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Why Were Corporations Illegal Before 1819?

While many here believe that Corporations are part of a healthy Free Market, it should be noted that our founders fought the British Corporations AS WELL AS the British Government.

So when you think it's "libertarian" to defend corporations like Monsanto, think again.


When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country's founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role. Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals. Enabling shareholders to profit was seen as a means to that end.

The states also imposed conditions (some of which remain on the books, though unused) like these:

* Corporate charters (licenses to exist) were granted for a limited time and could be revoked promptly for violating laws.

* Corporations were often terminated if they caused public harm.

* Owners and managers were responsible for criminal acts committed on the job.

* Corporations could not make any political or charitable contributions nor spend money to influence law-making.

But aren't corporations just part of the free market? Isn't that what capitalism is all about - corporate interests driving the economy?

Actually, no. Corporate libertarians would have you believe that somehow corporate dominance is entirely consistent with the values and vision of the Founding Fathers, but this is pure myth. The framers believed in limited government and free markets, but corporations were almost non-existent in the early days of the Republic. Unlike today, one could not form a corporation simply by filing a few papers with a government office; instead, permission from the government was needed (usually via an act of the Legislature)


Watch "The Corporation" documentary Free,


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Absolutely right

It is simply not true that corporations are necessary to conduct business (as some below have suggested). A business owner does not have to incorporate in order to hire employees and sell products. All that incorporation does is grant a business privileged protection by the state (limited liability, mainly, but also tax advantages). The argument for having corporations is the same as for any other government exercise of power: "it is good for society." The extent of influence and power that the largest corporations exert today makes them effectively "anti-business," because they wield the power of government to make it impossible for new and/or smaller businesses to enter the market and compete with them.

Every anti-business rant on

Every anti-business rant on the DP makes me shake my head in disbelief. How far has the liberty movement strayed from the pro-business, pro-capitalist roots. The problems stem from the influence of a small number of cozy relations between lawmakers and certain favored businesses. There is nothing wrong with C Corps, S Corps, LLC's, LLP's, and sole proprioterships. These types of incorporated businesses make business possible. Without them no one would engage in any business at all because we'd all be constantly drafting contracts and negotiating to even go for a walk!

The biggest complainers about "corporations" obviously have no business experience.

anti-corporation is not anti-business

Every serious libertarian scholar will tell you that in a libertarian society, it is all about contracts. You may not be aware of it, but you are constantly drafting contracts. When you go get a haircut, can you walk out without paying? You didn't sign a contract, so why should you have to pay for the haircut? Because you made a verbal contract. We make verbal contracts all the time. Whenever you accept an offer, you have entered into a contract. I encourage you to read up on this.

Are saying is that corporations don't need to engage in contracts? That sounds rather undesirable to me. With respect to corporations, they rely on state power and are therefore incompatible with libertarianism.

BTW, a sole propriotership is not a corporation.

“With laws shall our land be built up, but with lawlessness laid waste.”
-Njal Thorgeirsson

Of course you are correct

Of course you are correct about the sole proprietorship not being a corporation. I mistakenly listed most forms of businesses, not just the incorporated ones.


Kinsella not a serious libertarian scholar?

Good link.

He is...

only coming at it from a perspective of shareholder's personal non-share assets being exposed. Incorporation also shields the assets of the principals of a corporation. The principals of the corporation can pay themselves big fat salaries then walk away from liability.

It is VERY common for persons to accept investment money, form a corporation, pay themselves handsomely and then, either through incompetence or even sometimes intentionally, run the company into the ground then run off with the treasure leaving society(taxpayers) AND the shareholders holding the bag.

~wobbles but doesn't fall down~


is why they lose lawsuits when they spend corporate revenue on things not designed to help the company profit. Not because they are "mandated to operate for short term profit ONLY" as some have suggested. When people invest in a corporation, they assume the operators of that corporation have a goal to grow and maximize that investment, unless contractually stated otherwise.

he is

but he represents a minority view

“With laws shall our land be built up, but with lawlessness laid waste.”
-Njal Thorgeirsson

I thought opinions of the

I thought opinions of the "majority" were something that should be avoided? ;)

There are no libertarian

There are no libertarian societies. In my opinion, Libertarianism is an ideal, a philosophy. One worth promoting and striving for, but there will never be complete uniformity of opinion. Even the definition of "Libertarian" is open to broad interpretation, as evidenced by the opinions of learned people as well as lay persons.

Also, even as Libertarianism emphasizes the individual over the collective, legal structures would certainly be a part of a Libertarian United States, as there would still be Democrats, Republicans, Communists, Socialists, and lots and lots of case law.


using "Libertarian" (with the "big L") some Benton talking point to smear Ron or something? Its use has popped up suddenly amongst hardcore Randites.

