Chapter 25 - Corporations Flashcards
1
Q
Formation
A
- File “articles of incorporation” with the state
- Contains name, incorporator, address, etc.
2
Q
Bylaws
A
- Explain how a corporation is run.
- Contain info about how the board of directors is constituted, when board meetigns and shareholder meetings will take place, boting rights, etc.
3
Q
Capital Structure
A
- Bonds (borrowing money)
2. Stocks (finding investors = stockholders)
4
Q
Operations
A
- Board of Directors - Elected by shareholders
- Officers - day to day decisions
- Shareholders - vote for board (indirectly owners)
5
Q
Duties of Officers and Directors
A
- duty of care - legal duty imposed to prtect shareholder interest, review issues, attend meetings
- Duty of Loyalty - Can’t compete against corporation for which I am an officer or director.
- No usurping of corporate opportunity (personally taking advantage of)
6
Q
Guth v. Loft
A
- Guth was a member of the Board of Directors for Loft corporation
- Loft carried coke in stores but Guth didn’t like coke.
- Pepsi came to Guth and said to invest in them.
- Problem was that loft already sold coke.
- Once he found out about this, he had the duty of care to inform the Loft board about pepsi opportunity, but he didn’t - he was in breach of duty of care usurping opportunities.
7
Q
Pre-emptive Rights
A
- Shareholders have these.
- Existing shareholders have the right to purchase new shares being issued so they can maintain percentage ownership rather than being diluted.
8
Q
Taxation
A
- Regular C- corporations are subject to tax as well as shareholders.
9
Q
S-corporations
A
- Flow through entity
- File paperwork
1. Can’t have more than 100 shareholders
2. Can only have one class of stock
3. No corporations, LLC’s , Partnerships can own an S-corp
10
Q
Owner Liability
A
Stockholders are not liable for debts of corporation except for piercing the corporate veil.
