Legal Entity - Creation and History of The Doctrine

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 and, creation, history and/or doctrine:

    As a natural process, of the same character as the development of a tree from its seed, or of a fowl from its egg, evolution excludes creation and all other kinds of supernatural intervention.
    Thomas Henry Huxley (1825–95)

    Some collaboration has to take place in the mind between the woman and the man before the art of creation can be accomplished. Some marriage of opposites has to be consummated. The whole of the mind must lie wide open if we are to get the sense that the writer is communicating his experience with perfect fullness.
    Virginia Woolf (1882–1941)

    The greatest horrors in the history of mankind are not due to the ambition of the Napoleons or the vengeance of the Agamemnons, but to the doctrinaire philosophers. The theories of the sentimentalist Rousseau inspired the integrity of the passionless Robespierre. The cold-blooded calculations of Karl Marx led to the judicial and business-like operations of the Cheka.
    Aleister Crowley (1875–1947)

    If the Soviet Union can give up the Brezhnev Doctrine for the Sinatra Doctrine, the United States can give up the James Monroe Doctrine for the Marilyn Monroe Doctrine: Let’s all go to bed wearing the perfume we like best.
    Carlos Fuentes (b. 1928)