The move is inherent to capitalism and was realized in Europe much earlier.
It is a legal fiction which is very useful.
Before it was done, an investor in a business was legally liable of any debt incurred by it. By making the business a legal distinct person, the investors are protected and are not liable beyond their investment, as long as they donât break the law and donât participate in the management of the business.
To âincorporateâ means to âmake into a personâ (the root is âcorpâ for âbodyâ such as a corpse is) The idea is to make sure that the entity is required to OBEY the same laws as any other legel âpersonâ. That has to be done when liability is limited because the human owners are relatively âanonymousâ. Without that, the corporation would be able to be as inhumane as they choose without accountability.
One of the problems comparing corporate rights with individual rights is that when a corporation fails its stockholders are exempt from liability, whereas individuals who fail are held to account.
A perfect example is found in bankruptcy. A corporation can declare bankruptcy and stiff all the creditors without holding the stockholders personally responsible for the debt.
An individual cannot declare bankruptcy without having to sell his assets.
THE DIFFERENCES BETWEEN PERSONAL AND CORPORATE BANKRUPTCY
When an individual applies for personal bankruptcy, theyâre required to submit to a means test to prove that they canât pay their debts. By contrast, businesses have no such requirement. Another major difference between personal and business bankruptcies is the ability to cancel contracts .
In furtherance of defining "personhoodâ, this conversation between Stephen Fry and Steven Pinker throws new light on the subject of individual adaption to societal dogma.