Corporations are a common source of controversy because of their dominance of the massive United States economy. Proponents of big government often see government control as the last line of defense the general public and working class have against the expansion of corporate power over our society. Libertarians, strong supporters of free markets and critics of diametrically opposed political ideas like Socialism and Authoritarianism, will often defend the actions of big business and U.S. corporations as they consider the alternative of big government as considerably worse.

Still, libertarian views on the corporations themselves vary greatly. Many disagree with corporate charters and the idea of having any organization be classified as a juristic person. Still others disagree with corporate welfare, corporate practices and scandals, regulation on stocks & exchange, and special privileges like limited liability granted to corporations. They see these things as methods by which the government expands its control over the marketplace, and as inhibiting many of the positive effects of the free market while at the same time creating new negative effects. These diverse viewpoints give libertarians a lot to think about when it comes to the role of corporations in the free market society that libertarians advocate.

Corporations make up the decided majority of the current United States market economy. Libertarians support free market policies and thus do not have a problem with corporations playing the role of private big business. Joint stock companies and privately-run businesses are cornerstones of libertarian economic policy.

Common criticism, generally from ideological camps opposed to libertarianism, depict corporations as irresponsible, unethical and corrupt. However, most libertarians agree that while these complaints in given situations may in fact be true, that no corporation or group of corporations is as corrupt as big government has been historically shown to be, and that giving the government arbitrary power to regulate such large markets engenders furthered political corruption. Regulation on American big business creates an environment where there is big money in the whims of politicians, and thus creates a system dominated by the money of lobbyists and special interest groups representing the big money interests of the highly regulated corporate marketplaces.

Libertarians generally see that the best method of keeping businesses honest is to deregulate the economy, thus making the marketplace more openly competitive, making it easier for people who disagree with the practices of one corporation to find a competing company which might more accurately reflect their views and still provide the products/services that they as consumers need.

Regulation of corporations via the Securities and Exchange Commission, as well as efforts to zone corporate businesses and perform anti-trust breakups, are seen as some of the forefront measures government takes to control the progression and spread of the corporate marketplace. However, most libertarians see these regulatory authorities and powers as means by which government often creates and sustains new, micro-monopolies, because it keeps many of these corporations from being directly competitive with one another. This sustains a marketplace where corporate control is in a perpetual, arbitrarily designed state of flux, and where long-standing financial holdings are generally in bigger corporations that own a diversified series of smaller ones, encouraging unnecessary conglomeration.

Some libertarian intellectuals actually despise many big businesses currently in the American marketplace (for various reasons, such as practices, attitudes, productivity - whereas others simply see them as poor examples of capitalism), however they see these regulatory methods as poor attempts at addressing the real issues behind corporate failures and moreso as a gross abuse of legislative authority.

Limited liability is the condition where a person's liability on their investments is limited to a fixed sum, it is generally regarded as a special privilege granted by the government to limited liability corporation shareholders, however many libertarians disagree with this view and see it as a fundamental right. Most mainstream supporters of limited liability state the reason it exists is to encourage investment, however many libertarians view this reasoning to be flawed for several reasons.

[edit] Viewpoint: In Favor of Limited Liability

Prominent anarcho-capitalist libertarians, such as Murray Rothbard, argue that as limited liability can be easily contracted for in a free society, it is not a "special privilege" of the government but instead a right of free commerce. Critics of this viewpoint have several observations both critical of the current system and this libertarian pro-limited liability viewpoint:

