railroads, turnpikes, and telegraph systems, or to supply water, gas, and electricity, if they are conducted for private gain, are properly classed as private corporations. They are sometimes called "quasi-public corporations" because they render services more or less essential to the public. More often they are termed "public utility corporations." A moneyed corporation is one authorized to engage in the business of using money for the sake of making a profit upon it as money, such as banks, mortgage loan or trust companies, insurance companies, etc. Corporations may also be classed as: (1) corporations sole, those consisting of a single person; and (2) corporations aggregate, those consisting of two or more persons. Private corporations may be divided into corporations without capital stock and corporations with capital stock. §306. Corporations Without Capital Stock Most religious, educational, charitable (eleemosynary), and social organizations belong to this class. They are nonstock, or membership corporations. In some cases certificates of membership are issued to the members, but these are not stock certificates and are not usually transferable. When corporate action is taken, each member has one vote without regard to the amount of his financial interests, if any, in the corporation. The body of modern corporation law has to do with the stock corporation. § 307. Corporations With Capital Stock Stock corporations have a capital stock divided into shares, usually of like amount, which are evidenced by transferable certificates of stock. These stock certificates are issued to the members of the corporation, who are termed stockholders, the certificates evidencing the number of shares which each owns. The ultimate control of the corporation rests with the stockholders, who act in meetings and by vote. Each share of stock usually entitles its owner to one vote in stockholders' meetings, hence those owning a majority of the shares control the corporation. When profits are to be divided, they are distributed among the stockholders in proportion to the number of shares owned by each. On account of the convenience of the system, all corporations intended for profit are organized as stock corporations. §308. Distinctive Features The distinctive features of a modern stock corporation may be summarized as follows: I. 2. Its creation and regulation by the state. The limitation of the corporate powers to the objects specified at the time of its creation, or later by amendment. 3. The limitation of the liabilities of the stockholders. The distinct entity of the corporation for all legal and business purposes. 4. 5. The comparative permanence of its organization. These features are possessed by every stock corporation, and every organization possessing them is a stock corporation. $309. (1) Creation by the State A partnership may be formed by the mere agreement of the parties. A corporation, on the contrary, may be created only by the state. Formerly each corporation was created by a separate legislative enactment. Today the formation of corporations is governed by general laws. These laws vary in minor details in the different states. All are alike in their general plan and scope. In each state, the legal requisites are to be found in the state law. $310. (2) Limited Powers An individual or a partnership may engage in any business that seems best, and may change from one business to another at pleasure. A corporation, on the contrary, is limited to those purposes enumerated in its charter. If it is desired to engage in any other business, it must amend its charter. §311. (3) Limited Liability Subscribers to the stock of a corporation are liable to the corporation for their subscriptions. Calls for payment on unpaid stock must be impartial and uniform, that is to say, calls must be made on all subscribers alike. If the subscriptions have not been paid, the corporation, or its creditors in case of its insolvency, can compel payment. A subscriber cannot repudiate his subscription. If subscriptions have been accepted by the corporation at less than par, corporate creditors can usually force payment of such additional amounts as will render the stock full-paid. (See $353-) A subscriber to stock who fails to make his payments is chargeable with interest from the time he makes default. He must pay both principal and accrued interest before he can claim a negotiable certificate of stock.2 A subscriber to stock, being sued for payment, and claiming that he was induced to subscribe through fraud, must show that the agent was duly authorized by the corporation, that his statements were in fact of the condition of the corporation in past or present time and that his representations did materially influence the subscriber to take the stock. 2 Cook on Corporations, 112. Beyond this liability, known as the subscription liability, stockholders have in most states no individual liability for any indebtedness of the corporation. $312. (4) Legal Entity of Corporation The distinct legal entity of the corporation may best be shown by a comparison between corporations and partnerships. The difference is radical. A partnership is merely a collection of all the individual partners. Hence each partner represents the partnership fully, can make contracts for it without consultation with other partners, and can bind it by his action. On the other hand, he cannot contract with his partnership, bring suit against it, or be sued by it, any more than he could so act with or against himself. In any suit by or against a partnership each partner must be named. A corporation, on the contrary, is itself a legal entity, distinct from its stockholders. These stockholders as individuals do not represent it, cannot make contracts for it, nor bind it in any way. Each may, however, deal with the corporation as with a stranger, may contract with it, may sue it, may be sued by it. A corporation sues or may be sued by its corporate name and the members' or stockholders' names do not appear. $313. (5) Permanence A partnership may be dissolved at any time, at the will of any partner, and is necessarily dissolved if a partner dies, becomes insolvent, or sells out to a stranger. A corporation, on the contrary, continues for the term of its existence, un interrupted by the dissatisfaction, financial embarrassment, death, or retirement of its stockholders. Its entire membership may change again and again, but the corporation continues. $314. (6) Stock System The division of the stock of the corporation into shares represented by stock certificates, transferable by indorsement, is one of the most convenient features of the modern corporate system. It permits the investment of varying amounts, and gives each investor his proper proportionate interest both in the management and in the resulting profits of the business. It permits a ready sale of part or all of the stockholder's interest to some other investor. In case of his death it renders the transfer or division of his interest a simple matter. It is in striking contrast to the difficulty of transferring an interest in an ordinary partnership. $315. (7) Corporate Mechanism A corporation is created by the grant of a charter from the state, which in general terms defines the rights and powers of the corporation. After this charter has been allowed, the incorporators hold a meeting and adopt by-laws which lay down the lines along which the business of the corporation is to be conducted. The stockholders elect a board of directors, which, subject to the regulations of the charter and by-laws, controls and manages the business and property of the corporation. The directors at their first meeting elect officers and take such other action as may be necessary to inaugurate the corporate activities. Thereafter they hold their meetings from time to time as may be required by the by-laws or the necessities of the business. § 316. Attractiveness to Investors As a consequence of the advantages enumerated, and because of the liabilities and inconveniences of the partnership, the corporate form is peculiarly attractive to the investing |