Purpose—Partnership enables a number of persons, as we have seen, to accomplish by combining their property and skill what would be unattainable by them acting individually.

But the individual responsibility involved in partnership, and the difficulty of transferring interest, render necessary some other mode of combining capital for carrying on enterprises requiring vast resources, and, from their nature, demanding long time and freedom from interruption for their accomplishment. For instance, no one would dare to assume personal responsibility for the debts of a railroad, nor could such an enterprise be managed if every transfer of interest dissolved the company. The desired limitation of responsibility and facility of transfer of interest are secured by the formation of corporations.

Nature.—But responsibility there must be, or the combination could transact no business. And responsibility depends upon personality—a thing cannot be held responsible. As this personality does not exist aside from the persons of those uniting their resources, it must be created. The creative power is the legislature. The personality created is the corporation. [Footnote: From the Latin corpus, corporis, a body.] A corporation is, therefore, an artificial or fictitious person, created under general law or by a special act of the legislature, [Footnote: This special act defining the powers and duties of the corporation is called its charter.] and capable of acting within prescribed limits as if it were a natural person, but beyond those limits incapable of acting at all.

Management.—The persons who contribute to the capital of the corporation, or company, receive certificates of stock, that is, pieces of paper certifying that said persons own so many shares in the company. The capital, be it remembered, is the property of the corporation, not of the individuals. The number of these stockholders may be large or small, a dozen or a thousand. The general management of corporate business is necessarily entrusted to a small number of persons called directors. These are elected by the stockholders, each share having one vote. The directors select from their own number a president, a secretary, and other necessary officers. These persons and the other agents of the corporation carry out the policy determined upon by the directors.

Why Limited in Powers.—The question suggests itself, Why can a corporation do only certain things? The most obvious answer is, that this is consequent upon its mode of creation. Being a creature of the legislature, it can have only those powers which are specifically or impliedly granted to it. But pushing the matter farther, it may pertinently be asked, Why doesn't the legislature endow it with power to do anything that may properly be done by a natural person? Two reasons, at least, appear. First, from the corporation's standpoint, it is a matter of business prudence to have its purpose and powers defined: (a) to enable it to secure subscribers to its stock, as no one would like to risk his money blindly; and (b) because thus only can the directors be held to accountability. Second, from the standpoint of the public, for whom the legislature acts, the defining is necessary in order that corporations may be controlled and dangerous combinations prevented.

In this connection it may be noted that corporations are granted some privileges not possessed by individuals. For instance, private property such as land may be taken, even against the wishes of the owner, to permit the building of a railroad. This can be done, however, only on the ground of public good, and by giving the owner just compensation.

Responsibility.—A corporation, like any other person is responsible for any contracts that it makes, within its charter. It necessarily acts entirely through agents, hence the law of agency has an important bearing upon all contracts with a corporation.

Debts incurred lie against the corporation, not as a rule against the stockholders individually. Sometimes stockholders are by the charter made liable to limited extent, say to an amount equal to the par value of their stock.

Dissolution.—Some companies are incorporated so that they may last forever. Others are incorporated for a specified time. The latter expire by limitation or by becoming insolvent. A corporation of either kind may secure dissolution by voluntarily surrendering its charter. And sometimes the legislature reserves in the charter the right to dissolve the company under certain conditions.

The affairs of a corporation are usually closed up by a "receiver," who collects the bills, disposes of the property, pays the indebtedness as far as he can, and distributes the residue among the stockholders.

COMPARISON OF PARTNERSHIP WITH CORPORATION.

POINTS OF PARTNERSHIP. CORPORATION. COMPARISON.

1. Status. A collection of natural A fictitious person.
persons.

2. Formation. By agreement. By legislative
enactment.

3. Powers. Those of natural persons. Only those conferred
by law.

4. Debts. All partners liable for all Stockholders not
debts. usually liable.

5. Transfer of Dissolves partnership. New stockholder interest by sale succeeds to shares of or death. the old.

Pertinent Questions.

Who constitute the managing body in a school district? In a town? In a village? In a city? In a county? In the state? In the United States? [Footnote: The United States: "Its charter, the constitution…. Its flag the symbol of its power; its seal, of its authority."—Dole.] In a railroad? In a mining company? In a bank? In a church? In a college?

Write a list of all the corporations that you know or have ever heard of, grouping them under the heads public and private.

How could a pastor collect his salary if the church should refuse to pay it?

Could a bank buy a piece of ground "on speculation?" To build its banking-house on? Could a county lend money if it had a surplus? State the general powers of a corporation. Some of the special powers of a bank. Of a city.

A portion of a man's farm is taken for a highway, and he is paid damages; to whom does said land belong? The road intersects the farm, and crossing the road is a brook containing trout, which have been put there and cared for by the farmer; may a boy sit on the public bridge and catch trout from that brook? If the road should be abandoned or lifted, to whom would the use of the land go?