1. Business enterprise in the Unite

1. Business enterprise in the United States is so largely corporate enterprise that for present purposes the two can be considered almost synonymous. Of course, there are many individual proprietors -- the owner of the comer grocery store or pastry shop, the tailor or shoes maker, perhaps the real estate agent. And we also have a considerable number of partnerships the German offene Handelsgesellschaften -- especially in the case of lawyers and certain other professional people who traditionally have not been permitted to incorporate. But more likely than not, even the delicatessen or gasoline station or drug store will be incorporated., And it goes without saying that the larger business units are invariably corporations
2. The modern corporation has a number of characteristics that have made it ideal device for investment by members of the public wherever free enterprise is recognized on this globe. It may be organized in a variety Of Ways as the need of the particular case require. An investor who wants to transfer his savings from one company or industry to another can do so at very low cost, and usually in a matter of minutes through the well-developed mechanism of the stock exchanges and the other securities markets. At the same time, the investor has none of the responsibility for day-to-day management. And the corporation as a legal unit survives the death of all its owners. These advantages benefit all concerned management, investors and the economy in general -- by channeling the citizens’ saving into the financing of the nation’s industry.
3. Moreover, the smallest family business may incorporate just as freely as the largest steel manufacturer. And the shareholder’s limited liability -- the fact that the most he can lose is what he has invested in the particular corporation-- appeals to the businessman who wants to manage his own enterprise, just as it does to the small investor in a large corporation. Accordingly, it is not uncommon to find a family business incorporated, with father, mother and their chidren as the sole shareholders, directors and officers.

4. A corporation, in other words, may be anything from General Motors at one extreme to the incorporated “hot-dog” stand at the other. Both owe their existence to the state. Hence, it is not surprising that they must organize and conduct themselves as the state requires. Just as obviously, the large, widely owned corporation needs more regulation in the public interest than the closely held corporation precisely because the existence of thousands of stock holders produces a separation of ownership of the business from its managerial control These differences between the elephants and the mice of the corporate world are recognized by our law. But it must always be remembered that the United States is a federation of states that have yielded only a portion of their sovereignty to the national goverment. And the line between state and federal regulation of our corporations has been determined by our political and economic history

5. Basically and traditionally, corporation law. it is now quite clear ,as a matter of constitutional law, that Congress could require federal charters for businesses that want to engage in interstate or foreign commerce in corporate form. But except in a few special instances like national banks -- which compete with state-chartered bank -- Congress has never provided for federal incorporation. Consequently there is a separate body of corporation law in each of the fifty-two American jurisdictions: the fifty states, the District of Columbia, and the Commonwealth of Puerto Rico. Historically all this state law is part of the common law that we inherited from England and that the courts of both countries have been continually developing. But the state legislatures have systematized and developed the corporation law, so that today the law under which our corporations are organized and operated is for the most part statutory.
6. The basic patterns of the statutes are much the same throughout the country. Ownership of the corporation is represented by shares of stock. of which there many be various classes with different voting and dividend rights And the corporation may also borrow money, issuing transferable bonds to represent the debt. Bondholders, being creditors rather than owners of the corporation. Have an absolute right to their interest and eventual repayment of the debt. The stockholders must yield to the bondholders if the corporation fails. On the other hand. the stockholders have everything that is left after payment of the debt if the corporation succeeds. Hence stocks and bonds appeal to different types of investors.