Highways and Highway Transportation

by George R. Chatburn

In the other class of individual ownership the business is usually so small that one person, the owner, can look after the whole of it. He may or may not have any assistants. However, he finances it as an individual. He either has the money at the beginning or is able to borrow it. If he borrows it he gives his note acknowledging the debt and stating the time or times for payment, rate of interest and any other stipulations that might have been entered into at the time of securing the loan. He will probably give a mortgage on his property, that is a writ showing the debt to be a lien on the property under which the loaner of the money may, if it is not paid as stipulated, foreclose and sell the property for the settlement of the debt. It becomes null when the note on which it is based has been paid. If, however, it has been “recorded” in the office of the Register of Deeds or other place set aside for that purpose, it will have to be “released” and the release recorded in order to clear the title to the property.

Partnership.

—An agreement of two or more persons to combine their property, labor, or skill for the purpose of transacting any particular business for their joint profit is called a partnership. The agreement may be oral or written. The partnership is just as extensive as the business it is proposed to do, but no more so. Each partner is entitled to his share of the profits as arranged for in the agreement but in the absence of any stipulation the law will presume equal shares. The partners may agree on a way of dividing the losses, but such agreement will only hold as against those to whom it is made known and credit has been given accordingly. The laws usually provide that articles of partnership may be made known generally to the public by proper publication and recording in a place designated for that purpose. Although long neglect of any articles of agreement will act as a waiver against an innocent creditor.

In a partnership the action of one partner with some exceptions, binds the whole partnership, so that rather than have several members to a partnership it is better to form a corporation. A partnership may borrow money and mortgage its property just the same as an individual.

A transport line then could be financed by each partner putting in a definite proportion of the capital. Two men might enter into a partnership and one man furnish all the capital, the other the skill and experience necessary to operate the business, the profits and losses to be shared in a manner agreed upon. However, without notice to a creditor at the time the debt was entered into each partner could be held for the entire debt if partnership property would not take care of it.

The advantages to be derived from a partnership are that larger capital may be obtained and more business done, the benefit of business skill and experience may be procured, and the work of management may be sub-divided among the several partners so that each may become more proficient, or more efficiently administer his own department.

There will be no particular difference between the financing of the partnership and the individual ownership, except perhaps more capital will come in with more partners. The partnership agreement should, to prevent misunderstanding, be carefully drawn up in writing and signed by each partner. It should state the amount and kind of capital each partner puts into the business, the relations and duties of the partners, and the manner in which profits and losses are to be shared.

Corporation.

—A corporation is a legal combination of two or more persons into an artificial personage for the purpose of carrying on some lawful business under such grants as secure to it a legal existence and power to act even though the individual memberships change.

In this type of proprietorship the individual owners called stockholders are liable for the debts of the business only to the extent of their stockholding, in some states to double the par value of their stock. The stockholders have a voice in the affairs of the business only to the extent of their ownership of stock, such ownership being evidenced by certificates of stock issued in proportion to the number of shares of stock owned. State laws are voluminous and restrictions are numerous for the regulation of corporations. The organization must be made according to law and then incorporated. It must conduct its work according to definite requirements, file regular reports, pay special taxes, and so on. The business is conducted through a board of directors elected by the stockholders at regular intervals of time specified in the articles of incorporation. The board of directors usually elects its own officers and appoints a manager or managers for the business. The operation of the business is under the direction of a manager, who may as a rule appoint his assistants and employees, unless this latter be designated to under officers. The manager is under the supervision of the board of directors, and the directors hold their office at the hands of the stockholders. So that the real owners have only an indirect supervision over the affairs of the business. The corporation is given a name and seal and is empowered to act as an individual, may borrow money, own property, sue and be sued. Notwithstanding its somewhat cumbersome machinery the corporation is a favorite form of organization possibly because of its limited liability feature, its close centralized control even though the ownership be spread over large numbers, and the amount of money handled be great.