Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-07-07
STRIKING CONTRAST
Between the Corporation Laws Of
Pennsylvania and Illinois.
A WIDE OPENING FOR SCHEMERS
Found in the Very Loose Statutes Prevalent
in the West.
THE MANY POINTS OF DIVERGENCE
roonnrsrosDrsc. OF THE D1.rArcH.l

CORRESPONDENCE OF THE DrsPATCH.1
CHICAGO, July 5.-To business man,
one of the most striking differences between
this city and Pittsbure and Philadelphia is
the large number OF businesses which are
carried on in the form of corporation. In
Pennsylvania the purposes for which cor
poration may be formed are comparatively
few, and are specifically enumerated in the
statute. In Illinois the statute provides
that corporations may be formed "for any
lawful purpose" except real estate broker
age.
In Pennsylvania there must be paid TO
the State Department, besides other liberal
fees. bonus of per cent of the capital stock
before the charter issues. In Illinois no
bonus is required at all and the fees for incor-
porating company amounts to just % 90,
even though its capital stock may be several
million dollars.
ANOTHER DIFFERENCE.
In Pennsylvania before the charter issues
a certain per centage of the capital stock
must be paid in in money or in the equival-
ent of money. In Illinois, though
the entire stock must be SUBJ
scribed, it is not necessary that one
cent should be paid on the subscriptions.
In Pennsylvania the stockholder is liable
for double the value of his stock. In II.
linois his liability ends when he has paid
his subscription. The corporation laws Of
the two States stand out in sharp contrast
with each other. In Pennsylvania the pol
icy of the law seems to be to discourage the
formation of corporations by making 1t ex-
pensive and difficult to charter them, and
thus to force the business man to carry on
business as an individual, or as part
ner, with unlimited liability.
In Illinois. on the other hand, the policy
of the law seems to be to facilitate the for
nation of business corporations and to place
every inducement before the business man
to do business not as an individual or as a
partner with unlimited liability to his cred
itors, but as stakeholder with liability
limited to the amount of his stock subscrip-
ton. As consequence, business corpora
tions have been formed for every conceiv-
able purpose, and, within the last three or
four years, the number of those formed in
Chicago has increased with amazing ra-
pidity.
THE GREAT ATTRACTION.
The chief attraction about this form Of
doing is of course the limited liability OF
those engaged in it. Ifa man wishes to open
a cigar store or grocery and is unwilling
to expose himself to liability for the acts OF
his partners, he forms a stock company with
a capital stock of say So, 900. He subscribes
for s., 600 of it himself. and thereby obtains
a controlling interest, and $4,000 is, for all
practical purposes, the limit of his
liability. The acts of his fellow
in debt, but after he has paid in the full
amount of his subscription the creditors
of the company have no further hold upon
him. An incidental advantage of this is
that an investor may have an interest in =
score of business senterprises-stores, saloons,
amusement devices. factories and the like.
and know precisely to what amount he can
be held financially responsible in the event
of the failure of any or all OF them.
To q schemer, the Illinois corporation law
has one other great attraction. There is no
restriction whatever as to the name of q
business corporation. In Pittsburg the cor
porate title must begin with the word The
and end with the word Company, but not so
in Illinois. Consequently, when the firm
Of Smith & Jones may become corporation,
very frequently they do not change the firm
name, but continue in business under the
same style as before. Smith may own one
share Of stock in the CORPORATION and his
liability may be limited to 500; Jones may
be in the same situation and the bulk of the
stock may be held by wholly irresponsible
parties who alone can be held liable to the
creditors in the event OF failure.
ONE OF THE FEATURES.
The corporate name is frequently so
formed that the leading individual name in
it is that of man of good financial stand
ing, though he may not hold more than
single share of stock. The strength of his
name is thus obtained for the corporation
and unthinking people may give 1T credit
On that account which they would other
wise withhold, only to find after a few
months that they have been taken In, the
parties in the company being
worthless. Thus supposing John Smith, of
Chicago, to be man of great wealth
may be formed with the name
John Smith & Co.
On the strength Of John Smiths name on
he sign and on the letterheads, it gets
,redit, and the creditor who tries to collect |
lis claim discovers that John Smith owns
'nly one share of stock, and having paid for |
t. is not further liable, and that the other |
tockholders who may be held liable are |
Such cases are of frequent oc-
but it is usually the ignorant and |
he unwary who are victimized.
A business man invariably resorts to a
commercial agency or finds out where the |
toek is held before he gives credit. The
commercial agencies speak favorably of the
present corporation law OF this State. Its
workings are satisfactory to them. They
ke 1t especially, because from the recorded
harter they are able to make pretty close
.uess as to the financial backing of the cor
'oratioD and to guard against imposition.
The tendency in Pennsylvania Just now
GEMS to be gradually to con form their cor
'oration law to that of Illinois. At every
ession OF the Legislature the number of
pecific purposes for which corporations
nay be formed is increased until only a
hort step will have to be taken when they
re all swept away, and provision inserted
instead authorizing the formation of corpora.
ions for apy lavful nurnose