The Complex Question Of Human Corporate Identity

The concept of corporate personhood is a legal framework that grants certain rights and protections to corporations, treating them as separate legal entities from their owners and shareholders. This concept has evolved over time, with early examples including the controversial Bank Bill of 1791, which granted a 20-year monopoly to the First Bank of the United States. While the specific legal status of corporations varies across different jurisdictions, they are generally recognized as having some of the rights and responsibilities of natural persons. For example, corporations can enter into contracts, pay taxes, possess property, and sue or be sued in court. However, there are also important distinctions, as corporations do not always have the same constitutional protections as individuals, such as the right against self-incrimination. The legal status of corporations as persons under the law has significant implications for business operations, liability, and the protection of personal assets.

Corporations as 'legal persons'

The concept of a corporation as a legal person is known as "corporate personhood". This concept has existed in some form for a long time, with its roots in Roman law, which included municipalities, trade groups, and other entities under the umbrella of "corpus" or "body". In the US, the Supreme Court has, over time, extended many rights to corporations, treating them as "'persons'" covered by the Equal Protection Clause and Contracts Clause, among others. However, the Court has also denied corporations certain rights, such as privacy rights under the Privacy Act of 1974.

The benefits of corporate personhood include encouraging investment and driving economic growth, as it allows corporations to conduct business activities as a "legal person". This enables them to own property, enter into contracts, sue and be sued, and exist in perpetuity, separate from its owners, shareholders, or managers. This also means that corporations can protect their owners from personal liability in most instances. For example, in the case of bankruptcy or lawsuits, the personal assets of the owners are usually shielded.

Despite these advantages, there are concerns about the implications of corporate personhood. Some worry that corporations can abuse their rights, such as in the case of Jesner v. Arab, where the Supreme Court considered whether corporations could be sued for human rights violations abroad in US federal courts under the Alien Tort Statute. Additionally, the ambiguity in the Constitution and some statutes has led to increasingly expansive court interpretations, which has caused concern for some groups who argue that the concept should be abolished or at least legislated more carefully.

While the concept of corporate personhood grants corporations certain rights, it is important to note that it does not grant them identical rights to natural persons. For example, in FCC v. AT&T (2011), the Court held that corporations do not have a "personal privacy" interest under the Freedom of Information Act. Additionally, in United States v. Sourapas and Crest Beverage Company, the Court did not agree that the Fifth Amendment self-incrimination warning applied to a corporation.

Shareholders' liability

Shareholders in a corporation are generally immune from liability. However, there are certain exceptions where a shareholder may be held personally liable for the debts or liabilities of the corporation. For example, if a shareholder has agreed to be a co-borrower or guarantor of a loan, they can be held liable for the corporation's debts if it defaults on repayment.

In closely held or "closed" corporations, shareholders need to be vigilant about the actions of their directors, as these may impute liability to the shareholder. Shareholders in such corporations owe each other a duty of loyalty and good faith. Shareholders may be held personally liable for back wages of employees in the event of corporate dissolution. Additionally, if a shareholder holds a substantial stake in the company and has access to its financial information, they may be held responsible if they approve an illegal dividend, even if they were unaware of its illegality.

Courts may also "pierce the corporate veil" and impose personal liability on shareholders in certain situations. This can occur if a shareholder exercises complete domination over the corporation and uses it to commit fraud or another wrongful act. It can also happen if corporate formalities are disregarded to the point where there is little distinction between the corporation's and shareholder's affairs, such as when a shareholder runs their personal business through the corporation, uses corporate funds for personal purposes, or fails to keep separate accounts.

Shareholders can obtain indemnification or advancement provisions in corporate documents to protect themselves from certain liabilities. Indemnification allows shareholders to recover their costs and losses, including legal fees, at the end of litigation, while advancement provides immediate relief for legal fees during ongoing legal action. However, it is important to note that indemnification does not apply to cases involving gross negligence, criminal actions, or intentional torts.

