hat he should be taxed as a corporation, which
was at a lower or favored rate than that paid by individuals. The
court said the game would not work, that for the purposes of taxation
the concern must be regarded as an individual. So the stockholder knew
more after that decision than he did before.
CAPITAL.
Every private corporation has a capital composed usually of money,
which is advanced or paid by its members or shareholders. Among the
reasons for forming corporations two may be stated. It is a way for
collecting money from many sources needful for an enterprise; the many
contributors are like the small streams that unite and create a great
reservoir. The other reason is, the contributors are free from the
liabilities that attach to every member of a partnership for its
entire indebtedness. A stockholder may indeed, if his corporation does
not succeed, lose a part or all of the capital he has contributed, but
no more or only a fixed amount, as will be hereafter explained.
Almost anyone can subscribe for stock, with a few limitations. A minor
cannot subscribe for stock, nor can his guardian act for him.
Doubtless they do subscribe in some cases; the practical difficulties
will be shown in another connection. A married woman cannot always
subscribe, unless by virtue of a statute. What usually happens when
she wishes to subscribe is to act through a friend, who, after the
corporation is fully formed, transfers the stock to her. There is no
legal stone in the way of such a course.
Sometimes fictitious subscriptions are made to induce others to
subscribe for stock. Whenever the fraud is found out an innocent
subscriber can do one of three things. If he has paid for his stock,
he can bring an action to recover it; if he has not paid, he can
refuse to do so, and set up the fraud as a defense. He can do another
thing, accept the stock and sue for the damage he has sustained by the
deceit that has been practiced on him. The discovery of a fictitious
subscriber among the number, after all have subscribed, where his
action in subscribing did not affect their action, will not justify
them in not fulfilling their obligation to pay for their shares.
The issuing of a share certificate is not an essential condition of
ownership. It is merely evidence of it, like the deed of a piece of
real estate. All the shareholders of a corporation are the owners
whether any certificates are issued to them or not. Of course a
stockho
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