1. Corporate charters which currently grant limited liability are not contacts with private parties but instead, agreements with the government. If limited liability is a "right" of buyers and sellers in corporate stockholdings, it would be contracted for, and not granted by government charter. Government charters also come with additional restrictions and regulatory provisions that ask private businesses to give away certain controls of their organization to the government to gain limited liability protections. Thus the current system is at the very least in need of significant reform.
2. In a free society, individuals cannot contract with one another to transfer rights that they do not initially have. The owner of a particular piece of property has by default full liability for the property and its use, the property is their responsibility being they are its owner. They cannot transfer ownership of the property to another person without transfering that full liability, unless they agree to retain the remaining liability upon themselves. For instance, a private property owner with a gun would be fully liable for damages caused by shooting someone in a free society. The gun owner cannot sell the gun to a buyer with the agreement that the buyer is only partially liable for actions taken with the gun, as the new owner must take full responsibility for their own actions. They can agree to co-own the gun and thus be both liable for its damages, or the original seller can agree to take partial responsibility for the buyer's use (perhaps through a means such as insurance), but they cannot jointly agree to discard liability for use of the property no matter how many times it is transferred from one owner to the next. Thus while investors in stocks could agree with the business to be limited in the liability they have for their shareholdings (or not do business with the corporation), the other business owners whom they make this deal with must retain the remaining liability for themselves, and thus, the responsibility for running the business does fall to someone (namely the individuals profiting from the sales of stocks). Thus it can be argued that no system of limited liability shareholding would allow liability to fall to the juristic person that exceeds the collective liability of the owners who the juristic person represents. Any of the owners of the juristic person can take the remaining liability, but someone must, or the juristic person can be said to be given a right that the individuals who created it did not initially have to give.
3. The effect of limited liability policies, while encouraging investment in the marketplace, can be said to have negative side-effects, such as encouraging marketplace transactions to exist on speculation and encouraging frequent short-term investment or "day trading". With less liablity financial decisions are based solely on earnings, whereas with more liability the consideration of the stability of long-term earnings is more important to the investment process. This contributes to the boom-bust nature of the economy, whereas a limited-liability free system would encourage less speculative and more fully informed investment (given the investments would include higher stakes). Likewise, limited liability makes it easy to create many corporate juristic persons to own other corporations, thus obsfucating who or what is liable for the actions of each corporation, and creating a marketplace where so many corporations own each other that it is often difficult to tell who in fact owns what, creating more uncertainty in the marketplace. These suggestions revolve around the idea that limited liability, even if permissable in a free society, may be something a free marketplace would not desire.
4. Lastly, even if limited liability were permissable as it is currently practiced in a free society, it could be said that the massive damages that are held unaccounted for in a corporate marketplace with limited liabilities encourages corporate fraud, which no one other than society as a whole compensates for, as limited liability would not permit any specific group from being held responsible for the full damages. This type of behavior is not encouraged in a free marketplace, and thus some may argue, limited liability is not a healthy expression in a free society.

[edit] Viewpoint: Against Limited Liability

Generally the viewpoint against limited liability centers around depiction of limited liability as a special government privilege, which it currently is. Likewise it is also suggested that the benefit of limited liability is a lure given to businesses to incorporate, which involves signing a charter with the government, thus giving the government a means by which to have corporations abide by additional regulation the charters sanction.

A libertarian is not necessarily against the concept of limited liability as a method for investment, but most libertarians who are against limited liability policy in our government would agree that every corporation needs a principle owner who is liable for any excess of liability that the limited liability shareholders are not liable for. How this would work in a free market society is the subject of much debate and should be included in any comprehensive libertarian platform.

A juristic person is a legal entity composed of multiple people which is treated for legal reasons as a single individual, or in some select situations, an entity which allows a single individual to act as a seperate entity apart from themselves. Corporations are juristic persons. Juristic persons are commonly refered to in lawsuits, property claims, and contracts and help clarify many legal processes revolving around modern business.

During the era of common law, juristic persons did not exist, as most businesses were proprietorships or partnerships. Owners were simply liable for debts of a business. Once joint stock companies were granted limited liability, owners (stockholders) were considered seperate from the business itself. By making their business a juristic person (creating a corporation), the property of the corporation is treated like a person's personal assets. Thus, if the corporation is exacted for damages in a civil lawsuit, instead of exacting an overall expense on the owners of the corporation (who are protected by limited liability), the assets of the corporation as well as the stocks which control its ownership are transfered via damages leveraged against the corporate juristic person.

This is a controversial approach to business, and some libertarians will advocate that a juristic person (while fine as a method to define the terms of contracts and lawsuits) is ultimately an unnecessary construct that creates confusion and obsfucation in the law. This encourages a seperate legal system to deal with corporations while private businesses (which are usually smaller) are required to deal with conventional legal methods. It could be argued that both types of businesses should be subject to the same legal principles, regardless of the fictionalized entities involved.

