# Why do corporations have to publically disclose what kind of corporation they are? **URL:** \ **Category:** Factual Questions\ **Created:** [November 16, 2006, 10:55am UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657 "2006-11-16T10:55:19Z")\ **Posts on this page:** 9\ **Page:** 1
**Author:** ![Derleth](https://avatars.discourse-cdn.com/v4/letter/d/b9e5f3/32.png) [@Derleth](https://boards.straightdope.com/u/Derleth)\ **Post date:** [November 16, 2006, 10:55am UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/1 "2006-11-16T10:55:19Z")
Why does a corporation have to disclose what its internal organization is, such as whether it’s an LLC? Why do businesses often use this information as part of their public communications? ---
**Author:** ![Princhester](https://avatars.discourse-cdn.com/v4/letter/p/3e96dc/32.png) [@Princhester](https://boards.straightdope.com/u/Princhester)\ **Post date:** [November 16, 2006, 12:10pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/2 "2006-11-16T12:10:22Z")
IAAL (I am an Australian lawyer) but I suspect this holds good all over: at least in Australia, corporations are required by law to disclose their status in all their public communications. At least one significant rationale for this is that corporations have limited liability, to the potential detriment of those dealing with them. ---
**Author:** ![Billdo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/billdo/32/315_2.png) [@Billdo](https://boards.straightdope.com/u/Billdo)\ **Post date:** [November 16, 2006, 1:05pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/3 "2006-11-16T13:05:55Z")
I would call it a historical consumer protection artifact that is slowly receeding. It shows everybody who is dealing with these entities that the personal liability of the entity’s owners may be limited. One of the salient facts about a corporation is its limited liability. In other words, if a corporation is sued, the plaintiff can win only those assets owned by the corporation itself, and (in most circumstances) not obtain the assets of the owners of the corporation. This is a contrast to a partnership, in which a creditor of the partnership can obtain the personal assets of the partners if the partnership assets are insufficient to pay the debts. Originally, each corporation had to be incorporated by special legislative act. When general corporation laws came in allowing corporation to be formed without special legislation, they generally provided that the names of corporations had to show that they were corporations by terms such as “corporation”, “incorporated”, or “limited” (or their abbreviations) in their names (with exceptions for speciallly regulated types of corporations like banks, which used reserved terms like “bank” or “trust company”). Later, business organizations other than partnerships and corporations were authorized. (By the way, things like LPs and LLCs are not corporations, but other legally separate types of business organizations.) First were limited partnerships (with regular partnerships becoming known as general partnership), under which there could be limited partners whose individual liability only extended to the funds they invested. However, the law required that there be at least one general partner with unilimited liability. These entities were required to be named with “Limited Partnership” or “L.P.” in their name. In the last 20 years or so (in the US at least) limited liability companies were authorized. The members of LLCs all have liability limited to their investments, but the form is much more flexible and may, if properly set up, be taxed like a partnership rather than a corporation (which can be a significant advantage). These forms again required the term “Limited Liability Company” or an abbreviation in their name. There is another class of organizations in which all of the owners are licensed professionals (doctors, lawyers, CPAs, etc.), under which the general liability of the owners limited, except that they may have unlimited personal liability for professional negligence or misconduct. These are known by terms such as “professional corporation”, “limited liablity partnership” or “professional limited liability company”, or their abbreviations. Although many states require these desigations in business organization names, some states (including, significantly, Delaware) have changed their law so that they are not required. However, most new business organizations do continue to use these designations in their names. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 16, 2006, 7:39pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/4 "2006-11-16T19:39:49Z")
What \*\*Billdo \*\* said. In addition, these days virtually no state \*requires \* a corporation to use the designation (Corp., Inc., LLC, etc.) in its public communications. Just about any entity can register an assumed name. If an organization has the name Widgets, Inc., for example, it can get rid of the pesky appendage by registering an assumed (or fictitious) name, like “Widgets” and use that name on its communications. Most states have an online search engine that permits members of the public to trace the name back to the corporation. And there is generally no limit to the number of assumed names a company can register and use. If the company is regulated or licensed, it might be more limited in the kinds of assumed names that it can use, and it might also need permission from a regulatory body before it can use an assumed name in the first place. ---
**Author:** ![Random](https://avatars.discourse-cdn.com/v4/letter/r/57b2e6/32.png) [@Random](https://boards.straightdope.com/u/Random)\ **Post date:** [November 16, 2006, 7:55pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/5 "2006-11-16T19:55:19Z")
I agree with the 2 previous posts. The whole idea is that the public should have some way of knowing who they are dealing with. ---
**Author:** ![Derleth](https://avatars.discourse-cdn.com/v4/letter/d/b9e5f3/32.png) [@Derleth](https://boards.straightdope.com/u/Derleth)\ **Post date:** [November 16, 2006, 10:16pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/6 "2006-11-16T22:16:26Z")
Fascinating thread. This is why I always pay my membership fee before the deadline. 🙂 ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 18, 2006, 4:43am UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/7 "2006-11-18T04:43:49Z")
[QUOTE=Derleth] Why do businesses often use this information as part of their public communications? [/QUOTE] I guess nobody really addressed this part of the OP. I don’t have any cites to support my opinion here, but I suspect it has something to do with people just being impressed by corporations. A segment of the population seems impressed that they are dealing with a corporation, especially. It’s not especially meaningful these days, but not everyone knows that. For example, in Michigan, I can form a corporation ([http://www.dleg.state.mi.us/bcsc/forms/corp/corp/500.pdf](http://www.dleg.state.mi.us/bcsc/forms/corp/corp/500.pdf)) in about five minutes for $60. To keep it running and all takes a little more time, and there are some pitfalls to avoid in some cases, but the paperwork is minimal and available online. That and it sounds more official-like. ---
**Author:** ![Dr\_Paprika](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr_paprika/32/3042_2.png) [@Dr\_Paprika](https://boards.straightdope.com/u/Dr_Paprika)\ **Post date:** [November 18, 2006, 4:49am UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/8 "2006-11-18T04:49:35Z")
I suspect many corporations also like to raise capital by wooing investors. These investors may like to know the internal structure of the company, that liability is limited, etc. This may be less important now than formerly. ---
**Author:** ![FRDE](https://avatars.discourse-cdn.com/v4/letter/f/e68b1a/32.png) [@FRDE](https://boards.straightdope.com/u/FRDE)\ **Post date:** [November 18, 2006, 12:20pm UTC](https://boards.straightdope.com/t/why-do-corporations-have-to-publically-disclose-what-kind-of-corporation-they-are/380657/9 "2006-11-18T12:20:05Z")
I speak from a UK perspective As GFactor pointed out - the terms Ltd, PLC etc were originally designed as **warnings** - but have irrationally mutated into reassurances