CH 19 Forms of Business Organizations Flashcards
Appraisal rights/ dissenters’ rights
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
Articles of incorporation
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
Articles of organizations
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)
At-will partnership
a partnership that does not involve a fixed term or the completion of a specific undertaking
B Corporation (certified)
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)
Bidder
A party making a tender offer
Bylaws
the rules governing the corporation (including the number of authorized directors)
C Corporation
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
Classified board/ Staggered board
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.
Close corporation
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.
Closely held corporation
Only exists in common law; a small corporation with little to no market for its stocks
Corporate domicile
A country or a US state under whose laws a corporation is formed
Corporation by estoppel
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.
estoppel
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
De facto corporation
An enterprise that does not fulfill all the requirements of a corporation but is treated as such in court
De jure corporation
A corporation by law ( a real corporation), as contrasted with de facto corporation.
Disappearing corporation
A corporation that loses its status upon a merger
Dissociation
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
Dissolution
The designation of the point in time when partners no longer carry on their business together.
Estopped
prevented
Fictitious business name
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.
forgotten founder
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
freeze-out merger
A merger in which the (minority) shareholders are required to surrender the shares of the disappearing corporation for cash
general partnership
a partnership in which the partners share both profits and losses of the partnership
going private
buying back the shares so that there are 300 or less shareholders of record (official shareholders)
Outsider reverse piercing
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
Pass-through entity
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.
Pierce the corporate veil
“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.
proxy
A written document authorizing another person to vote on a shareholder’s behalf
S corporation
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.
Shareholder derivate action
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.
Short-form merger
A merger when a surviving company already owned a large portion of a disappearing company’s shares
Sole proprietorship
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
Winding up
The process of bringing a company to an end (liquidating its assets, paying off creditors, ceasing operations) after it has been dissolved.
Charter
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.
