Are Corporations an Invention of the Free Market?

In a very interesting article, Gene DeNardo discusses a viewpoint that I believe should get way more attention in the libertarian world:  whether or not corporations should be considered part of the free market. I know through a class I took on corporate law that a corporation is purely an invention of the state and owes all of its success to the government which protects its investors from the liability normally associated with similar investment ventures.

The main draw to investing in a corporation is the limited liability one receives for choosing the corporate form of investment over investing in, say, a general partnership.  However, where does this limited liability come from, and who pays the price when the consequences of ones actions are not allowed to be divvied out? It is the opinion of DeNardo that society bears the cost. Therefore, in order to protect certain investors, the costs those investors would normally be held responsible for are distributed onto all of us:

Basically, when a corporation exceeds its liability in any way, when it extends itself beyond its value, the cost is socialized. It matters not whether the creditors take a bath or the government steps in, someone besides those within the corporation must make up the difference. This forced market condition in and of itself, is blantant socialism.


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