Business Entities Flashcards
Who may incorporate?
One or more natural or artificial persons capable of contracting may form a corporation.
What is the internal affairs doctrine?
Laws of the state of incorporation govern the internal structure/actions of a corporation. Only Louisiana chartered corporations are governed by LA law.
How do you file appication for corporate name?
Application must be filed with the Secretary/State and the name will be reserved for 60 days with TWO 30-days extensions allowed.
What are the requirements for the corporate name?
Corporate name, except in cases of railroad/telegraph/telephone corporations, shall contain the word CORPORATION/INC/LTD, or Company/Co. However (& Co. is not allwed). No business corporation shall include any word in its corporate name that suggests it might be a bank or insurance company/charitable/nonprofit entity. Every business corp must have a name that is DISTINGUISHABLE from every other PREVIOUSLY REGISTERED corproation ot trade name.
What are the requirements for the articles of incorporation?
- Articles shall be written in English; 2. Signed by each incorporator; or 3. By a mandatary of each incorporator. An incorporator can be a mere functionary/need not be anyone important to the corporation.
What are the mandatory statements for the articles of incorporations?
- The name of the corporation; 2. The corporate purpose–cannot simply say that the the purpose is to make money; 3. The aggregate number of shares which the corporation shall have authority to issue/if only one class, the par value of each share; 4. The full name and address of each incorporator.
What happens if the Secretary of State accepts flawed articles of incorporation, e.g., do not include all mandatory articles of incorporation?
No substantive effect on the corporate existence or powers; Sec of State may ask for a correction.
What other clauses must be added to the articles of incorporation in order to be oeprative?
- Preemptive rights; 2. Cumulative voting; 3. Cumulative and/or participating rights for preferred shareholders in dividend distributions; 4. Limiting liability for breach of fiduciary duty; 5. A statement that if any paid out dividences are unclaimed, they revert to the corporation (otherwise,r evert to state). Note: anything LAWFUL may be put in the articles.
How are the articles of incorporation filed?
Filed, with an INITIAL REPORT, with S/State. Certified copy is filed in the mortgage office of the parish in which the registered office of the corporation is located.
What is the initial report?
Unique to LA. Must be signed by EACH incorporator/agent, and must state: 1. Location and municipal street address of the corporation’s registered office; 2. Full name and municipal street address of each registered agent; and 3. Names/municipal street addresses of each of the initial directors if selected by the time the articles are filed.
When does the corporation’s legal existence begin?
Legal existence begins with the issuance of the certificate of incorporation by Sec/State, but it is effective RETROACTIVELY to the date the articles were filed.
When must a corporation file an annual report?
A corporation is required to file an annual report EVERY year with Sec/State on or before the anniversary date of incorporation. Must be signed by an officer/any two directors, and it UPDATES the initial report.
What are the consequences of failing to file the annual report?
- Sec/state can demand that the report be filed; 2. If the report is not filed within 15 days, the Atty Gen an institute a civil action and collect $50 fee for every fifteen days that goes by that the corporation fails to file the report. 3. If the corporation fails to file an annual report for three consecutive years the Sec/State shall give notice of intention to revoke the articles and franchise–corp and thirty days to cure the defect.
What are the various menthods to accomplish filings?
Filings related to ANY type of business entity (partnerships/LLC/corps/LLPs) may be by: 1. HARD COPY in person at Sec/State’s office; 2. Electrontically on state internet website; 3. Fax to Sec/state; 4. PDF emailed to Sec/state. Note: documents must be signed by those authorized, i.e., incorporators. Electronic filings must have either an electronic/digital signature.
When does a filing NOT need the signature witnessed by a notary public?
Dispened with if the document is filed: 1. Electronically, or, 2. In person, if the ard copy is signed by person authority/verified in presence of employee of SecState.
What is the function of bylaws? What is the primary distinction between bylaws and articles of incorporation?
- Regulate more mundane internal affairs of the corporation; 2. Board may adopt/amend the bylaws without shareholder approval unless the articles say otherwise–subject to the power of the shareholders to change or repeal any by-laws. 3. Bylaws are INVALID if inconsistent with any terms in the articles. 4. Primary distinction between bylaws and articles is that articles may ONLY be amended by shareholder vote.
What general rule governs the issuing of shares? What about the issuance of first shares?
- All shares issued by a corporation MUST be authorized in the articles–may authorize shares of different classes, each with stated designations/voting powers/preferences/divided or redemption rights/other relative rights or restrictions/limitations/qualifications. 2. First shares may be issued to the corporation promoters at the time a corporation is first formed, or, they may be issued AFTER incorporation by the board of directors.
What are permitted types of consideration for shares?
- Cash; 2. Any kind of property; 3. Services already rendered to the corporation–however, pre-incorporation services, such as an attorney drafting the articles of incorporation–are not valid consideration; 4. Unexecuted promises/promises to perform services/transfer property, even if secured or through NI, are NOT valid consideration. (can get through 3&4 by giving person cash to buy stock).
What is the result of issuing stock for invalid consideration?
Stock issued for invalid consideration is VOID and must be cancelled by the corporation (which can then reissue the stock for valid consideration).
What is the required AMOUNT of consideration for stock?
- Par value stock–(cannot be sold for less than par, but it may be sold for any amount greater than par that the Board sets); 2. No-par stock–can be sold at a price set by the Board (provided it is a FMP); 3. If stock is sold for property, the Board’s determination of the value of the property is upheld if it was made in good faith without a confict of interest.
What is dilution?
If the board sells stock at different prices, DILUTION will occur. If the Board does so WITHOUT a valid reason, the directors will be liable to the shareholder whose stock was diluted.
What is appropriate consideration for treasury stock?
Stock once sold and then REPURCHASED by the corporation, par/no par, may be sold for any type of consideration determined by board of directors, subject only to the fiduciary duty to the corporation. Limitations in ISSUING never before issued stock DO NOT apply to treasury stock.
What are the stock certificate requirements?
All shares MUST be represented by certificates of stock UNLESS the corporation is a participant in the Direct Registration System/Depositary Trust & Clearing Corporation.
What information must be on the stock certificate?
- Name of issuing corp; 2. Name of person who owns shares; 3. Number/class/series of shares; 4. Rights/prefs/limiations on class/series of shares, if the corporation has different classes/and or series of shares.