(12) May stock- be paid for at less than par, or in anything but cash? (13) Is the duration of the company limited? (14) Are there any burdensome requirements as to keeping the corporate and financial books in the state, or in regard to the number of annual reports that must be filed? (15) Are there any provisions affecting the bold ing of stock in other corporations? (10 Have the laws been well adjucaated? The internal management of a corporation is ordinarily governed by the law of the state in which the corpora tion was formed, no matter where an action is Frought to enforce that law. The courts frequently interpret statutes to mean something quite different from what they may appear to mean, to the ordinary layman. One of the. most important of statutes of this kind is that found in the laws of New Jersey, Maine and other eastern states providing that stock may be paid for in property, and that in the absence of fraud the judg ment of the directors as to the value of the property shall be conclusive. New Jersey and Maine have other laws, however, which state that any gross dis crepancy between the par value of the stock issued and the reasonable value of the property for which it is issued, shall be considered sufficient to indicate fraud.
(17) Are the taxes burdensome? Some of the taxes to be considered are the organization tax, the an nual franchise tax, taxes on indebtedness, taxes on transfers of stock, and the inheritance taxes. The tax last named falls upon persons, whether living within or .uutside the state, who become stockholders by inheriting some of the capital stock of the corpora tion. There are always, also, the property taxes levied on corporations and natural persons alike.
8. Deciding upon the state in which to incor was indicated above, the law is not the only question to consider in deciding in which state to incorporate. Practical questions of busi ness expediency may arise. Ex-Attorney-General George W. Wickersham, in an address before the Graduate School of Business Administration of Harvard University, summarized the problem as follows : My whole purpose has been to emphasize, by illustrations drawn from the varying provisions of constitutions and statutes, the divergent elements which enter into the problem where to incorporate ; to show that it is not enough to select a state whose laws seem to be simple, inexpensive and free from official interference; that the matter cannot be deter mined by turning to one of the convenient handbooks of incorporation published by many of the law stationers or issued by the corporations whose business is to act in a state as the agent of corporations whose real business is conducted out of the state; but that it is necessary to carefully ex amine the laws of all the states where the business is to be carried on, and that a balance must be struck of the ad vantages and disadvantages attendant upon any particular selection. Quite apart from a choice based upon these,
which may be called scientific reasons, there are also certain unscientific but often equally controlling considerations. Thus, there is a strong feeling among many business men in favor of incorporation in New Jersey, merely because it is understood that her attitude toward incorporation is liberal and encouraging, and because a very great number of large companies, including the United States Steel Corporation, the Standard Oil Company of New Jersey, and others of the great industrial companies popularly known as "trusts," have been incorporated in that state; and it is assumed that their influence will count in favor of securing a continued conservative policy on the part of the legislature, as well as of the courts, and that smaller organizations will be safer there, under the wing, so to speak, of the great ones, than in some other state more newly embarked in the business of granting liberal charters to all comers at small expense, and few questions asked. But, as a matter of fact, the annual franchise tax imposed on all business corporations in New Jersey-, added to the taxes enacted in many of the commer cial states where they may carry on their business, makes it more expensive to maintain an organization in that state than in one of the states where the corporate business is really to be done; and the courts of New Jersey have been no more liberal in the construction of their statutes than those of many other states; in fact, they have gone very far in the reasoning employed, if not in the actual decision rendered, in the recent case of Receiver v. Heppelheimer (69, N. J. Eq., 36) to destroy that provision of the New Jersey statute relating to the finality of the directors' act in fixing the value of property as the basis of a stock issue—a provision which is of more importance to the purchaser of stock than almost any other in the whole corporation law. On the other hand, there is a feeling among many members of the profession that laws such as those of Delaware and West Virginia are too loose to be resorted to for anything but speculative enteiprises, such as mining companies and the like, and that it would not be desirable to form a substantial corporation under the laws of one of those states to carry on business elsewhere.