Business and Corporate Law

By far the most universal and resilient of business structures, both on the national and international level, is the corporation. Most state, federal and international regulatory control is directed at corporate business. Therefore, more emphasis is placed on corporations than on other business forms in the discussions that follow.

Corporate business structures date back to at least the sixteenth century, when merchants of England faced not only the perils of dangerous sea voyages, but also the prospect that they and their descendants could be liable for cargo losses due to bad weather or pirates. Some early well known corporations include the East India Company and the Hudson's Bay Company, and many American colonies were themselves chartered as corporations. Early corporate charters consisted of a grant from the crown that limited investors' liability for losses of the corporate assets equal to the amount of their investments. The early corporations were also granted monopoly powers over territories and industries that were considered critical to the interests of the English state.

As the U.S. Constitution makes no specific reference to corporations, the individual states retained the power to regulate them. By 1800, about 200 corporate charters had been granted by the states. In 1886, the U.S. Supreme Court ruled, in Santa Clara County v. Southern Pacific Railroad, that a private corporation is a "natural person" under the U.S. Constitution, and therefore protected under the Bill of Rights, including the right to free speech and other constitutional protections (excepting those of the privileges and immunities clause). Big business expanded rapidly across America and the world. In 1901, J.P. Morgan and John D. Rockefeller joined forces to control 112 corporate directorates, combining $22.2 billion in assets under the entity of the Northern Securities Corporation of New Jersey. In today's terms, that massive sum of monies would be the equivalent of the total assessed value of thirteen to fifteen of the southern states of America.

Today, the corporate charter is a grant of privilege extended by a state to one or more investors to serve a public purpose. Most states have standardized their requirements for the formation, continuation and dissolution of corporations by adoption of the Model Business Corporation Act (MBCA). Corporations remain the most popular form of business structure because of their limited liability, their perpetual life, the ease with which they can raise capital, the transferability of their shares or interest, and the limitations placed on the powers of the shareholders that bind the corporation.