The "big L" form means the Libertarian Party which is a super tiny extremist sect among all things "libertarian". Anarcho-capitalists (ancaps) and libertarian anarchists are only like 10% of those that call themselves libertarian and even many of them don't/won't have anything to do with the LP.

~wobbles but doesn't fall down~

Michael Nystrom's picture

Velveeta - I disagree

There is nothing wrong with C Corps, S Corps, LLC's, LLP's, and sole proprioterships.

The Daily Paul is an S Corp because when I got sued, I was a sole proprietor, and I had none of the protections that a corporation can offer. When I got sued, I was on the hook for everything. So that is nice for me now that I have this protection.

However, the flip side of this is that the the company that sued me, Righthaven LLC, did things that no responsible individual would ever do. Righthaven LLC, protected by its "limited liability" status, sued people without grounds, committed fraud, caused lots of individuals - not just me, but the poor cat blogger who was running a little blog about cats. And not just her but a lot of other individuals without the government granted privileges, that I now pay the government to be afforded.

In the end, Steve Gibson, the jerk behind Righthaven, got off scott free because it wasn't him, it was the artificial person known as "Righthaven LLC" that was doing all that nasty stuff. And why not? THERE ARE NO CONSEQUENCES. Gibson just threw that shell away, crimes, unpaid bills and all and walks off scott free.

There is nothing wrong with business, but businesses must be held accountable. These government granted privileges are just part of the fascist society we live in. How do we know they're privileges? Because certain rules apply to you, as an individual, but different rules apply to these state-created, artificial persons known as corporations.

The biggest complainers about "corporations" obviously have no business experience.

Actually, I'm a huge complainer about corporations, and I own one. The fact of the matter is, you have to in order to compete in this world. But at the end of the day, government regulation, policy, and law all favor corporations - the big people - over the little man. And that is something I resent deeply.


Thank you, Michael, for that excellent example. I am sorry you had to go through that. When I had an acupuncture practice, I was a sole proprietor and everyone kept telling me to form a corporation so that I could not get sued. I wanted to stand behind my work and didn't want to hide behind a corporation. Luckily I never got sued but in retrospect it was pretty stupid of me to refuse to incorporate.

This seems analogous to me to the Austrian Business Cycle theory. All it takes is for one bad investor to take the cheap central bank money, and pour it into a bad capital project, and all the competitors have to follow suit or be left behind. All it takes is for one unscrupulous person to hide behind a corporation, and start taking liability risks, and all the competitors have to follow suit or be left behind.

“With laws shall our land be built up, but with lawlessness laid waste.”
-Njal Thorgeirsson



You're not a deep thinker on this subject. The reason you have incorporated is to protect your personal assets when someone sues the corporation. Piecring the corporate veil is only done in very rare circumstances.
I'm surprised at your simplistic/class warfare/ corp. equals big guy exploiting little guy/emotionally charged/ Jesse Jackson type argument.

Respectfully, do some more homework on business organizations.

General note: Big oil? Buy stock and become a part owner. get dividend checks. Now do you feel exploited?

“...taxes are not raised to carry on wars, but that wars are raised to carry on taxes”
Thomas Paine, Rights of Man

wolfe's picture

Michael is correct.

And you are not the deep thinker on this.

How is having the government provide special privileges for a price in any way libertarian?

Business is NOT the same thing as a corporation. I'm not anti business. I am against the immunity, immortality and other benefits afforded to corporations.

As far as your anecdotal thing at the end. I have owned several corps, and have played in the stock market. And yes, we are still being raped because corporations are government invented legal constructs to hide people from the ramifications of their crimes.

The Philosophy Of Liberty -


Tell me the advantage a corporation has in a free market setting? A group of investors, large or small, invest together to start a business. What is libertarian about denying that ability?
I understand being against the special privileges granted by the State to corporations now, but I honestly don't see what there is to be against about corporations in a free market. The privileges given to corporations currently are not required for a corporation to exist, just as a central bank is not required for money to exist. To me it is much like most of our other economic problems, government related.

The modern legal definition...

of a "corporation" since the 1600's is a charter by or contract with government. You can't divorce the two.

Being against the modern legal idea of a corporation is not being against persons joining together to conduct business. People can sign contracts with each other outlining responsibilities and liabilities regarding the joint venture and if they are concerned with liability they can purchase insurance.

~wobbles but doesn't fall down~

Mike, I'm aware of the

Mike, I'm aware of the negatives involved in the business world. I have personally dealt with a business issue (deadbeat client) for years that had almost destroyed my business. The simple fact of the matter is there are people out there who will make it their business to ruin you if it will enrich their own interests. That is the reason the legal construct of the corporation is so important.

Your previous lack of information regarding corporate protections was what almost ruined you personally, not the fact that a corporate entity is an essential legal barrier to do "good" or "ill" with ones chosen line of business. In a "society of laws" (and I don't hesitate to point out this includes every country on Earth) a business must also have a legal component. When YOU are YOUR BUSINESS, YOU are responsible for everything, even things beyond your control.

