The conception of a number of individuals as a corporate or collective entity occurs in the earliest stages of human development, and is essential to many of the most ordinary processes of thought. Thus the existence of tribes, villages, communities, families, clans, and nations implies a conception of these several bodies of individuals as entities having corporate rights and attributes. An ordinary copartnership or firm is constantly treated as a united or corporate body in the actual transactions of business, though it is not recognized in that light in the procedure of the courts of law. So, in numberless other instances, associations which are not legally incorporated are considered as personified entities acting as a unit and in one name,—such as political parties, societies, committees, courts, etc.

A legally constituted corporation is ordinarily treated at law, as well as in the transaction of ordinary business, as a distinct entity or person, without regard to its membership. In most cases this is a just as well as convenient means of working out the rights of the real persons interested; however, it is essential to a clear understanding of many important branches of the law of corporations to bear in mind. distinctly that the existence of a corporation independently of its shareholders is a fiction; and that the rights and duties of an incorporated association are in reality the rights and duties of the persons who compose it, and not of an imaginary being.

Different Kinds of Corporations.-Aggregate and

Sole.

The word "corporation" has been applied to various widely dissimilar classes of institutions. Thus, certain corporations, called corporations aggregate, are composed of many members; while others, called corporations sole, consist of a single person each. The King, the Governor of a State, or any other public officer who is invested with any of the attributes of a corporation by reason of his official position, is in this respect a corporation sole.

Private and Public Corporations.

Corporations have also been divided into public corporations and private corporations. The difference between these two classes of corporations is radical, and hence they are in many instances governed by widely different principles of law. Private corporations are associations formed by the voluntary agreement of their members, such as manufacturing, railroad and banking companies. Public corporations

are merely government institutions, created by law, for the administration of the public affairs of the community. States, counties and municipalities are examples of public corporations.

Whether a corporation be public or private depends wholly upon its organization. Shares in a corporation may be held by a State in the same manner as by a private individual. The fact that a part, or even all, of the shares in a corporation are held by the State, does not necessarily render it a public corporation. A State may undoubtedly establish a bank as a government agency, subject to government control, thus giving it the characteristics of a public corporation, unless prohibited by the Constitution; but if a corporation is formed by the State with transferable shares, for the purpose of conducting the banking business in the same manner as a private corporation, it must be classed as a private corporation in name as well as in fact.

Religious, Charitable and Civil Corporations.

Private corporations have been subdivided into ecclesiastical or religious corporations, eleemosynary or charitable corporations, and civil corporations.

Religious corporations are those which are formed for the advancement of religion, or, the administration of church property for religious purposes. The distinguishing feature of charitable corporations is that they are formed for the administration of charitable trusts, and not for the profit of the incorporators themselves. The term "civil corporations" applies to all those incorporated associations which are formed for the temporal benefit of their members, such as railroad companies, manufacturing companies, banks, clubs, and other associations of a similar character.

The real nature of a corporation, in every case, depends upon the charter or articles of association under which it is formed, and must be determined by reference thereto; whether the association should be termed a public, or private, or religious, or charitable, or civil corporation is simply a question regarding the meaning of those words.

Quasi Corporations.

Associations and government institutions possessing only a portion of the attributes which distinguish ordinary private or public corporations have sometimes been denominated quasi corporations.

Towns and other political divisions, school districts, boards of commissioners, overseers or trustees of the poor, etc., having

authority to act and bring suit as united bodies without regard to their membership for the time being, are quasi corporations of a public character. Individual public officers having authority to sue, in their official capacities, upon contracts made with their predecessors in office, are examples of quasi corporations sole. Joint stock companies may be cited as quasi corporations of a private character. They are associations having some of the features of an ordinary common law partnership, and some of the features of a private corporation. Their constitution varies greatly, and they may be found of every possible variety, from an ordinary copartnership to a corporation in the strictest sense of the word. Their real organization and character must in each case be determined by the laws and articles of agreement under which they are formed; whether they are to be called co-partnerships, or joint stock companies, or corporations, is solely a question of definition.

The Formation of Joint Stock Companies or Corporations.

