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by the partners. 2. Property otherwise acquired in partnership transactions. 3. Good-will.

Capital is not necessarily in money. It may be in any form of property. Real property, however, may not be acquired in the firm name. The legal title may be held by the individuals comprising the firm. Either real or personal property may, by agreement, be vested in a member of the firm for the benefit of the partnership, provided this be not to the disadvantage of third parties; the firm must be solvent at the time.

Good-Will. Good-will is substantially the capitalized value of the habit or inclination of customers and their acquaintances to deal with a going concern. The advantages of location, the necessity to use certain qualities of goods, and many other elements enter into it. A monopoly of product, or peculiar opportunity, may underlie this good-will. While it is intangible and cannot well be sold separately, in selling partnership property, or in adjusting values in dissolving a firm, considerable value may properly be assigned to it. The reputation gained under a firm name may be a part or even the whole of good-will.

Firm Name. The agreement should state the name or title under which the partnership or "firm" shall be carried on. It may be under any name desired provided this does not interfere with the rights of others acquired by the use of the same name or another practically the same. There are sometimes statutory provisions regulating this. Partnership contracts and transactions should be in the firm name. A suit at law, however, will be in the name of the members.

Partners, Principals and Agents. Partners are both principals and agents. Each partner is responsible as principal for all liabilities of the partnership. Each partner is also the agent of the others in partnership dealings; admissions or representations of one member bind the firm. The act of one partner clearly outside the firm's sphere is not binding on the firm, but may be ratified by the other members. In a trading or commercial partnership one partner may purchase and sell goods, receive payment and give receipt, and may compound claims. He may insure firm property, and engage servants and agents. He may draw checks or indorse them in the course of business, or take any necessary action with relation to negotiable instruments. For all business transactions either partner signs the firm name.

Fiduciary Character. - Partners in a firm stand in a fiduciary relation to each other. No one of them may make private gains at the expense of the others on matters in any way related to the business. No partner may receive special compensation except as agreed. It is customary for members to draw upon firm funds from time to time in place of salary, for household or other expenses; to provide for unequal drawing, the

contract should cover interest on advances or on undivided profits. If a member contributes real estate to the partnership property he retains the legal title and holds it as trustee. In a similar way on the death of a partner, the other members hold the firm property in trust until all the property is sold or satisfactorily apportioned. Capital should not be increased or diminished except by agreement. Some firms allow members to leave their profits to draw interest or a share of the profits; others prohibit this, partly because a large accumulation of this sort may become a serious matter to handle in case of the death of such a member. Proper accounts should be kept to which all partners should have free access. In firm meetings the majority rules, but the acts of this majority must be in good faith.

Liability to Third Persons. One of the most important points in the law touching partnerships is that each partner is liable to third persons to the full amount of all debts of the firm. He is liable not merely to the amount he has invested in the partnership, but to the extent of his entire financial ability. Another member of the firm who has contracted the debt has done so as agent of all the others, each of whom is fully bound. The creditor is not restricted primarily to firm property; he may pursue his remedy against an individual member and may reach his personal property. The firm member may, however, recoup himself by proper action in Equity against his partners if they own anything. The firm is liable for the torts of a member while acting as agent of the firm.

Limited Partnerships. The statutes of some States allow "limited " partnerships, in which at least one member must be a general partner and have general liability while the liability of others is limited to the amounts they have paid into the business. Notice, by filing the partnership agreement, is commonly required as suitable protection to third parties as well as to the limited partner. Similarly there are sometimes special partners, unknown, dormant, secret partners, whose connection with the firm is quite unknown to outsiders and who assume no liability. To the contrary, any ostensible partner who has the appearance of a firm member will be held liable to third parties whether he has exercised any voice in management or not.

Private Debts. The private debts of a member are not a liability of the firm; the most a creditor can do is to reach the interest of such member in the firm. Partnership property must be devoted first to the payment of firm debts, and creditors of the firm will take precedence as to this over creditors of individual partners.

Dissolution. Dissolution of a partnership may come about through agreement, the death of a partner, or the decree of a court. The winding, up of the partnership may be provided for by statute. It may be effected

by the surviving partners continuing in control as trustees. Sometimes a receiver is appointed. Sometimes, without a receiver, an accounting is ordered by the court.

Proof of Partnership. The existence of the relation of partnership is sometimes in question, perhaps between the immediate parties, perhaps on the part of some third person. Common ownership does not assure the relation, nor does the sharing of profits always do so, but an agreement to share profits is prima facie evidence of partnership. Engaging in an enterprise as co-owners, where profits are to be shared does constitute partnership. To prove partnership a stricter rule prevails when the question arises between partners than where it arises between partners on one side and third parties on the other. General reputation may readily serve in the latter case. There is involved a mixed question of law and fact; what constitutes partnership is law; the facts in the case, if in dispute, are for the jury. The intent may often be important. Any arrangement of association entered into by an engineer should be made clear, by writing preferably; but in any case there should be sufficient evidence available to clearly determine its character.

CORPORATIONS

Need for Corporations. When the steam engine for manufacturing and the locomotive for transportation were well established, there became apparent a need for large investments in single enterprises. The private fortunes of a few wealthy men combined in a partnership were hardly sufficient, while there was considerable capital in moderate sums seeking investment, provided the element of risk be reduced to a minimum. The corporation with its limited liability met the case very well and rapidly assumed importance in the business world.

