Thank you, TommyPaine, for attempting to help me get this. If you don't mind, I'm going to try to understand your response by argument.
Your first statement is pretty much the question I asked. I think I understand the risks that can be pursued legally; I'm interested in the risks that perhaps CANNOT be addressed through the justice system.
I'll skip the sole proprietorship and partnership stuff, as those aren't the business structures I'm concerned with here, and I think I get the broad strokes of risk dispersment on these fronts.
I also get the notion that a business that has gained permission to be incorporated under a state legal code, may be able to make loan agreements with lenders who are not willing to accept liability limited to the corporation's assets and require the corporation's owners to be personally liable. I don't see a potential for spreading risk for this scenario. I could be missing something, but this seems like a private one-to-one agreement, in which each party assumes the totality of risk for failure to comply.
In your next example, you move to a publicly traded stock. As I understand it, all publicly traded companies are corporations -- although I could be wrong. Certainly the majority of publicly traded companies are corporations. A person who buys a stock, buys it on the assurance that he can only lose his investment (plus brokerage fees). He knows that even purchasing stock in a corporation he knows is involved in illegal business, he won't be liable. That's the benefit. Both to that stock buyer, who gets to invest with limited risk, AND to the corporation, which gets to lure capital with that assurance of zero down side beyond their opportunity risk.
As I understand it, you're saying that the risk goes entirely to the corporation's creditors. But what about the other publicly traded companies, which aren't involved in corrupt practices? It may well be that their stock is rated lower, due to the lessor returns their companies are posting.
Could it not be argued that the stock purchaser, who's so protected, has little interest in ferreting out lower risk -- i.e. more scrupulous corporations -- and lower yield publicly traded companies? Could we not argue that the risk is transferred to scrupulous corporations, who pay the price of being less able to attract large stockholder investment because of their inability to compete with unscrupulous Barry?
Could we not say that withholding the risk associated with capital investment -- even in its lowest form of buying a stock -- skews investment decisions? Would not such skewing of investment decisions -- such skewing of risk -- land on the market as a whole? Does not an unscrupulous company, willing to go Barry, pervert capital (average stock buyers) away from more productive investment?
Is there an argument to be made that removing intrusive risk from investors, shifts the risk to the productive economy as a whole?
As for your assertion that NOBODY would be willing to risk the entirety of his assets. We know that's not true. Many nobody's risked everything to go exploring, to go west, to go to the gold fields. Some of those risk takers got rich. Most didn't. They made their judgments of risk and succeeded or failed. You do understand that hundreds of thousands of Americans left everything for a promise of gold -- in Montana, in California, in Alaska. None of them required the protection of limited liability. These people did not in transfer risk.
By contrast, your every bodies, who are unwilling to risk more than their initial investments, must -- by definition -- be transferring the risk somewhere.
How does the corporate structure allow that risk to be transferred? What part of that transfer is a drag on our economy and on our cultural zeitgeist?
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