The formal entries by which the sale of any business is recorded on its books, whether single proprietorship, partnership, or corporation, are treated in [Chapter XXXIX] under corporations.
CHAPTER XXXVIII
THE CORPORATION
Definition.—The definition of a corporation, given by former Chief Justice Marshall as “an artificial being, invisible, intangible, and existing only in contemplation of the law,” sets forth its fundamental characteristics, viz., artificial personality and creation by the law. Blackstone says, “A corporation is an artificial person created for preserving in perpetual succession certain rights which being conferred on natural persons only would fail in the process of time.” Blackstone’s definition lays particular emphasis on a characteristic not specifically mentioned by Marshall, that of perpetuity of succession. It is apparent that the corporation within the limits prescribed by statute has most of the attributes and powers of a person—it can sue and be sued, can hold and pass title to property, real and personal, can carry on business in its own name, is responsible to the extent of its entire property for the payment of its debts, etc.
Growth of the Corporate Form of Organization.—The corporate form of organization is being increasingly utilized for the conduct of business of almost every kind. It offers a much more attractive field to the investor who desires to place his surplus funds in productive enterprises and share in their profits without having the burdens of active management or the risk of losing his private fortune to satisfy the claims of business creditors should the undertaking prove unsuccessful. Just as the partnership is an advance over the sole proprietorship in point of business organization, efficiency, and ability to cope with larger undertakings, so the corporation in some of its forms represents an advance over the partnership form of business organization. Its advantages and disadvantages in comparison with the partnership will be reviewed briefly.
Advantages.—Some of its advantages are:
1. Limited liability. Only corporation property can be levied on to satisfy the claims of creditors; the private fortunes of the individual stockholders cannot be touched.
2. Continued existence. The death, withdrawal, or bankruptcy of any of its members does not interfere with its existence. Its life may be terminated by voluntary dissolution, insolvency, expiration of charter life, forfeiture of charter to the state for misuse, non-use, or abuse of its privileges.
3. Transferability of its shares, and their use as collateral for private loans without injury to the credit of the corporation.
4. Larger capital. A partnership becomes unwieldy and inefficient if the number of partners becomes too large. The number of stockholders in a corporation is not limited and varies from one to many thousands in the larger corporations. Accordingly much more extensive fields of endeavor are open to the corporation because it can bring together and use advantageously the combined capitals of many persons.
5. Centralized control. Its method of internal organization is such that one man can be made the responsible head instead of the many heads of the partnership.