A member or stock holder in a corporation is, as a rule, liable only for the amount of his subscription to the capital stock of the corporation. The exception to this is the organization of certain classes of corporations in which it is provided that a stockholder shall be liable for twice the amount of his stock subscription. National Banks are examples of this class. No stockholder, as such, has the right to make contracts in the name of the corporation, and any contracts he may make are not binding on the corporation. Contracts made in the name of the corporation, to be binding, must be executed by an officer duly authorized to make such contracts.
3. Joint Stock Companies. How distinguished from corporations. A joint stock company is a large partnership in which the capital is divided into shares which are distributed among the partners in proportion to their interests. Joint stock companies differ from corporations and are like partnerships in the following respects:
Each member is liable for the debts of the company, and if he sells his shares he is still liable for the debts which were contracted while he was a shareholder.
Except when otherwise provided by statute, all members must join in any action at law by the company, and if another brings an action against the company he must join as many shareholders as he wishes to hold. In some states the law provides that an action against a joint stock company may be brought in the name of its president or other designated officer representing all the members.
4. Joint Stock Companies. How like Corporations. A joint stock company is like a corporation and differs from a partnership in the following respects:
The shares may be transferred. If a member dies his shares pass to his estate; if bankrupt they pass to his assignee; if he sells his shares they pass to the purchaser. Partners may withdraw and new partners may be admitted without the dissolution of the company. A partnership is dissolved by the withdrawal by death or otherwise of a single partner.
The shareholders do not manage the affairs of the company but elect directors or other officers in whom the management of the business is vested. Members, as such, have no authority to bind the company.
CREATION OF CORPORATIONS
5. A corporation is created by legislative act. Formerly each corporation received a special charter from the legislature of the state, but as the advantages of corporations began to receive universal recognition it was seen that the delays incident to the granting of special charters were bound to work a hardship on those desiring to incorporate. Partly to overcome this, but more particularly to insure uniformity in the rights and privileges of corporations, and to prevent the conferring of special privileges through special charters, the legislature of most states has enacted uniform corporation laws. These statutes prescribe uniform regulations for the organization of corporations. State constitutions now very generally prohibit the granting of special charters to private corporations.
6. Requirements. While every state has its own corporation laws, the requirements of corporations are in many respects uniform. The law usually provides that a certificate of incorporation shall be filed with the secretary of state, or some other designated officer. This certificate must as a rule state: