of the corporation. These stockholders elect directors upon whom is cast the burden of managing and directing the business of the company. The directors are usually chosen to serve for a certain period, and as soon as chosen, organize themselves into a board which immediately elects officers, usually a president, vice-president, treasurer, secretary, other officers; in large corporations there may be many subordinate officers.

There are many kinds of corporations, all divided into various classes depending upon the objects they seek to accomplish, upon their duties, or upon other circumstances. The chief division is between stock corporations and non-stock corporations. A stock corporation is defined by the statutes of New York to be “a corporation having a capital stock divided into shares, and which is authorized by law to distribute to the holders thereof dividends or shares of the surplus profits of the corporation. A corporation is not a stock corporation because of having issued certificates called certificates of stock, but which are in fact merely certificates of membership, and which is not authorized by law to distribute to its members any dividends or share of profits arising from the operations of the corporation." Other corporations are non-stock corporations and include charitable institutions, clubs, educational corporations, etc.

An old classification which now is not of much importance divides corporations into corporations aggregate, those composed of more than one person, and corporations sole, those composed of but one person. In England, certain church dignitaries constitute corporations sole, and in Tennessee, perhaps, certain officers, as the governor, are looked upon as corporations. The fiction is that the corporation always exists though the incumbent officer be changed or die.

A more practical division is that into public corporations, quasi-public corporations or public utilities corporations, and private corporations. Public corporations are created for the purpose of local government in the management of public affairs, e. g., cities, towns, school districts and road districts. Public utilities corporations are formed by private persons to carry on some enterprise affecting the general public, and over which the public exercises some control, e. g., gas and railroad companies. Private corporations are those formed exclusively for private interests.

Looking at a corporation from the standpoint of the sovereign who created it, it may be either domestic, foreign or alien. A corporation is styled domestic if it is within the jurisdiction of the power which created it, e. g., a corporation formed in New York State is a domestic corporation in New York State only. A corporation is termed foreign outside of the jurisdiction that created it. Corporations formed outside the United States are usually called alien.

425. Corporations de jure and de facto.-It has been said previously that partners are severally responsible for all debts of the partnership. Where two or more persons engage in business and style themselves a corporation they will not escape the personal liability attaching to partnerships unless they make some attempt to conform to the laws regulating the formation of corporations. If they make complete compliance with a valid law, they form what is known as a de jure corporation, that is, a legal corporation. If, however, they do not comply completely with the law in all material respects (e. g., if the certificate of incorporation is improperly executed), they may still escape personal liability by constituting what is known as a de facto

corporation, that is, a corporation not in law but in fact. Three elements are necessary to make a defective legal corporation a de facto corporation and to raise it out of the realm of partnership:

1. General laws under which the corporation could have been incorporated.

2. A bona fide attempt to incorporate under these laws.

3. User of corporate powers.

426. Formation of corporations. It was said that corporations are now usually formed under the provisions of general corporation laws. It will be interesting to see just how a corporation is formed under these general statutes.1 In the State of New York the first step in the formation of a corporation is the drawing up of a certificate of incorporation called, in some states, articles of incorporation, or the corporate charter. This charter contains nine clauses, as follows:

1. Name of the corporation.

2. Purposes for which it is to be formed.

3. Amount of the capital stock and the kinds thereof. 4. Number of shares into which the capital stock shall be divided (each of the par value of between $5 and $100), and the amount of capital (not less than $500) with which the corporation will begin business.

5. Location of the principal office.

6. Duration, which may be perpetual.

7. Number of directors.

8. Names and postoffice addresses of the directors for the first year.

9. Names and postoffice addresses of the incorporators and the statement of the number of shares of stock which each agrees to take.

1 A form of organization papers for a corporation may be found in Appendix III.

Many other provisions may be inserted and the corporation laws of most states provide that certain powers can be exercised by the corporation if the certificate so provides. It is quite necessary, therefore, to study the laws of the jurisdiction in which the corporation is proposed to be organized to see if any powers that the corporation may care to exercise must be included in the certificate.

427. Certificate of incorporation.-A certificate of incorporation usually may be amended by a two-thirds vote of the stockholders. In most states the certificate required by the statute is similar to that of New York, except that sections 7 and 8 may be omitted, the directors not being chosen until the first meeting of the stockholders is held.

The certificate of incorporation must be signed and acknowledged by the incorporators and then sent to the secretary of state, who examines it carefully to see whether it complies with all the provisions of the law. The most usual cause for complaint arises from the fact that the proposed certificate contains powers which an ordinary corporation cannot exercise unless there has been an attempt to organize it under the provisions of some special corporation act, such as the banking law, the insurance law, the transportation law, or the education law. If such a complaint should be made by the secretary of state, the proposed certificate is returned to the incorporators and they either omit the objectionable clauses or else entirely abandon the certificate and organize under the provisions of the special corporation act.

Where an insurance company, banking or transportation company, or some other corporation is proposed to be formed, in which the public at large will have an interest, the formalities upon organization are more

complex and intricate. Usually a greater number of incorporators is required and a larger paid up capital. For example, a proposed insurance company must have a large number of applicants ready to take out policies and an educational corporation must have a valuable plant.

If the secretary of state accepts the certificate, an organization tax is paid, varying in the different states, to the state comptroller or state treasurer, and a duplicate copy of the certificate is filed with the clerk of the county in which the principal office of the corporation is to be located. After these formalities have been observed a meeting of the incorporators is held to elect directors (in New York the directors for the first year are appointed by the certificate) to adopt by-laws and to provide for raising capital through the sale of the capital stock of the corporation. A meeting of the directors is then held for the purpose of electing officers and acting upon the instructions of the stockholders in regard to the issuance of the shares of capital stock of the corporation. In many states the certificate must be published (for a certain length of time) in one or more newspapers in the county in which the principal office is to be located. After the papers have been filed, as above set forth, and the meetings of the stockholders and of the directors have been held and the certificate properly advertised, the formation of the corporation is complete.

428. By-laws.-The measure of a corporation's power is its charter, which at one time, as has been said, was a special act of the legislature, but which at present consists of the general corporation laws of the state, and the individual certificate of incorporation of the particular company. The powers set forth in this