Powers and privileges are given by the state to public corporations, not for the individual benefit of the persons who are members of them, but for their collective benefit as a part of the people of the state, and membership in such corporations depends, not upon individual choice, but upon residence in a particular locality or within particular limits. It is evident, therefore, that the charter of a public corporation or the privilege granted to it to have corporate existence does not constitute a contract, the impairment of which is prohibited by the federal constitution relating to impairment of contracts by the states. (See below, § 269.) Consequently it is entirely optional with the legislature of a state to create such public corporations as it sees fit, to change the laws relating to their powers and privileges whenever and however it is deemed to be advisable, and to discontinue them according to its best judgment, having in view the public interests, regardless of any claim of vested right. But so far as such corporations may be authorized to make contracts and own property, they may perhaps be said to have vested rights which the legislature cannot directly interfere with. It has also been contended that there is a constitutional right of local self-government, that is, a right possessed by the people composing a city or town to manage their own local affairs which cannot be taken away or substantially impaired by the state legislature. If the state constitution, either in express language or by implication, recognizes the right of local self-government, then no doubt a limitation on the power of the legislature with reference to such public corporations as cities and towns may well be inferred. But as yet no such implied limitations have been agreed to and it will be impossible to discuss the matter more fully or accurately without an elaboration which would be out of place in an elementary treatise. While, as a general principle or theory, the right of local self-government is recognized, it by no means follows that a state legislature is limited otherwise than as its discretion may dictate in legislating with reference to the power of public corporations which can exist only as a result of the legislative will. At any rate, it is universally conceded that the state legislature may provide for changing the boundaries of public corporations and fixing the limits within which the powers conferred upon them are to be exercised.

In this connection it is proper to suggest a convenient division of public corporations into two classes. The term public corporation can properly be applied only to collections of persons to which are given some powers of local self-government and which are authorized to act in an independent and collective capacity. Such corporations are usually termed municipal corporations. But the state may be divided into counties, townships, or similar portions for general governmental purposes, including the ownership of property, although the people of such portions are not given any corporate powers. Such divisions are created merely to facilitate the election of officers, the levying of taxes, and like purposes which the state can provide for as it sees fit. Counties and townships are therefore not public corporations in a proper sense and are not municipal corporations, but for convenience they are sometimes designated as quasi-corporations. The distinction between these two classes of corporations is not very definitely fixed, but some distinction is usually recognized. The state itself is sometimes spoken of as a public corporation, but only for purposes of convenience. It does not derive its authority from the federal government, nor from any other definite source except the will of the people as expressed in its constitution; and the rules respecting the powers which it may exercise are only remotely analogous to those recognized as applicable to corporations.