5. Reasons for selecting different forms of organi different kinds of business organization that will be examined in this book are the individual proprietorship, the partnership, the limited partner ship, the joint ad-Ventlire, tile joint stock company, tile business trust, the cooperativ–e association and the car _ poration. It will be explained how these are organ ized under the law, and how the management is con ducted. What influences inen who go into business to select one form of organization rather than another? Perhaps in many cases the form of organization is a matter of evolution, or is even the result of chance. An individual, for example, may inherit a business from his father and find no need to change the form of organization. But when enterprises are being pro jected and a conscious selection has to be made, the projectors will probably be influenced largely by the considerations that are treated in the following sec tions.
6. Facility of it will be shown, cer tain organizations are formed, without formal agTee ment, when a group of individuals begin to act in a certain way. Three or four people may place some money in a common fund and buy and sell goods, each of the members contributing his skill and service to the enterprise. Here we have a true partnership., There is no need for a contract, for the assessment of any special organization taxes, or for reports to be given to public officials. Certainly an important ad vantage of the partnership is the celerity and ease with which it can be formed.
7. Permanence of consider ation that will influence cooperators in the selection of a method of organization, is the varying degrees of permanence i)resented by the associations hereafter to be described. For example', while a partnership is easily formed, it is also easily destroyed, fOi -if Comes to an end upon the death of any partner, or it may be terminated at any time by any of the partners, even tho the partnership agreement states the term during which the partnership shall endure.
8. Desirability of aggregating large quantities of reader is undoubtedly familiar with the advantages of large-scale production. Popularly stated, it expresses the fact that thru the economies effected in production, units of product may be turned out at comparatively low cost. Wherever the advantages of large-scale production are especially great, the incentive to engage in the industr3r in a large way will induce the projectors to select a form of organization that will permit the assembling of suf ficient capital to make large-scale production possible.
We find that on this account the corporate form is prevalent in the machine industries while individual ownership has its stronghold in such branches of manufacture as the needle trades.
9. Flexibility of organization.—The three elements, or incidents, of ownership are income,_ control and risk. That organization will be the most popular which permits the most easy shifting of these ele ments among the owners. In this respect the cor poration is far superior to the other forms. -Not only is division of these elements of control, income and risk made between the immediate owners and the potential owners—between the stockholders and the bondholders—but in each class the division is carried on almost indefinitely. We find, then, not only common and preferred stock, debenture and mortgage bonds, but a host of intermediate forms of securities invented by practical business men, each of which makes some new combination, in degree at least, of the elements of income, control and risk.
10. Evolution of business early society individual ownership was the prevalent form of business organization, and the student of history knows that this form predominated until compara tively recent times. At certain periods other forms of organization increased in popularity, but never to the extent of outweighing in importance the sole pro prietorship. Thus in the seventeenth century, especially after the Restoration in England, many companies were formed to promote new inventions and to explore the newly discovered foreign lands. Rut many of these disappeared, and from 1720 to 1860 corporations were seldom formed. Even the partnership did not become popular till after the be ginning of the nineteenth century.
11. Rise and development of recent times the history of business organization is practically a record of the constantly growing favor with which the corporate form bas been regarded. Before 1776 only two corporations had been chartered in this country, and both were insurance companies. Many associations, however, ,acting as corporations, but unchartered, had sprung up in the large cities. In this class belongs, for example, the United Company of Philadelphia for Promoting American AIanufac tures. Tho this. company was never chartered it issued shares of stock of t10 each, and had a board of twelve directors. Between 1800 and 1823, as many as 557 manufacturing companies were formed in eight states. Their combined capitalization %%MS $72,000, 000. Over three-fifths of these companies were or ganized in New York and Massachusetts.