I try and keep politics off of this blog, but sometimes the coverage from politics sparks a question about entrepreneurship. Specifically today it was an explanation in The New York Times about how the law punishes conspiracy above and beyond the underlying crime.
That triggered the question of what is the difference between a conspiracy and a corporation? Both are groups of people planning to work together.
The New York Times article explains that conspiracy has been part of Common Law for over 500 years, and punished severely for all that time BECAUSE people working together can create more damage to society than people working alone.
The flip side of that is that governments grant privileges above and beyond the norm to people who choose to work together as a corporation, who promise to help society in some positive way. The most important of these privileges is limited liability, the right to shield one’s wealth from losses when those losses occur within a corporation.
The original limited liability right came about to encourage people to invest in overseas trading, where the investors had no control over what happened on those voyages. That right was later extended to domestic corporations, and extended and extended and extended to today where anyone can set up an LLC in an hour for any purpose and for $100 filing fee be granted limited liability.
I’ve wondered why that right is so freely passed out and why the cost of it is so low. This symmetry with conspiracy may be a big part of the answer. People working together can do a lot more good for society than people acting alone, and BECAUSE OF THAT we give everyone who forms a corporation the benefit of the doubt rather than having them try and prove their intent.
Of course, sometimes they end up doing both, creating a corporate conspiracy.