However, these complaints should not be confused with the complaints added by ideological groups inconsistent with libertarianism. Critics of the juristic person concept from these other camps often object to the "personhood" of a corporation for other reasons, some wish to limit the speech a corporate business can conduct, increase the regulatory authority government has over corporate business, and limit the civil protections a corporation has. Libertarians may argue that since corporations are owned by people, to prohibit or a censor a corporation's actions is the same as prohibiting or censoring individual actions, and thus even corporations (as representations of groups of people) do have basic civil rights. Typically these critics advocate centralized and regulated marketplaces, something libertarians are definitely against.

Because the corporation is a juristic person, under the law it must be treated like a person, as such every year corporations in America have to pay income tax. This taxation rate is special, and is a large portion of the government's general revenue. Owners of a corporation, who receive dividends on earnings that were already taxed once by the corporation's own income tax, are also personally taxed when they must report their income for their own income tax returns. This is considered by many as a form of "double taxation". Even libertarians who are lenient on transitional tax policy view this as dubious at best, and suggest reform of tax code policy to accomodate this situation. Whether that is at the corporate level and the individual owners get a tax credit to compensate their dividend income (as practiced in Australia and the UK) or whether corporate taxes are thrown away altogether, is an important part of libertarian policy and platforms. Creating a reform or transitional government will require many iniatives to be available to address this important issue, and libertarians may have many different ideas as to how to implement reform in this field. In general, the concensus by libertarians is that corporation owners should not be penalized for owning successful businesses by having to pay unduly high taxes, as these taxes - sooner than actually detracting from the personal finances of rich investors - deter investment, and reduce the general earnings of businesses (which contributes to more bottom-line cutting and higher unemployment rates).

The United States Federal government, being itself a juristic person, is also a corporation in the classical use of the term. It has a multi-trillion dollar budget that easily out-grosses the top 15 corporate earners combined, revenue entirely derived from compulsive taxation. The U.S. government owns entire business sectors and has offices in virtually every country, yet it is in nearly perpetual debt many times greater than its annual budget. Conception of government as a corporation was once widespread, in fact the colonies of Massachusetts, Rhode Island and Connecticut were all chartered British corporations before being independently established as states. However the terminology that might associate government with corporations has fallen into disuse.

The conception of government as a corporation is important to understand the many differences of a free market corporate marketplace from fascist corporatist economics, which may be considered contradicting political principles. Civil groups and governments may differ greatly from contemporary business corporations, however it is often noted by libertarian thinkers that governments share many of the same negative traits that abusive corporations have (only greatly amplified due to the indiscretionary monetary, legislative and executive authority governments have that private corporations don't). Governments with sufficient power leave civilians with little to no recourse for rights infringements, whereas conventional corporations are very frequently the target of such legal action. Offering civilians legal recourse against government abuse is in this light as important as (if not much moreso) making sure civilians have similar legal recourse against corporate businesses.

Libertarians often adopt this viewpoint to bolster their claim that giving the government more power over corporate growth is simply transfering power from one type of corporation to another considerably worse kind. As such, libertarians will frequently advocate limitation of government power coupled with limitation of special privilege given to corporate bodies as their preferred political doctrine.

Libertarian defense of corporations should not be construed as a unilateral defense of all corporate action. Libertarians are strong supporters of legal systems that provide methods for even the smallest parties to get appropriate recourse for the damages and infringements caused by corporations that abuse their authorities through fraud or direct property right violations. However libertarians do not see increasing government regulation over corporate action as healthy or respectful of the rights that corporate owners do have. Regulations of this nature are often inconsistent and - while under the guise of assisting the poor and underclassed citizens - simply create a more corrupt political system that these masses have even less control over.

Releasing the bonds between government and the marketplace, ensuring that existing legal codes that protect the property rights of all citizens are not mangled and confused by special corporate treatment in political policy, and ensuring a competitive economy by deregulating and dezoning the marketplace are all important parts of libertarian efforts to change the corporate marketplace for the better. These considerations should be placed at the forefront of any libertarian policies that effect the status of modern corporations.

Policy points discussed in this topic regard the general reform of the government's economic policies and do not require require major revisions to take effect. As such this article is classified under SECTION 1: "CORE MEASURES"