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Termyn8or -> RE: U.S. Act of 1871 ? (4/16/2011 5:52:29 AM)
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Taz, sorry about these guys, they need about five years to learn.
Your original question was unanswered because the all have different colored glasses, mine are not tinted.
What does the act of incorporation do ? First of all it differs from a sole proprietorship or a privately owned corporation in the fact that any liability incurred by the corporation does not subrogate the assets of it's officers, shareholders or employees. The company can be gillions in debt and everyone's houses, yachts, islands and cars are not subject to forfeiture and disbursement in the case of a bankrupcy or any other liability incurred, such as what happened to us in the gulf by the actions of BP, or what the people of India suffered by the actions of Union Carbide decades ago. While the company might have been sued out of existence, all that happens to the people responsible is that their paychecks are no longer any good and their stock is worthless.
In a sole proprietorship which is a stupid way to run a business in the US these days, if you own a corner store worth a hundred grand and someone gets hurt there and wins a million dollar lawsuit, it is against YOU, as the owner. Your personal property is at risk. In business it is referred to as a corporate shell, but it is a bit more.
To defy tort law that way, incorporating essentially sets up the company as an entity. This does not refer to anything recent, this is the basis of it. The recent supreme court ruling that a corporation has rights was not a giant leap. For a very long time, many business owners felt responsible enough to operate without the corporate shell, but our litagious society has hampered that ideal. This is why many things have happened, a subject for another time.
The fact is that when that plant blew up in India, Union Carbide might have been sued out of existence, if the law and the whim of governments allowed it. Their officers and shareholders would not be liable for a dime. Nobody would come and sue them, force them into personal bankrupcy or anything of the sort because of the corporate shell. In a way you could call it a shell game.
The largest corporations in the US are usually C corporations, which is fully incorported. Corp is the root of the word corpse. In other words they have allowed themselves to be eaten. A strange metaphor but if studied is applicable. They have become a part of something bigger, like the minnow eaten by the carp. Their "people" are personally completely indemnified from loss, unless they lie or commit something very greivous that would be prosecutable on a personal level. This rarely happens, so the corporation can operate in an amoral or even immoral fashion without this encumberance.
Smaller corporations can be either small S or large S. These options allow some immunity for would be sole proprietors. The small S offer the least indemnity, but the greatest freedom from certain types of scrutiny. For example a small S cna have some employees off the books, and a few other things. A C corporation would never consider it for reasons more than possble problems with the government. C is better for large companies. That is because their pockets are so deep and they are prone to getting sued.
Many bar, tavern and resaurant owners run in small S because it is impossible to make any money otherwise. There is no expected ISO compliance, nor do they have OSHA breathing down their necks all the time. They are small fries in the government's eyes. They are generally left alone as long as they pay their taxes. One lawsuit could end the business, but the house is safe, the car is safe, the money in the personal account is safe.
One of the most popular tactics in the US over the years was to incorporate in Delaware. Back in the 1970s it only took $500 capitalisation and a filing fee. Some people actually incorporated themselves ! I don't see the advantage but they did. One would have to know every law about it to be able to say if they did the right thing for themselves or not. Some corporations are formed by people who own several small businesses. Each one is then a subsidiary. They share one corporate shell.
Corporations in a way are technically conspiracies. They produce something to punish, in case shit. Very rarely does anyone lose their house or do any time. This only happens when they don't follow the rules of incorporation. Those rules are a constant subject of study for lawyers, not me.
The requirements to incorporate are very easy to follow in the first place, but there is a cost. That is another subject for lawyers. Every day actually. These rules differ from those imposed on individuals. When you incorporate, you form an identity. It is separate from yourself.
Most governments are incorporated. In fact you drive down the interstates in this country for example it does not say "welcome to Cleveland", it says "CLEVELAND CORP. LIMIT". You can see it for yourself. Why does a government have to incorporate ? That is another subject.
But to incorporate in a way is to allow your firm to be absorbed. It is now separate from you and contrary to popular belief, in essence the government owns all corporations. That is not so plain to see, but true nonetheless.
T^T
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