Corporate legal fiction lies in the notion that a corporation can hold the same legal rights and obligations as a human being. Even though it’s an artificial entity with no physical presence or consciousness.

Thus often obscuring the true accountability of the individuals who control the corporate legal fiction lies.

The idea that a corporation is a “legal fiction” can be held liable for actions, can certainly seem paradoxical or even misleading at first.

Corporate legal fiction doesn’t have a mind or body like a natural person. Yet amazingly it has the ability to own property, and enter into contracts. Doesn’t that sound nonsensical?

This paradox is a cornerstone of corporate law. And it raises important questions about responsibility, accountability, and the true nature of power within corporations.

In legal and practical terms, it’s not a “lie” so much as a legal construct that has evolved over time to facilitate economic activity and governance. ( is it any wonder why people think lawyers are liars?)

Why does this construct exists and how does it serve a functional purpose, even though it may seem “artificial?”

The Concept of Corporate Legal Fictions:

In law, a legal fiction is a concept or assumption that is accepted as true for legal purposes… Even if it doesn’t correspond to actual reality.
For example, a corporation is treated as a “person” under the law for practical reasons, but it’s not a person in the literal, biological sense.

The reason legal fictions exist is to provide clarity and efficiency in the legal system. They allow for the orderly functioning of complex systems that involve many parties, like business enterprises. Otherwise it would be difficult to manage without a clear legal framework.

So, saying a corporation is a “legal person,” is a simplification that allows it to be treated like an individual in legal terms… Even though it’s not a living, breathing entity.

It’s a tool created by society (of lawyers) to help businesses function within a legal and economic system.

Why Corporations Are Treated as “Persons”

Legal Capacity: For a business to operate in society, it needs the ability to own property, make contracts, and sue and be sued. If we treated corporations like a group of individuals (with each person needing to sign contracts, own property, etc.), it would be much harder to function as a business entity.

So, the law recognizes corporations as legal persons so that they can function separately from their owners and managers.

Limited Liability: One of the main reasons for creating the corporate structure is limited liability. This allows business owners to protect their personal assets from the debts and liabilities of the business.

If corporations were not treated as separate entities, then owners would be personally liable for everything the business did, which would make it much riskier to start or run a business. Yet, amazingly enough, when everything’s hunky dory, they get the credit.

Continuity: Unlike a person, a corporation can continue to exist even if its ownership or management changes. If the corporation were treated as a physical person, it would die when the owner or key person dies.

By giving the corporation a separate legal identity, it can persist, making long-term investments and planning more feasible.

Meeting of the Minds in Practice

Even though a corporation doesn’t have a mind or consciousness, its agents (the people acting on its behalf) are the ones that facilitate the meeting of the minds.

The board of directors, executives, and other authorized representatives of the corporation act in its name. Their collective decision-making process is treated as the corporation’s decision.

In other words, while it’s a “legal fiction” in that the corporation itself has no consciousness, the people representing the corporation are what make the decisions and agreements.

This structure is just an abstraction that enables business and governance to function more smoothly.

Why It’s Not a “Lie”

The idea of a corporate person is not intended to deceive anyone. This is a way to structure and simplify the functioning of large-scale organizations within a legal framework.

It’s a legal construct that has practical benefits, especially in contract law, liability protection, and business operations.

And it’s transparent and widely understood in the context of business and law that corporations are legal fictions.

There is no intention to mislead—rather, it’s a way to handle complex legal realities.

Can Corporate Legal Fiction Be Misused?

Yes, like any legal structure, corporations can sometimes be misused.

For instance:
Corporate personhood can be exploited in ways that might seem unfair, like when large corporations use their legal status to avoid responsibility for harm or evade taxes.

Corporate veil piercing is a concept in law where courts can look beyond the corporation’s legal status to hold individuals personally liable, especially in cases of fraud or abuse.

This potential for misuse has led to debates over corporate influence. We see this particularly in areas like political donations, environmental damage, and labor rights.

Critics argue that a corporation’s ability to influence politics and law through financial power, can undermine democracy or fairness.

The Practicality of Corporate Law

Ultimately, the legal construct of a corporation is designed for practical reasons. Without corporate personhood, businesses would not be able to function in the way they do today.

The law provides a framework for business to operate efficiently, with clear rights and responsibilities.

It enables businesses to hire employees, make agreements, raise funds, and enter markets—all of which are necessary for the modern economy to work.

Conclusion:
While it may seem that a corporation as a legal fiction is a kind of “lie,” it is better understood as a legal construct created for practical, economic, and organizational reasons.

It provides the legal capacity for a business to act, own property, and engage in contracts, just as an individual would.

The “meeting of the minds” happens through human agents who act on behalf of the corporation.

The corporation isn’t a “lie” in the sense of trying to deceive.  It’s a legal tool to facilitate business and economic activity.

Do you question it’s fairness, especially in cases where corporations wield disproportionate power or evade accountability? As in Bates v Post Office. Add your comments below.