What is a Corporation?

A corporation is an artificial entity that exists through the permission of the state in which the corporation is situated. States require that the purchaser provide his Social Security Number when a corporation is created. Governments also require that the corporation be licensed by the State. States can make these requirements because creating a corporation is not a natural right possessed by people and guaranteed by the Constitution. Rather, it is a privilege that is regulated, and all privileges come with a price. In the case of a corporation, the most significant privilege is that the corporation can declare bankruptcy. This is seen as a significant advantage for most people. Whereas people don’t have the natural right to take the property of others without fair compensation, the privilege to do so can be purchased in the form of a corporation. Of course, since this means that those doing business with the corporation are taking a risk, they must be given fair warning that the business is an artificial entity having such privileges. Thus corporations must contain the word “Corporation” or “Inc.” in their names.

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