So our founders were wrong how exactly??

No anti-business rant here.

Interesting read thanks!

not sure if you were trying to validate my point or not with it tho lol

Just putting out a piece of

Just putting out a piece of info I found fascinating.

Devil's Advocate

So, what if you have an idea, want to hire people to accomplish it, and people will buy what you sell. Now you need government's strict permission.

The British Empire was mercantilist. Wealth of Nations wasn't published until 1776. Governments chartered corporations
1)Because the King was the boss and people at one time needed his consent to fornicate in their own homes with their own wives.
2)Because state support of a commercial venture was considered critical to competing with other nations. This was before economics was well understood.

Although the federalist, incorporationist, republicanist mindset of people like John Marshall caused a lot of harm, he was also a foremost defender of property rights.

The left has at times been the champion of liberty. But they've never quite understood economics very well. Freedom to keep the product of your labor and make long term plans for what to do with it is an essential freedom, on par with life itself.

The problem is a government that 1)allows corporations (especially the people within them) to be immune from the repercussions of the harm they cause. and 2)government establishes and protects industries through regulation and subsidy, the financial system being the most egregious example.

Solving our socioeconomic problems will involve rethinking finance, but it will have to be in a voluntarist setting, and the right to property shall be absolute.

Corporations then, are people. People trying to obtain property and employ it for gainful purpose, or whatever purpose they choose so long as it isn't harmful to others (via non-aggression). So, protecting 'corporations' is actually sort of important.

Nothing is 100% Good or Bad

There are good businesses and good governments as well as bad.

Corporations CAN do some good but their main goal is to maximize profits for the shareholders.

Profits are fine but the corporations are literally psychopathic organizations because there goal is to take in the most money possible at all cost, sometimes with no regard to the law.

And some have gotten so large and powerful that if they don't like a law they can send in their lobbyist and rewrite the law.

Some corporations have more power these days than most countries on earth, including the USA.

I'd prefer a strong government that defends it's people while being accountable to them instead of strong corporations that are only accountable to their board members.

I don't know all of the ins and outs of why our founders didn't like corporations, but I agree with how they were treated prior to 1819.

I also believe that people should be able to freely associate but there does need to be some government involvement to prevent monopolies and other things that hurt it's citizens.

THANK you for this post re corporations!

I'm sending this link to everyone I know. A while ago I learned some of it through Kalle Lasn's "Culture Jam." (Lasn coined the term Occupy Wall St. and apparently set the first date. He also publishes Adbusters Magazine.) I remember in the book he said something like, "Just know, we're not a bunch of lefties." Here at the DP, the minute you say anything against Monsanto (for one), you get accused of being a "statist" or a "collectivist." The enormous power wielded by these global corporations is not how things should be, nor what the founders intended. And it's outrageous that corporations should be enjoying human rights. That's thanks to a misguided Supreme Court justice. I know of two instances where corporate charters were revoked. If difficult to achieve, it's still on the books. Today we have the worst of both worlds: big government and big corporations - working together. And not for us, either.

When we try to pick out anything by itself, we find it hitched to everything else in the Universe.
~ John Muir

Thank you!

Would you recommend "Culture Jam"? I read Adbusters when I'm checking out at Whole Foods sometimes lol

Yes, I do recommend Culture Jam.

Kalle Lasn's one of my "heroes." Culture Jam is old by now. (You can get a copy dirt cheap http://www.amazon.com/Culture-Jam-The-Uncooling-America/dp/0...) But it's eye-opening, remains one of my most recommended books - for things I learned about corporations, but also for his great explanation of how advertising affects us. He's an adman (as I once was, so to speak) who had an epiphany. And he had both the creativity and funds to do a little "anti-advertising." Thing was, he couldn't find media venues to accept his ads. You know, "conflict of interest." Okay, maybe towards the end of the book he goes a bit off the deep end; but given where he's coming from, it's understandable! I recommend it for everyone, but especially parents so that they understand how advertising affects their children. At my children's private school, they didn't allow "word shirts" - clothing with corporate names or logos or anything else plugging an agenda for that matter (even "good" things). They don't allow children be used as human billboards, period, the end. Nor should teachers and other students be subjected to it. P.S. For an enlightening read unrelated to content or advertising but the medium itself, I also recommend the book of another former adman who had an epiphany, Jerry Mander: Four Arguments For the Elimination of Television. Again, thanks for your post.

When we try to pick out anything by itself, we find it hitched to everything else in the Universe.
~ John Muir

You want the solution?

No State, No State privilege.

Check out the Laissez-Faire Journal at LFJournal.com

"The State is a gang of thieves writ large." - Murray Rothbard

But then all you have left are corporations.

The State is no more dangerous than an out of control corporation.