an interest in what the corporation was doing because the chances are that it would not get the waiver right every time if it got very big. That would limt the market in corporate shares.
And this is only dealing with contracts, not torts. When you buy stock in a corporation now, you don't need to be concerned with being sued by someone when a corporate driver runs over a pedestrian. But no contractual limit of liability can contain accidental injuries caused to others.
Ownership without responsibility is far easier to sell than ownership WITH responsibility. That is the purpose of the corporate business form - to allow people to control vast amounts of other people's money.
The proper concern of society is the preservation of individual freedom; the proper concern of the individual is the harmony of society.
"Who would be free, themselves must strike the blow." - Byron
"Who overcomes by force, hath overcome but half his foe." - Milton
If the organization pays the settlement out of the coffers, the shareholders are paying.
But I think it's ridiculous to assert that if a newly hired truck driver has a traffic accident driving the company truck that I could be personally sued because my mutual fund invested in shares of that company. When I invested, I in essence agreed that I might lose a piece of the profit if someone running the company does something horrible, or even accidental. I also in essence agreed to pay for insurance against that scenario through the company.
But if I only bought $10,000 worth of stock, no way should my entire portfolio be in jeopardy because I happen to have one.
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I blog at Red State Eclectic, I totally tweet here, I sell stuff here, and also here. Liberty rocks!
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