CORPORATION 



1595 



CORPORATION 



entirely prohibited by law, and most of the 

 large cities have abolished it, even where per- 

 mitted by law. We have learned that suppres- 

 sion is not discipline, that the truest discipline 

 consists in willing and free action along right 

 lines. H.K.S. 



CORPORATION, kaurr po ra' shun, a corpo- 

 rate body created by law, distinct from the 

 members who comprise it, having a special 

 name and capacity for acting as a single 

 individual. It has been denned as a fictitious 

 person. The corporation is immortal, in the 

 legal sense that it can be made capable of 

 indefinite duration; it may sue and be sued in 

 its corporate name; it may acquire property, 

 and under certain limitations-^borrow money ; 

 and finally, it has the power to elect officers 

 and to adopt by-laws for the detailed regula- 

 tion of its business. 



Usually, at least three or five persons may 

 form a corporation by applying to the state 

 authority for a charter. In the United States 

 and Canada the amount of property that may 

 be held by a corporation is frequently lim- 

 ited in the act or charter which authorizes its 

 existence. At one time or another about one- 

 half the states of the American Union levied a 

 general corporation tax, which is a fixed rate 

 either on the capital stock or on the earnings 

 of all corporations doing business in the state. 

 Nearly all of the states have abandoned this 

 form of taxation, especially since corpora- 

 tions are subject to the Federal income tax. 



Public Corporations. Public corporations are 

 those created for the purposes of government, 

 as counties, cities, towns and villages. For ex- 

 ample, a community may become an in- 

 corporated village, or a village may incorporate 

 as a city, by meeting conditions laid down by 

 the state legislature. These public corporations 

 may be dissolved or changed by action of the 

 state legislature, subject to the restrictions of 

 the state constitution, and they may sue and 

 be sued, as individuals. 



Private Corporations. Private corporations 

 consist of four classes. Those in the first class 

 are not organized for profit of the members; 

 there is no capital, and the object is amuse- 

 ment or philanthropy or other uncommercial 

 object. The second, or joint-stock corpora- 

 tion, is formed for the financial gain of indi- 

 vidual members; the third is organized for 

 mutual aid and relief, and the fourth, known 

 as incorporated trusts, has a fund set apart for 

 special purposes, such as colleges, hospitals and 

 charitable associations. 



Joint-Stock Corporations. The joint-stock 

 corporation is organized by the stockholders, 

 who meet and choose a board of directors, 

 varying in number from three to over twenty. 

 These directors in turn choose the officers re- 

 sponsible for the daily conduct of affairs, and 

 fix their salaries. Each man who invests in 

 such a business receives certificates of stock, 

 and usually each stockholder has as many votes 

 as he owns shares of stock. Those holding the 

 largest amount of stock are generally chosen 

 directors, because of their larger interest. Often 

 it is true that the officers who manage the 

 routine affairs are only small stockholders, 

 but are chosen for their recognized ability. 

 As a rule, any person owning fifty-one per cent 

 of the stock can elect the officers and control 

 the policy of the corporation. The division of 

 corporation capital into shares affords oppor- 

 tunities to both small and large investors, and 

 the transferability of the securities makes it 

 possible for stockholders to join or leave the 

 corporation at any time, simply by transfer- 

 ring stock. The corporation may owe money, 

 but the members as individuals are under no 

 obligation to pay the debt; the debts are ob- 

 ligations of the company and not of the individ- 

 uals composing it. In this respect a corpora- 

 tion differs radically from a partnership (which 

 see). If, however, an individual has not paid 

 up his stock in full he is liable for the amount 

 unpaid; in some states holders of hank stock 

 may be assessed double their holdings, in case 

 of failure of the bank. 



Corporations in Commerce. The advantages 

 derived from corporations undoubtedly have 

 led to greater economy in production when 

 large resources are combined in manufacture. 

 They have enlarged the facilities in traveling; 

 have cheapened such communications as the 

 telegraph and telephone service; have reduced 

 the cost of life and fire protection, and in 

 many other ways have benefited all the people. 

 These advantages, on the other hand, have in 

 a measure been offset by forcing many smaller 

 producers out of the business field. In some 

 instances, too, the standards of business were 

 for a time lowered, for frequently the power 

 of immense capital has been used in ques- 

 tionable ways, but for years a high standard 

 has been approached. Such objections have 

 less weight now than formerly, for it has be- 

 come a part of the business of the general 

 government to regulate all large corporations. 

 See TRUSTS; INTERSTATE COMMERCE ACT; FED- 

 ERAL TRADE COMMISSION. WJJ.G. 



