' A charter may be obtained from the legislature of a State, or from such officers as may be authorized to grant charters, or, even under certain conditions, from Congress. This charter is an instrument which states the privileges, etc., which the body incorporated thereunder enjoys. The different ownerships in the business to be conducted under this charter are represented by shares of stock, and the owners thereof are known as stockholders. Very large enterprises, such as railroads, etc., are generally conducted in an incorporated form, as such large amounts of capital are wanted, necessitating so many subscribers, that a partnership agreement would be unwieldy. And, also, owing to the desire which would arise from the multiplicity of ownership for transference or sale of the same to other parties. A corporation is more permanent in its character than a partnership, or a business conducted by an individual.
There are many enterprises, very largely of a public nature, such as gas, electric lighting, street railways, etc., which must lawfully be conducted by incorporated companies, so that there may be more or less State control of the same. Still another reason in favour of incorporating is that the owners of the shares are limited in their liability for the debts of the corporation, whereas, if the business were conducted as a firm, each partner is liable for all the partnership debts.
Although formerly corporations were usually created to conduct the larger enterprises, to-day their use has been extended to almost every conceivable business or industry. It might be found difficult to secure money to " finance " many such if it were not possible to obtain many stockholders for small amounts.
The majority of companies may incorporate under the laws of some other State, if so desired, than that in which business is actually conducted; except in case where certain privileges are derived from the State in which the enterprise is carried on. This has resulted in almost countless instances of the selection of that State which conveys the greatest privileges in a charter. There are many which have enacted laws especially to encourage this sort of thing, thereby deriving a large revenue from the same. Some one has facetiously referred to New Jersey, West Virginia, and Maine, as the " Incubators of Trusts," as those three "charter bartering States" are, perhaps, most liberal in the scope of the charters granted. They convey rights upon corporations to do things in other States often forbidden by the laws of those States.
1 A corporation has been legally defined as " an invisible, intangible person existing only in contemplation of law."
Wherever a company is incorporated, it is necessary to file with the Secretary of State, or some other properly designated officer, a "certificate of incorporation" (see that subject) following the form as furnished by the State in question. , (In many instances, such as railroads, etc., it may be necessary to obtain a special legislative act.) Accompanying the certificate of incorporation, a copy of the constitution and bylaws is usually required.
It is not the intention here to suggest anything as to the actual formation of the company itself, the holding of meetings, electing directors, adopting of the constitution and bylaws, and so on; for competent legal advice should always be obtained in that direction. In fact, so far as that goes, it is very essential that an incorporation of any kind should not only be conducted under a careful supervision of counsel, but under very painstaking and competent counsel.1 (See also "Corporation Trust Companies.")