chapter  2
15 Pages

The Development of the Discretionary Model

ByNorman I. Silber

The discretionary model for chartering nonprofit corporations formed the original basis for parceling out nonprofit status and, more importantly, it rationalized the benefits that evolved along with it. Compared with the limitations of a for-profit corporation, the nonprofit form has offered various opportunities, subsidies, and reputational rewards. Chartering both not-for-profit and for-profit enterprises as corporations became a common occurrence in antebellum America, but for many years the distinction between the groups was hardly noticed. Although the general incorporation statutes continued to require that commercial corporations act "in the public interest" or "for benefit of the public", this was not a significant component of administrative review during the process of obtaining a certificate of incorporation. There would be limits on businesses after they commenced operation, and rules for doing business that all corporations needed to obey, but by midcentury the incorporation of a business corporation had become, essentially, the recognition of "a private arrangement to achieve private ends for private gain".