Stock companies are in a sense corporations, but the name CORPORATION
has in its common application a broader meaning. PUBLIC CORPORATIONS
are those which are created exclusively for the public interest, as
cities, towns, counties, colleges, etc. PRIVATE CORPORATIONS are
created wholly or in part for the pecuniary benefit of the members, as
railroad companies, banks, etc. Corporate bodies whose members at
discretion fill by appointment all vacancies occurring in their
membership are sometimes called _close corporations_. In this country
the power to be a corporation is a franchise which can only exist
through the legislature.
In municipal corporations the members are the citizens; the number is
indefinite; one ceases to be a member when he moves from the town or
city, while every new resident becomes a member when by law he becomes
entitled to the privileges of local citizenship.
The laws which corporations may make for their own government are made
under the several heads of by-laws, ordinances, rules, and
regulations. These laws may be made by the governing body for any
object not foreign to the corporate purposes. A municipal corporation,
for example, makes ordinances for the cleaning and lighting of its
streets, for the government of its police force, for the supply of
water to its citizens, and for the punishment of all breaches of its
regulations. A railway corporation establishes regulations for
signals, for the running of trains, for freight connections, for the
conduct of its passengers, and for hundreds of other things. But such
by-laws and regulations must be in harmony with the charter of the
corporation and with the general law of the land. For instance, a
municipal corporation could not enforce a by-law forbidding the use of
its streets by others than its own citizens, because by general law
all highways are open to the common use of all the people. Again, a
railway corporation could not make a rule that it would carry goods
for one class of persons only, because as a common carrier the law
requires that it carry impartially for all.
As a general rule private corporations organised under the laws of one
State are permitted to do business in other States. It is quite often
to the advantage of a company to organise under the laws of one State
for the purpose of doing business in another. For instance, there are
many companies chartered under the laws of Maine with headquarters in
Boston. The Massachusetts laws require that a large proportion of the
capital be actually paid in at the time of organising, while the Maine
law has no such provision. For similar reasons many large companies
doing business in New York or Philadelphia are organised under the
laws of New Jersey.
A corporation may make an assignment just as may an individual. If all
the members die the property interests pass to the rightful heirs, and
under ordinary conditions the corporation still exists.
A FRANCHISE is a right granted by the State or by a municipal
corporation to individuals or to a private corporation. The franchise
of a railroad company is the right to operate its road. Such franchise
has a value entirely distinct from the value of the plant or the
ordinary property of the corporation.
An UNLIMITED LIABILITY corporation is one in which the stockholders
are liable as partners, each for the full indebtedness.
A LIMITED LIABILITY corporation is one in which the stockholders, in
case of the failure of the corporation, are liable for the amount of
their subscriptions. The name _limited_ is required by law to appear
after the name of the company. If a subscription is entirely paid up
there is no further liability--that is to say, the property of a
shareholder cannot be attached for any debts of the company.
Understand clearly that the name _limited_ printed after the name of a
company does not indicate in any way that the capital or credit of the
company is limited, only that the liability of the shareholders of the
company is limited to the amounts of their shares.
A DOUBLE LIABILITY corporation is one in which, in case of failure,
the stockholders are further liable for amounts equal to their
subscriptions. All national banks are double liability companies. If A
owns $5000 stock in a national bank, and the bank fails, he loses his
stock; and if the liabilities of the bank are large he may be obliged
to pay a part or the whole of an additional $5000.