Question

Corporations had the important advantage of

Answer 1

There are a few:

(1) Those who work for it, and who own it, have limited liability for the corporations actions. For example, if GM sells a car that explodes and kills a family of five, the heirs may sue GM (and win massive money damages), but they cannot sue the CEO of GM, or the line workers who made the car, personally. Without this protection, large businesses would become extinct, because no one person can possibly have the resources to take on the potential liabilities of a big company. A similar theory operates in government -- the government and its officers are immune to liability claims. You cannot sue City Hall.

(2) The corporation can be a party to contracts, just like a person. So, for example, a contract for employment can be made between an employer and the corporation -- not any one person in the corporation. A corporation can sign contracts for health care insurance, or rent, or to buy things on credit, or take out a loan, and no individual person becomes responsible for the contract. This allows those contracts to have longevity, and survive even if the people at the corporation come and go (get hired, get fired, retire, die, go out sick for a year). Again, large companies would be impossible if one person in them had to sign every legal contract and be responsible for it.

(3) In sensible and successful jurisdictions, the corporation pays tax at much lower rates than an individiaul with the same amount of income. The idea is that if a single person makes $500,000 a year, he's quite wealthy, but if a small company of 20 workers makes $500,000 a year, each worker is not doing very well. Additionally, taxes on corporations are just passed on through to consumers as higher prices -- a corporation can't "enjoy" its income the way a person can, so it's not like if you tax Apple, Inc. the building in Cupertino gives up the idea of flying to Cancun for vacation. All that happens is the cost of an iPad goes up a few dollars to pay for the taxes. So if you tax corporations the end result is that you raise the prices successful, well-run, profitable companies must charge, and you reduce the prices poorly-run and therefore unprofitable companies must charge. Totally backwards from common sense. Nevertheless, in some jurisdictions, notably the United States, corporations are taxed at a fairly high rate. The result, not surprisingly (unless you're a Democratic politician) is that American corporations will alter their activities strenuously to avoid taxes, and often the biggest will spend more hiring lawyers and lobbyists than they will on, say, R&D.

(4) The corporation usually has a written charter and is run by a board of directiors, with strict rules of disclosure to shareholders (the owners). That makes it very difficult for unethical or greedy managers to ruin the company, because everything is out in the open, and there are many watchdogs. That makes the jobs there more secure, and makes the investments of shareholders, e.g. people saving for retirement, pension funds, et cetear, more stable.