Chapter 39: Corporate formation

Question 1

Shareholder liability

Answer 1

Personally liable to the extent of their investment

Question 2

Domestic corp

Answer 2

Operates in the state it was incorporated in

Question 3

Foreign Corp

Answer 3

Operates in a state other than where it was incorporated

Question 4

Alien corp

Answer 4

Formed in another country

Question 5

Public corp

Answer 5

Owned by a government

Question 6

Private corp

Answer 6

created for private benefit

Question 7

Nonprofit corp

Answer 7

Not formed to make a profit. Allows members to form contracts without personal liability.

Question 8

Close corp

Answer 8

shareholders are limited to small group of people; family business. Can restrict the transferability of shares to outside persons.

Question 9

Subchapter S corp

Answer 9

most attributes of a closed corp; limited liability, but taxed as a partnership.

Question 10

Requirements for Subchapter S corp

Answer 10

1. Be a domestic corp
2. must not be a member of an affiliated group of corps
3. no more than 100 shareholders

Question 11

Incorporation procedures

Answer 11

1. pick state to incorporate in
2. choose name
3. prepare articles of incorporation
4. file the articles of incorporation (with secretary of state)

Question 12

Articles of incorporation

Answer 12

1. Bylaws cannot conflict with it
2. validify the number of total shares
3. name/address of incorporator

Question 13

After incorporation

Answer 13

First organizational meeting;
1. elect board of directors
2. adopt bylaws (voting requirements of shareholders, election of board rules)

Question 14

Piercing the corporate veil

Answer 14

Action of a court to hold shareholders personally liable for corporate debts.

Question 15

Cases when corporate veil will be pierced

Answer 15

1. Corporate privilege is abused for personal benefit
2. business is indistinguishable from personal