CH 19 Forms of Business Organizations

Question 1

Appraisal rights/ dissenters’ rights

Answer 1

Rights of the shareholders who voted against a merger to receive in cash the fair value of the shares they were forced to give up as a result of the transaction

Question 2

Articles of incorporation

Answer 2

Certificate of formation; Certificate of incorporation; A document filed upon the incorporation of the business. Typically includes the name, purpose, agent, authorized number of shares, and classes of stock of the corporation

Question 3

Articles of organizations

Answer 3

The articles of organization are a document similar to the articles of incorporation, outlining the initial statements required to form a limited liability company in many U.S. states.

A charter document of a limited liability company (LLC)

Question 4

At-will partnership

Answer 4

a partnership that does not involve a fixed term or the completion of a specific undertaking

Question 5

B Corporation (certified)

Answer 5

A for-profit corporation that also has a goal to create tangible societal or environmental value. Formalizing this status allows the board of directors to make decisions that are not necessarily profit-maximizing.
B for (Benefit)

Question 6

Bidder

Answer 6

A party making a tender offer

Question 7

Bylaws

Answer 7

the rules governing the corporation (including the number of authorized directors)

Question 8

C Corporation

Answer 8

A corporation which is taxed according to the rules of the Internal Revenue Code Subchapter C; corporation pays income tax, and shareholders pay income tax on received dividends

Question 9

Classified board/ Staggered board

Answer 9

A board for which directors are divided into classes, each serving a specified term, usually lasting three years. This way, every year, one-third of the directors get re-elected.

Question 10

Close corporation

Answer 10

State close corporation laws permit significant depar- tures from the formalities required of traditional corpora- tions.

A close corporation is a corporation which does not exceed a statutorily defined number of shareholders and is not a public corporation. This number depends on the state’s business laws, but the number is usually 35 shareholders.

A close corporation allows the shareholders to act as would a general partnership in day-to-day operations, however, IF the shareholders step in to run the company, they retain limited liability as shareholders, but take on the fiduciary duties of directors. As such, these shareholders may be liable for failing to fulfil their fiduciary duties.

Question 11

Closely held corporation

Answer 11

Only exists in common law; a small corporation with little to no market for its stocks

Question 12

Corporate domicile

Answer 12

A country or a US state under whose laws a corporation is formed

Question 13

Corporation by estoppel

Answer 13

If a third party is performing transactions with an enterprise as if it were a corporation, then the third party must treat it as a corporation in all legal matters.

Question 14

estoppel

Answer 14

the principle which precludes a person from asserting something contrary to what is implied by a previous action or statement of that person or by a previous pertinent judicial determination

Question 15

De facto corporation

Answer 15

An enterprise that does not fulfill all the requirements of a corporation but is treated as such in court

Question 16

De jure corporation

Answer 16

A corporation by law ( a real corporation), as contrasted with de facto corporation.

Question 17

Disappearing corporation

Answer 17

A corporation that loses its status upon a merger

Question 18

Dissociation

Answer 18

the change in the relationship among the general partners that results when a partner ceases to be associated with the general partner-ship’s business

Question 19

Dissolution

Answer 19

The designation of the point in time when partners no longer carry on their business together.

Question 20

Estopped

Answer 20

prevented

Question 21

Fictitious business name

Answer 21

There are no formal requirements for forming a sole proprietorship. If, however, the business operates under a fictitious business name—that is, a name other than the name of the owner—then that name must be registered with the state.

Question 22

forgotten founder

Answer 22

when a founder only works informally, then leaves, and others proceed with the idea and create a business, the forgotten founder might have ownership rights to the enterprise

Question 23

freeze-out merger

Answer 23

A merger in which the (minority) shareholders are required to surrender the shares of the disappearing corporation for cash

Question 24

general partnership

Answer 24

a partnership in which the partners share both profits and losses of the partnership

Question 25

going private

Answer 25

buying back the shares so that there are 300 or less shareholders of record (official shareholders)

Question 26

Outsider reverse piercing

Answer 26

When a third party, such as a creditor of a shareholder, is able to reach the assets of the corporation to obtain payment of the shareholder’s debt

Question 27

Pass-through entity

Answer 27

A pass-through entity is a business entity in which income is passed through to its owners and taxed at their personal tax rate. This method allows businesses to avoid double taxation and potentially reduce their overall taxes owed.

Question 28

Pierce the corporate veil

Answer 28

“Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts. Veil piercing is most common in close corporations.

While the law varies by state, generally courts have a strong presumption against piercing the corporate veil, and will only do so if there has been serious misconduct.

Question 29

proxy

Answer 29

A written document authorizing another person to vote on a shareholder’s behalf

Question 30

S corporation

Answer 30

An S corporation, for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes. Instead, the corporation’s income and losses are divided among and passed through to its shareholders.

Question 31

Shareholder derivate action

Answer 31

A shareholder derivative action is a legal action that is taken by one or more shareholders (owners) of a company, who act as representative plaintiffs. The shareholder plaintiffs actually file suit on behalf of the corporation that they own a part of. Typically, the claim is filed against board members, executive directors or others within a position of power in the organization and who may be engaging in misconduct.

Question 32

Short-form merger

Answer 32

A merger when a surviving company already owned a large portion of a disappearing company’s shares

Question 33

Sole proprietorship

Answer 33

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business

Question 34

Winding up

Answer 34

The process of bringing a company to an end (liquidating its assets, paying off creditors, ceasing operations) after it has been dissolved.

Question 35

Charter

Answer 35

Charter, a document granting certain specified rights, powers, privileges, or functions from the sovereign power of a state to an individual, corporation, city, or other unit of local organization.