Corporations' constitutional rights

A corporation is a legal entity that exists separately from its owners, management, and shareholders. This means that a corporation is considered a "person" under the law and has rights and protections under the Constitution.

The concept of corporate personhood has evolved over time, with the first corporate rights case brought before the Supreme Court in the early years of the republic by the Bank of the United States. In 1819, the Supreme Court ruled in Trustees of Dartmouth College v. Woodward that a corporate charter is a contract that cannot be impaired without violating the Constitution. This decision recognized corporations as having the same rights as natural persons to contract and enforce contracts.

In 1823, the Supreme Court extended the same protections to corporate-owned property as it would to property owned by natural persons in Society for the Propagation of the Gospel in Foreign Parts v. Town of Pawlet. In 1886, the Court appeared to grant a corporation the same rights as an individual under the 14th Amendment in Santa Clara County v. Southern Pacific Rail Road. However, it is important to note that corporations are not able to claim constitutional protections that are not available to persons acting as a group. For example, the Supreme Court has not recognized a Fifth Amendment right against self-incrimination for a corporation.

The Citizens United v. Federal Election Commission decision in 2010 upheld the rights of corporations to make unlimited political expenditures under the First Amendment, leading to increased public awareness of corporate personhood and calls for a Constitutional amendment to abolish it. The Court's ruling argued that political speech rights do not depend on the identity of the speaker, whether it be a person or an association of people.

In summary, while corporations have gained rights and protections under the Constitution, they are still subject to certain limitations and cannot claim all the same constitutional protections as natural persons.

Corporations' ability to sue

A corporation is a legal entity that exists separately from its owners. This means that, under the law, a corporation is treated as an individual person and can sue and be sued like an individual person. This is referred to as corporate personhood.

The concept of corporate personhood has evolved over time, with the Supreme Court extending the same protections to corporate-owned property as it would to property owned by natural persons. This means that corporations have the right to seek relief in court and can sue and be sued in the same way as individuals.

However, it is important to note that corporations must have the capacity to sue in order to maintain a lawsuit. This means that they must comply with certain provisions of the state corporation laws. If a corporation fails to comply with these laws, it may lose the capacity to sue and be unable to bring a lawsuit.

Additionally, there is a distinction between the capacity to sue and the standing to sue. Capacity refers to the right to come to court and seek relief, while standing refers to the requirement that a plaintiff must have suffered an injury that can be redressed by a favorable court decision. For example, if a corporation's subsidiary is harmed, the corporation itself would not have standing to sue, as the injury is to the subsidiary and not directly to the corporation.

Furthermore, suing a corporation can be complex, and it may be difficult to sue an individual behind a corporation. This is because corporations are considered separate legal entities from their owners, and the owners may have limited liability. In some cases, it may be possible to pierce the corporate veil and hold individual officers of a corporation liable, but this requires specific circumstances and the presence of injustice or unfairness.

Overall, while corporations have the ability to sue and be sued, there are legal considerations and complexities that must be navigated when dealing with corporate personhood and the capacity to sue.

Corporations' tax status

A corporation is a legal entity that exists separately from its owners. It can enter into contracts, pay taxes, and transact business. Corporations can be taxed in one of two ways: as a C-Corporation or an S-Corporation.

A C-Corporation, or C corp, is a legal entity that is separate from its owners. C corps can make a profit, be taxed, and can be held legally liable. They offer the strongest protection to their owners from personal liability, but the cost to form a C corp is higher than other structures. C corps also require more extensive record-keeping, operational processes, and reporting. C corps pay income tax on their profits, and in some cases, corporate profits are taxed twice—first when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.

An S-Corporation, or S corp, is a special type of corporation designed to avoid the double taxation drawback of regular C corps. S corps allow profits and some losses to be passed through directly to owners' personal income without being subject to corporate tax rates. S corps must file with the IRS to get S corp status, a different process from registering with their state.

Limited liability companies (LLCs) are similar to corporations but with slight differences. LLCs offer limited personal liability and are not required to hold regular stockholder or management meetings. They can be taxed as a C corp, S corp, or a nonprofit.

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