Creation and History of The Doctrine
In the common law tradition, only a person could sue or be sued. This was not a problem in the era before the Industrial Revolution, when the typical business venture was either a sole proprietorship or partnership—the owners were simply liable for the debts of the business. A feature of the corporation, however, is that the owners/shareholders enjoyed limited liability—the owners were not liable for the debts of the company. Thus, when a corporation breached a contract or broke a law, there was no remedy, because limited liability protected the owners and the corporation wasn't a legal person subject to the law. There was no accountability for corporate wrongdoing.
To resolve the issue, the legal personality of a corporation was established to include five legal rights—the right to a common treasury or chest (including the right to own property), the right to a corporate seal (i.e., the right to make and sign contracts), the right to sue and be sued (to enforce contracts), the right to hire agents (employees) and the right to make by-laws (self-governance).
Since the 19th century, legal personhood has been further construed to make it a citizen, resident, or domiciliary of a state (usually for purposes of personal jurisdiction). In Louisville, C. & C.R. Co. v. Letson, 2 How. 497, 558, 11 L.Ed. 353 (1844), the U.S. Supreme Court held that for the purposes of the case at hand, a corporation is "capable of being treated as a citizen of, as much as a natural person." Ten years later, they reaffirmed the result of Letson, though on the somewhat different theory that "those who use the corporate name, and exercise the faculties conferred by it," should be presumed conclusively to be citizens of the corporation's State of incorporation. Marshall v. Baltimore & Ohio R. Co., 16 How. 314, 329, 14 L.Ed. 953 (1854). These concepts have been codified by statute, as U.S. jurisdictional statutes specifically address the domicile of corporations.
Read more about this topic: Legal Entity
Famous quotes containing the words creation, history and/or doctrine:
“Party action should follow, not precede the creation of a dominant popular sentiment.”
—J. Ellen Foster (18401910)
“Modern Western thought will pass into history and be incorporated in it, will have its influence and its place, just as our body will pass into the composition of grass, of sheep, of cutlets, and of men. We do not like that kind of immortality, but what is to be done about it?”
—Alexander Herzen (18121870)
“The doctrine of those who have denied that certainty could be attained at all, has some agreement with my way of proceeding at the first setting out; but they end in being infinitely separated and opposed. For the holders of that doctrine assert simply that nothing can be known; I also assert that not much can be known in nature by the way which is now in use. But then they go on to destroy the authority of the senses and understanding; whereas I proceed to devise helps for the same.”
—Francis Bacon (15601626)