Among the many words you wouldn’t think need defining, the word “Person” is one of them. That said, in the language called “Legalese,” which looks suspiciously like English but isn’t really, everything gets defined, and then defined again, and then redefined. O.C.G.A. §1-3-3 defined a lot of things, including “Act of God,” “child,” “lunatic,” “oath,” and “signature.” Naturally, “person” is included in that list. According to that code section, “’Person’ includes a corporation.” §40-1-1, which lists definitions regarding Motor Vehicles and Traffic, goes even further. It says that a “’Person’ means every natural person, firm, partnership, association, corporation, or trust.”
What does that mean, exactly, that a corporation is a person? Is this the “corporate personhood” that was talked about on the news a little while ago?
The answer is yes. And, it helps us to understand why people would bother incorporating.
When you are creating a corporation, you are creating a legal entity, a ‘person’ if we want to use shorthand, which has the rights and obligations of a person. A corporation has to pay taxes and obey the law or it must suffer the consequences. A corporation is “entitled to receive due process and equal protection from this state.” See Eckles d/b/a Atlanta Technology Group v. Atlanta Technology Group, Inc., 267 Ga. 801. Therefore, if the corporation breaks the law, the corporation (not the owner) gets prosecuted. If the corporation fails to file taxes, the corporation has to pay a penalty. The corporation goes bankrupt, not the person who owns the corporation. It is just that the person’s ownership is of a worthless corporation.
Whether a corporation is a regular corporation (Co. or Inc.), an LLC (Limited Liability Corporation), a P.C. (Professional Corporation), or any of the other varieties of corporation is mainly a taxation issue. The reasons why you would choose one over the other are more related to how you pay taxes rather than any other reason, and the reasons for that is a subject for another day.
Since we’re talking about corporate personhood, and since the vast majority of corporations aren’t corporations like Walmart, but rather corporations like Joe’s Plumbing, Inc., owned and operated solely by Joe, with a little help from his wife in the bookkeeping department, it is important to know what happens if the corporation gets sued for something or accused of criminal action.
A corporation has to have a lawyer representing it in court. A regular human person can represent him or herself in a courtroom. That is called acting “pro se,” which is Latin for “for himself.” Of course, I can say from having spent over 20 years in the courts that the old adage is true 99 percent of the time – a lawyer who represents himself has a fool for a client. And that’s a lawyer – with non-lawyers, there is much more that can go wrong in a courtroom that a competent lawyer could have prevented.
A corporation, on the other hand, can’t exactly represent itself, mainly because it is an “it.” A corporation can’t speak or examine documents or sign anything. A representative of the corporation – the owner or president or manager or, ideally, a lawyer – has to speak for the corporation. So, if one of those people who is not a lawyer comes as a representative of the corporation in court, that person is, effectively, acting as the lawyer for the corporation. And, just like a lay person can’t represent another person in court, a lay person can’t represent a corporation in court, since the code defines a corporation as a person, and that would be practicing law without a license. As the Georgia Supreme Court said in Eckles, “To allow a corporation to maintain litigation and appear in court represented by corporate officers or agents only would lay open the gates to the practice of law for entry to those corporate officers or agents who have not been qualified to practice law and who are not amenable to the general discipline of the court.” In other words, Joe can represent himself, but he can’t represent Joe’s Plumbing, Inc., because he can’t represent someone else, and Joe’s Plumbing, Inc. is, according to the law, a “someone else.”
This article is not intended to be considered as legal advice – it is written for general informational purposes only. No lawyer or entity can give you legal advice without hearing the particular unique details of your situation.