public and private corporations

Public and private corporations.

A public corporation is one created by the state for political purposes and to act as an agency in the administration of civil government, generally within a particular territory or subdivision of the state, and usually invested, for that purpose, with subordinate and local powers of legislation; such as a county, city, town, or school district. These are also sometimes called "political corporations."

See municipal corporation.

Private corporations are those founded by and composed of private individuals, for private purposes, as distinguished from governmental purposes, and having no political or governmental franchises or duties. The true distinction between public and private corporations is that the former are organized for governmental purposes, the latter not.

The term "public" has sometimes been applied to corporations of which the government owned the entire stock, as in the case of a state bank. But bearing in mind that "public" is here equivalent to "political," it will be apparent that this is a misnomer. Again the fact that the business or operations of a corporation may directly and very extensively affect the general public (as in the case of a railroad company or a bank or an insurance company) is no reason for calling it a public corporation. If organized by private persons for their own advantage,-or even if organized for the benefit of the public generally, as in the case of a free public hospital or other' charitable institution,-it is none the less a private corporation if it does not possess governmental powers or functions. The uses may in a sense be called "public," but the corporation is "private," as much so as if the franchises were vested in a single person. Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 562, 4 L.Ed. 629.

It is to be observed, however, that those corporations which serve the public or contribute to the comfort and convenience of the general public, though owned and managed by private interests, are now denominated "public-service corporations.".

Another distinction between public and private corporations is that the former are not voluntary associations (as the latter are) and that there is no contractual relation between the government and a public corporation or between the individuals who compose it. While the above are strict distinctions between "public" and "private" corporations, in common usage the term "public" corporation is frequently used to distinquish a business corporation whose shares are traded to and among the general public as opposed to a "private" (or "close" corporation) whose shares are not so traded.