buildings, the legal title to which is held by a board of trustees, subject to the direction of the stockholders. The formation of such trusts sometimes raises difficult questions as to their validity under the rule against perpetuities and the rules against restraints on alienation. It should be expressly provided that the death of a member or the transfer of his shares shall not effect a dissolution.

§ 45. Same: Under statutes. In some states the formation of such organizations is regulated by statute, and there may be thus created an organization which is neither a "voluntary organization," a partnership, nor a corporation, but has some of the characteristics of each. Unless the statute expressly so provides, however, the liability of each shareholder for partnership torts, debts, and other obligations is unlimited, and in general the ordinary principles of partnership law control. The attempt is sometimes made to restrict the shareholders' liability by inserting in the articles of association, and in each contract, a provision that the person contracting with the association shall look only to the funds in hand for payment. The English jointstock company, a limited liability association, organized under statutory authority and required to use the word "limited" as part of its name, is not properly a partnership, but is very similar to the American corporation. In England the word "corporation" is usually applied only to municipal corporations and to certain long established guilds and other companies.

CHAPTER XIV.

PRIVATE CORPORATIONS.

Section 1. General Nature of a Corporation.

§1. Definitions. A private corporation may be defined as an association of persons to whom the state has offered a franchise to become an artificial, juridical person, with a name of its own, under which they can act and contract, and sue and be sued, and who have accepted the offer and effected an organization in substantial conformity with its terms. There are three leading ideas in the definition of a corporation, each of them being important in certain circumstances. These ideas are: A person-"a corporation is an artificial being, invisible, intangible, and existing only in contemplation of law"; a collection of persons-a corporation aggregate is a "collection of many individuals united into one body, under a special denomination, having perpetual succession in an artificial form, and vested by the policy of the law with the capacity of acting in several respects as an individual"; a franchise-"a corporation is a franchise possessed by one or more individuals, who subsist as a body politic, under a special denomination, and are vested by the policy of the law with the capacity of perpetual succession and of acting in several respects, however numerous the association may be, as a single individual.'1

§ 2. Corporation and partnership. These differ: (1) In creation: corporations can be created only by express authority of the state; partnerships, by mere contract of parties. (2) In franchise: a corporation has at least one franchise, a partnership (3) In management: a corporation is managed only

none.

12 Kent, Commentaries, 257.

through its duly appointed officers and agents; in partnerships, each partner or member can act for the partnership. (4) In powers: the corporation can lawfully exercise no powers except those expressly conferred or necessarily implied from those granted; these cannot be enlarged except by the state's consent; the members of a partnership may do anything lawful that they agree to. (5) In duration: the corporation is perpetual unless expressly limited; the death, resignation, or insolvency of members does not dissolve; but either of these dissolves a partnership. (6) In ownership of property: the title to the corporate property is in the corporation; that of the partnership, in the members of the partnership-they are all considered part owners. (7) In litigation: a corporation sues or is sued in its corporate name; the partnership, in the names of its members. (8) In transfer of interest: the transfer of his interest by a member has no effect on corporate existence; but a transfer of interest dissolves a partnership. (9) In liability of members: in absence of statute, a member of a corporation is not liable beyond the amount to be paid for his shares; but in partnership, there is an individual liability to the extent of its debts.

§3. Corporation and fraternity or stock exchange. An unincorporated society resembles a partnership more nearly than a corporation; it is not a legal entity, and hence those who claim to be agents of such an institution bind only themselves and those who authorize them to act. The members are not authorized to act for one another as in partnerships.

§ 4. Syndicates. These are in fact temporary partnerships organized for a particular transaction, such as to purchase or subscribe for a large amount of stock in a corporation to be formed, so as to insure the completion of the proposed scheme. As soon as the special transaction is completed, the syndicate is terminated. They are substantially partnerships.2

§ 5. Corporations and state institutions. There are in many states, state universities, asylums, penitentiaries, etc., managed by boards created by law, and appointed by the governor or elected by electors. These are frequently called corporations of

25 National Corp. Rep. 455; 8 Q. J. Econ. 98.

a public kind; while in other states they are not so considered, although they have some corporate powers. They are, in such states, called state institutions, and are subject to modification at the state's will without violation of the constitutional prohibition against impairing the obligation of contracts.

Section 2. Creation of Corporations.

§6. In general. A corporation is created through the joint act of the state and individuals, usually designated incorporators or promoters; these apply to the state for the privilege of becoming incorporated themselves, or of creating a corporation out of other individuals, or a group or association of other individuals or corporations. After permission is given, these promoters organize or provide for the organization of the corporation; their functions then ccase; the members or subscribers contribute the capital, elect directors and officers, and take general control of corporate affairs; the directors and officers then start and keep in operation the ordinary powers of the corporation.1

§ 7. Where to incorporate. In the absence of express statutory requirements, incorporators do not need to reside in the state in which they seek to be incorporated. So also, under the rules of comity that obtain throughout the United States, a corporation formed under the laws of one state is permitted to do business in another state. In some of the states the incorporation laws are much more liberal than in others, and confer much more extensive powers. In fact, many states have so liberalized their corporation laws as to be fairly open to the charge of bidding for the fees arising from incorporation. Business men generally prefer to incorporate where they can secure the broadest powers, be hampered least, and be required to give as little information to the public as possible. It has therefore become customary to inquire, "Where is the best place to incorporate for certain purposes?" The so-called liberal or desirable states, for one reason or another, are generally stated to be: Arizona, Connecticut, Delaware, District of Columbia, Maine, Massachusetts,

11 Cook, Stock and Stockholders (3d ed.), par. 2.

Nevada, New Jersey, New York, Porto Rico, South Dakota, and West Virginia.

The points to which attention and comparison are usually directed are: Whether part or all of the incorporators or directors must be residents of the incorporating state; whether there is a maximum or minimum limit to the capital stock, and a limit to corporate indebtedness; what part of the stock is required to be subscribed, or paid in, before doing business; whether stock can be paid for in property or services, and, if so, whether, in the absence of actual fraud, the judgment of the directors as to the value of the property taken in payment of stock is conclusive, or only prima facie sufficient, or whether the matter is for the court or jury to determine; whether the shares may be issued with preferences or not; whether the shareholders' or directors' meetings must be held within the incorporating state; whether the shareholders are authorized to vote by proxy, or to cumulate their votes; whether there is any statutory liability upon shareholders or directors for debts of the corporation, or for failure to make certain reports; whether directors are liable for paying dividends out of the capital, or whether shareholders are liable for receiving such dividends, not knowing they have been so paid out of the capital; whether a transfer of unpaid shares releases. the transferror; whether the records, minute-, account-, and stock-books must be kept within the state, and be open to inspection of shareholders or public officers; whether annual reports as to names of officers, directors, shareholders, and details as to paid up capital, debts, and operations are required; whether the corporate property, surplus, and franchise are subject to tax, and if so how; whether shares are taxed to the shareholders also, and whether they are subject to an inheritance tax; what are the powers as to consolidation, leasing and selling property, and holding its own shares or shares in other corporations; can material amendments be made without unanimous consent; can directors prefer themselves as creditors; are directors liable only for gross negligence, or must they exercise the reasonable care of competent business men in the management and control of the corporate business; what are the organization and filing fees; are the provisions of the law under which it is proposed to incorpo