Preceding the organization of any Joint Stock Company, the objects, the utility, and the probabilities and possibilities of its success are discussed by those who originate the idea or devise the plan of the proposed company. Frequently a prospectus is issued, setting forth. in detail the plan of the originators, thereby securing numerous subscribers to the capital stock. When the plans for the organization of a stock company are complete, the first step to be taken is to call a meeting of the projectors and intended stockholders, and proceed to draw a charter or articles of incorporation, which must contain

The name of the corporation, which shall begin with the word "The" and end with the word "Company," unless the organization is not for profit. (This is not required by all states.)

The place where it is to be located, or where its principal business is to be transacted.

The purpose for which it is formed.

The amount of its capital stock, if it is to have capital stock, and the number of shares into which the stock is divided, etc.

The different States have their own laws regarding the formation of corporations, and should be thoroughly understood before attempting to incorporate into a stock company.

This charter or article of association, when drawn according to statute, is signed by the incorporators, and acknowledged before any person authorized to take acknowledgments. The official character of

the officer before whom the acknowledgment of the articles of incorporation is made shall be certified to by the clerk of the court of the county in which the acknowledgment is taken.

The charter or articles of incorporation are then forwarded to the Secretary of State, who shall record the same, and a copy, duly certified by him, shall be prima facie evidence of the existence of such corporation.

Subscriptions to the capital stock are then made, and a certain percentage paid up, according to the laws of the different States.

Until the corporation has been fully and completely organized under the laws of the State, no attempt should be made to do business. An Unlimited Liability Corporation is one in which the stockholders are individually liable for the debts of the

pany.

com

A Single or Limited Liability Corporation is one in which the stockholders are liable only for the amount unpaid on their shares.

A Double Liability Corporation is one in which the shareholders are liable for an amount equal to their subscriptions or shares. All U. S. National banks are corporations of double liability.

Note. The liability of shareholders and the rights of creditors is a branch of law that every one should thoroughly understand. The subject as it is treated in chapter 22, though brief, will be found invaluable to the investor.

Capital Stock, or authorized capital, is the par amount of capital authorized by the charter or articles of incorporation. The paid-in capital is the amount received from the stockholders on the shares for which they have subscribed.

Capital Stock Increased or Decreased. A corporation has no implied authority to alter the amount of its capital stock, when the charter has definitely fixed the capital at a certain sum. The shares of a corporation can neither be increased nor diminished in number, or in their nominal value, unless this be expressly authorized by the company's charter. It follows, therefore, that a corporation cannot buy its own stock, unless expressly authorized by its charter to do so, for such purchase would diminish the amount of the company's capital. There are exceptional cases, however, in which a corporation may become a purchaser or transferee of shares of its own stock, although its charter does not authorize a reduction of capital; as, for example,

where the shares are received in discharge of a debt which cannot be collected otherwise, or where the shares are received as a`gift, and the company's real capital therefore remains undiminished.

a company does receive or become owner of its own stock, it is held as

Treasury Stock.

Treasury Stock is stock held by the Treasurer. and is considered an asset, to be sold as an opportunity may offer. Frequently a company is orgànized and the entire capital stock is subscribed and paid in, and that the whole capital is then invested in plant or machinery, leaving the company without funds to operate its business. In this case the stockholders instead of increasing the capital stock, donate pro rata to the company a specified number of shares, to be put on the market and sold for Working Capital.

Working or Operating Capital. Many corporations set aside a certain amount of money for the purpose of conducting the business, which is kept in a working capital account.

Watered stock is stock issued above the authorized capital, which is sometimes distributed among the shareholders without payment. When the amount of the capital stock of a corporation is fixed by its character or articles of association no authority exists to alter the amount so fixed, or to issue additional shares. The agents of the corporation, and even the majority of the stockholders, would have no authority to create new shares after the limit fixed by the charter or articles of association of the company was reacted. The issue of certificates for any shares in excess of the amount so fixed would therefore be unauthorized, commonly called watered, for such certificates would involve a false representation to the world that the holder of the certificate was a shareholder in the company.

The Par or Nominal Value of Stock is the sum named in the certificate of stock. When stock sells for more than the original or par value, it is said to be above par, or at a premium; when for less, it is below par, or at a discount.

Preferred Stock is stock taking preference of the ordinary stock of a corporation; one on which a dividend is declared out of net earning, before any dividend can be declared on the common stock.

Preferred stock can be issued only when authorized by its charter, and is issued to obtain means to carry on the business; or in case of reorganization of railroads, etc., preferred stock is issued to prevent the sacrifice of the company's property.