Corporation and Partnership. The most important distinction between a corporation and a partnership is the limited liability of the members of a corporation. In a partnership every member is financially responsible for all the debts of the firm. In nearly all corporations (National Banks are a notable exception) a stockholder's risk is limited to the par value of the stock he holds, part or all of which may have been paid in, or in some cases only to the extent of the money actually paid in.

Advantages. Additional attractive features of the corporation are the fact that on the death of a stockholder, his stock is transferred to another, with no effect otherwise on the corporation; in a partnership the death of a member ordinarily works dissolution of the partnership, requiring financial adjustments often burdensome to the surviving partners. In a similar way a dissatisfied stockholder in a corporation may withdraw with no

effect on the business, provided only he can find a purchaser for his stock, an action commonly possible in large corporations, but not always in small. In a partnership, each member has power to act independently of the others; in a corporation, the directors cannot act individually, they act only as a board, and better unity of action is secured.

How Created. A corporation cannot be created by mere agreement between its members, as can a partnership; it is an artificial body, deriving its existence from a charter granted usually by or under a statute passed by the State legislature. In this country the State is the sovereign; the federal government possesses only such powers as are found in the Constitution of the United States, which is the creation of the States acting at first in convention, together with such other powers as are necessary for the exercise of those expressly conferred. While the federal government may, and does grant charters to corporations for certain purposes, yet in most cases the charter is secured from the State within which the corporation is organized.

Special Charters. Sometimes the corporation is created under a special charter, that is, by a special act or statute; in some States, however, the constitution specifically forbids this. More commonly, the corporation is organized under some general statute providing the procedure to be followed to secure a charter, such as: holding a "first meeting," drawing up the "articles of incorporation," filing these, and complying with other required formalities, following which a formal certificate of incorporation is issued with the signature of the Secretary of State or other designated official.

Kinds of Corporations. Corporations differ in their character and purposes; they may be divided into classes. Among the important classes of interest here are: business corporations, covering various kinds of manufacturing, mining, financial, insurance, or general mercantile business; municipal corporations, as cities, towns, counties, school districts; public service corporations, such as railroad, water, light, telegraph, telephone companies; and those for educational, social, and charitable purposes.

In addition to actual corporations, there are joint stock companies which issue transferable shares, but which are not organized as corporations. The legal status of such companies seems to be that they are in effect partnerships.

Connecticut Statute. Where a charter for other than a municipal corporation is to be secured, the following statutes of Connecticut furnish a fair sample of one general form of procedure. Changes have at times. been made in the phraseology and arrangement shown here, but the general scheme for incorporation is well exhibited.

Formation. Any three or more persons may associate to form a corporation for the transaction of any lawful business, except that of a bank, savings bank, trust company, building and loan association, insurance company, surety or indemnity company, steam railroad or street railway company, telegraph company, gas, electric light, or water company, or any company which shall require the right to take and condemn lands or to occupy the public highways of this state. Nothing herein shall prohibit corporations organized under the provisions of this chapter from constructing, maintaining, and operating railroads outside of this state. Every corporation formed under the provisions of this chapter shall be located in some town in this state.

Certificate of Incorporation. The persons so associated shall file a certificate, signed and sworn to by all of them, setting forth: (1) the name of the corporation, which shall be such as to distinguish it from any other corporation chartered by or organized under the laws of this state, and from any other corporation engaged in the same business or promoting or carrying out the same purposes in this state, and every such name shall begin with "The " and end with "Corporation," or have the word "Incorporated" immediately under or after the name; (2) the name of the town in this state in which the corporation is to be located; (3) the nature of the business to be transacted, or the purposes to be promoted or carried out; (4) the amount of the authorized capital stock of the corporation, which shall not be less than two thousand dollars, the number of shares into which the same is divided, and the par value of each share, which shall not be less than twenty-five dollars, and, if there be more than one class of stock, a description of the different classes, with the terms on which they are respectively created; (5) the period, if any, limited for the duration of the corporation.

Certificate may Contain Additional Provisions. The certificate of incorporation may also contain any lawful provisions which the incorporators may choose to insert, for the regulation of the business of the corporation or for defining and regulating the powers of the corporation, its officers, directors, and stockholders, or any class of stockholders.

Evidence of Corporate Existence. Upon the approval of the certificate of incorporation by the secretary of state, corporate existence shall begin. A copy of such certificate and approval, duly certified by the secretary of state, under his hand and the seal of the state, shall be prima facie evidence of the legal existence of any such corporation.

Power of Incorporators. After the approval of the certificate of incorporation as aforesaid, and until the directors are elected, the incorporators shall have charge of the affairs of the corporation, and may take such steps as are necessary or proper to obtain subscriptions to stock.

Call of First Meeting; Waiver of Notice. After fifty per cent. of the authorized capital stock has been subscribed for, a majority of the incorporators shall call the first meeting of the corporation, at such time and place as they may designate, by a notice published twice, at least seven days before the time designated, in a newspaper of this state having a circulation in the town in which the corporation is located; but such notice may be waived by a writing signed by all the subscribers to the capital stock and a majority of the incorporators, specifying the time and place for said meeting, which waiver shall be recorded at length upon the record of the corporation.

Organization; Adoption of By-Laws. At such meeting including adjournments thereof, the subscribers for stock shall perfect an organization, by the choice

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