A corporation is an artificial person created by law. It is a personage entirely distinct from the individuals who form it or conduct its affairs. Its members may all die and be succeeded by others, but its existence is not affected thereby. It continues on indefinitely or until its charter expires, or is forfeited or surrendered. Corporations are of two kinds, public and private. Public corporations are such as are created for public purposes, viz., cities, towns, libraries, hospitals, etc. Private corporations are such as are conducted for private purposes and for the benefit of those directly connected therewith, as railroad, bank, insurance, manufacturing and mercantile corporations. In the case of public corporations every citizen is a member of the corporation. In the case of private corporations only those are members who own shares of stock. A close corporation is one with a limited membership, no stock for sale to the public and vacancies filled by selection, the prime object being to keep the profits of the company within a small circle or family and immediate connections. Many of the most profitable business corporations are conducted in this way.

One of the primary reasons why a corporation, rather than a co-partnership, is preferred by those intending to embark in an enterprise is that when the capital stock is paid for by the stockholders there is no further individual liability for debts and obligations of the corporation, and in case of insolvency and failure of the corporation, their loss is but the amount they have already invested when they subscribe to their shares of stock. If the stock is not fully paid up, the stockholder is liable to creditors and the corporation for the unpaid balance, while in a co-partnership business, conducted by individuals, each individual is personally liable for the entire obligations of the co-partnership of which he is a member.

Another reason for preferring a corporation to a co-partnership is the facility it affords for procuring investments by the public, who, by reason of the segregation of the entire capital into numerous small shares, are enabled to make an investment of such amount as the individuals desire. This method enables organizers and promoters to enlist in their enterprises the capital of a multitude of investors, large and small, which they would be unable to interest without such form of organization.

Corporations are creatures of the state, and are formed either by special charter or compliance with the requirements of a general statute. At the beginning of the century all corporations in this country were formed by special charter, but owing to the corruption and bribery resorted to in order to get charters passed through the legislatures of the several states, containing favorable terms and granting valuable privileges and monopolies, the constitutions of most all of our states have been amended so as to prohibit the legislatures from granting special charters. Many corporations are formed for the purpose of conducting an ordinary business in competition with other houses, as banks, railroads, etc., or for buying out or "taking over" established concerns, while others are formed especially to develop or promote a particular franchise, invention or discovery. In the latter case the value of the shares is largely fictitious, being based upon the estimated future profits of the company. A large portion of the capital stock goes to the inventor or discoverer or promoter of the enterprise, as payment for his services, and the rest is sold to the public, usually at a very low price at first, and an increasing price as fast as the stock will sell. It is in the formation and promotion of corporations that serious evils and abuses have grown up in this country. Fraudulent prospectuses are issued by skillful "promoters" versed in all the arts by which stock is sold, representing that the enterprise is fully afloat and the stock paid up, when in fact it has been "paid up" only by worthless patents, or property purchased at a gross over-valuation. The number of "bubbles" which are floated every year, and in which the inexperienced and unwary lose their savings, is astounding. In England this evil became so great that in 1867 a law was passed requiring a public registry of all contracts whereby stock was issued by a corporation in payment for any franchise or other property. Investigators claim that over speculation is largely due to the formation of corporations that have no real excuse for existence, except the furtherance of the personal aims of the promoters. The fullest possible publicity concerning the initial acts of every new company is believed to be the only remedy for the existing evils.

It frequently occurs that subscribing stockholders are not required to pay the full amount of their stock upon subscription, or when it is issued, but that the balance that may be due the corporation is subject to the "call" of the directors. The usual penalty imposed upon the stockholders for failure to respond to the "call" is the forfeiture and sale of their stock upon reasonable notice, and the proceeds of such sale are used to pay the obligation contracted by the subscriber. The subscriber is also liable to the corporation for unpaid subscriptions, and failure to respond to the "call" generally renders the subscriber liable to suit for the recovery of the unpaid balance.

In corporations conducted for the benefit and profit of members, the interest of each is represented by the number of shares of stock which he holds. These shares of stock may be transferred or assigned, and the person to whom they are thus transferred becomes entitled to all rights belonging to the assignor. In case of death of a shareholder his legal representatives succeed to the ownership of the stock. The ordinary stock of a corporation is called common stock to distinguish it from preferred or other kinds.

Each share of stock in a corporation has what is technically termed a par value. This means the value indicated on the face of the stock certificate itself, which usually ranges from $1 to $100 per share. A great many mining corporations have stock at a par value of $1, while manufacturing and mercantile corporations usually have stock at the par value of $100. Other corporations have stock at the par value of $5, $10, $25 and $50 a share. The entire issue of stock is universally of the same par value. The par value of stock may differ from its market value. The market value of stock is usually ascertained from what the buying public would pay for the stock in open market. Some stocks have a market value much greater, even several times greater, than their par value. This is usually caused by the large earnings of the corporation making the stock a valuable investment, and the demand of investors for stock regularly earning large dividends causes the market value to appreciate. It, of course, naturally follows that there are stocks in many corporations that have no market value, and others whose market value is less than the par value. It is not uncommon that stocks in national banking corporations have a market value largely exceeding the par value, although the dividends are not necessarily larger than stocks of other corporations of a lesser market value; the usual careful management of national banks, coupled with the watchfulness of government officers over their affairs and the laws regulating them, insures to the public, in a very large measure, the safety of the investment and the stability of the corporation itself, which frequently appreciates the value of the stock of such institutions to a higher market value than stock in other corporations earning much larger dividends.