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LA100 > Corporations > Flashcards

Corporations Flashcards

1
Q

Corporation

A

a fictitious legal entity that exists as an independent “person” separate from its principals
obligations are separate and distinct from personal obligations of their principals

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2
Q

Privately Held Corporation

A

a corporation that does not sell ownership interests through sales via a broker to the general public or to financial institutions or investors

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3
Q

What are some benefits of a Privately Held Corporation?

A

(1) flexible internal operating procedures
(2) do NOT have to comply with rigorous corporate structures or formalities (fewer regulations)

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4
Q

unanimous consent resolution

A

a single document signed by each principal to dispose of necessary tasks like electing directors or issuing stock

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5
Q

What two types of entity can Privately Held Corporations choose to become?

A

(1) closely held
(2) family held
these types restrict the number or type of owners, but are more flexible on organization and management

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6
Q

True/False: Privately held corporations have a small number of shareholders, but there’s no limit in terms of revenue.

A

True

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7
Q

What does the flexibility of Privately Held Corporations have the capability to do?

A

it outweighs any desire of principals to be able to capitalize business through a sale to the general public

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8
Q

How does a Privately Held Corporation fund capitalization?

A

(1) sale of ownership to general public
(2) commercial investors

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9
Q

What must a Privately Held Corporation pursue in order to exist as a PUBLICLY Held Corporation?

A

an initial public offering (IPO)

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10
Q

What are Publicly Held Corporations subject to?

A

federal/state regulation and close scrutiny by agencies to ensure integrity among insiders and global investors

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11
Q

Domestic Corporation

A

operates in state of incorporation

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12
Q

Foreign Corporation

A

conducts business in a state other than its state of incorporation

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13
Q

Alien Corporation

A

a corporation formed outside the US that does business in the US though

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14
Q

Nonprofit Corporation

A

no profit seeking owners and performs a service to the public

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15
Q

Benefit Corporation

A

for-profit with societal objectives

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16
Q

Public Corporation

A

formed by government body to serve public at large but with no owners

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17
Q

Professional Corporation

A

ownership is restricted to a particular profession and members in good standing

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18
Q

True/False: Corporations have the least formal filing and reporting requirements.

A

False
(Corporation have the MOST formal filing and reporting requirements)

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19
Q

articles of incorporation

A

the document filed with state authority that sets in motion the incorporation process, includes the corporation’s name and purpose, numbers of shares issued, and address the corporation’s headquarters
it MUST have by laws

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20
Q

What must Corporations choose when becoming to incorporate?

A

the state to incorporate in

21
Q

Are a business venture’s taken on before or after filing?

A

before

22
Q

promoter

A

an individual who performs arrangement of capitalization, personal recruitment, property leasing, and incorporating the business

23
Q

What do principals address in organizational meetings after filing the AoI?

A

(1) bylaws
(2) board of directors and officers
(3) issuance of shares

24
Q

bylaws

A

issues left for the principals to decide; files aren’t public but kept in corporate recors

25
Q

Who are the three types of people operating a Corporation?

A

(1) shareholders
(2) board of directors
(3) officers

26
Q

board of directors

A

individuals responsible for oversight and management of the corporation’s course of direction; sets the strategy; are independent from shareholders and officers

27
Q

officers

A

individuals responsible for oversight and management of the corporation’s course of direction; the day-to-day management

28
Q

express authority

A

gives specific authority to particular officer; comes from bylaw or director resolution

29
Q

implied/inherent authority

A

based on position to act on behalf of the corporation

30
Q

issuance of shares

A

official issuing of ownership interest; recorded in a stock register kept by the secretary

31
Q

shares

A

ownership interests (indicates owner’s name and number of shares)

32
Q

shareholders

A

owners of a corporation that act principally through electing and removing directors and approving or withholding approval of major corporate decisions

33
Q

Do directors and officers comply with federal or state requirements?

A

state statutory requirements

34
Q

corporate formalities

A

(1) meetings with shareholders and directors
(2) filing annual reports
(3) disclosures to shareholders
(4) must keep records and by laws up to date

35
Q

sources of financing for Corporations

A

(1) debt (lengthy process)
- bonds: debt money issued by a corporation with promises to pay back at a specified rate of interest for a length of time and repay full amount upon expiration of bond (maturity date); “credit”
- debentures: like bonds, but issued on the strength of the general credit of the corporation
(2) equity
- to capitalize operations but is highly regulated due to process of issuing securities
(3) venture capital firms
- venture capital: funding provided by a group of professional investors for use in a developing business; focused on one industry
(4) public offerings
-complex and time consuming process

36
Q

List the advantages of a Corporation.

A

(1) 1+ owners
(2) limited liability
(3) well developed case law
(4) entity of choice for going public

37
Q

List the disadvantages of a Corporation.

A

(1) more regulations
(2) expensive

38
Q

corporate veil

A

liability protection shareholders, directors, and officers of a corporation have from personal liability in case the corporation runs up large debts or suffers

39
Q

piercing the corporate veil

A

when the court discards the corporate veil and holds some or all of the shareholders personally liable because fairness demands doing so in certain cases of inadequate capitalization, fraud, and failing to follow corporate formalities

40
Q

True/False: Piercing the corporate veil is an extreme remedy.

A

True

41
Q

What does a personal guarantee that creditors request allow?

A

allows creditors to obtain a judgement against personal assets of one or more shareholder in event of a default by the corporation in addition to any collateral that’s pledged by shareholders or corporation

42
Q

insiders

A

officers, directors, and controlling shareholders
all owe the durty of care and duty of loyalty

43
Q

duty of care

A

(1) act in good faith
(2) act in care
(3) carry out duties

44
Q

negligence

A

a breach of the duty of care where there is a failure to complete tasks/role accordingly

45
Q

failure to act with diligence

A

a breach of the duty of care that doesn’t necessary mean suspicious activity but does sometimes require outside experts to investigate or have the corporation and its practices monitored

46
Q

rubber stamp

A

a breach of the duty of care when transactions proposed by officers aren’t from the best possible information and in the best interest

47
Q

business judgement rule

A

a “shield”; a principle that protects officers and directors from liability when they have made an unwise decision that results in a loss to the corporation but they have acted in good faith, had no private financial self-interest, and used diligence to acquire the best information related to the decision

48
Q

corporation opportunity doctrine

A

disclosure that considers if the corporation had current/expected interest in the opportunity, if it’s fair to the corporation’s shareholders to allow another to usurp, and if the opportunity is closely related to existing/prospective activities

49
Q

Trefoil Park v. Key Holdings

A

Plaintiff = Trefoil
Defendant = Key
Federal Trial Court
Case involving corporate commercial real estate and the corporate veil
Court’s reasoning…
- there was no injustice or fraud
- Key followed all corporate formalities

LA100 (6 decks)

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