Corporations

Question 1

How is a corporation formed?

Answer 1

by filing articles of incorporation

Question 2

bylaws

Answer 2

internal rules that specify how the corporation will operate

Question 3

what needs to be in the articles of incorporation

Answer 3

1. name
2. how many shares the corp may issue
3. each incorporators name and address
4. address of the corporate office
5. corp’s agent for service and process

Question 4

priority of conflicts with corp rules

Answer 4

1. state law
2. articles
3. bylaws

Question 5

How is an LLC formed

Answer 5

organizers must file a certificate of organization

Question 6

operating agreement

Answer 6

LLC’s bylaws

Question 7

de facto corporation

Answer 7

courts will recognize limited corporate liability if there was a colorable, good-faith attempt to incorporate and actual use of the corporate form (ex. contracting in the corporate name)

Question 8

incorporation by estoppel

Answer 8

courts will recognize limited corporate liability if a third party deals solely with the purported corporation and has not relied on the promoter’s personal assets

Question 9

piercing the corporate veil factors

Answer 9

1. commingling funds
2. undercapitalizing
3. disregard for corporate formalities
4. using corporate funds as their your own
5. using corporate form to facilitate fraud or crime
6. grossly failing to maintain records
7. concentrating stock ownership in one person or very few persons

Question 10

alter-ego theory

Answer 10

courts will pierce the corporate veil if a stockholder controls the corp to such an extent that the corporation is merely an extension of the shareholders will. Requires
1. shareholder disregards the corporate form
2. this disregard worked some unfair harm or injustice

Question 11

subscription agreement

Answer 11

an agreement with a pre-corporation to purchase stock once they become available

Question 12

common stock

Answer 12

receive periodic dividends and have voting rights

Question 13

preferred stock

Answer 13

no voting rights but higher dividends than common stock

Question 14

preemptive rights

Answer 14

a shareholders right to buy a percentage of newly issued stock equal to her current ownership percentage in the corporation and to do so before the stock is offered to the public

Question 15

record date

Answer 15

A record date is a cut-off date set by a company to determine who is eligible to participate in a transaction or receive a distribution. Must be within 70 days of a shareholder meeting

Question 16

who can call a special meeting?

Answer 16

1. the board of directors
2. anyone designated by the bylaws
3. or a shareholder holding at least 10% of shares entitled to vote on a matter and he delivers a signed, written demand to the corporation

Question 17

when must notice of a shareholder meeting be provided?

Answer 17

10-60 days before the meeting

Question 18

voting trust

Answer 18

shareholders transfer their shares to a trustee and the trustee has the right to vote the shares

Question 19

voting agreement

Answer 19

MUST BE IN WRITING
parties agree to vote in a certain way

Question 20

Proxy

Answer 20

person appointed by a shareholder to vote their shares. Must be a written agreement submitted to the officer in charge of vote counting

Question 21

Close corporation

Answer 21

a corporation with fewer than a specified number of shareholders (State law will specify) and stock that is not publicly traded

Question 22

share-transfer restrictions

Answer 22

must be reasonable and cannot totally ban transfers

Question 23

Buy-sell agreement

Answer 23

a commitment between corporation and shareholders that the corp will buy a shareholders shares if a certain event occurs

Question 24

Third-party intervention

Answer 24

judicial way to defeat deadlock within a corp. Court may appoint custodian to solve the deadlock

Question 25

appraisal rights

Answer 25

right to have your shares purchased by the corp if you dissent to an extraordinary corporate action, like a merger

Question 26

Direct litigation

Answer 26

shareholder sues to vindicate their own personal interest

Question 27

Derivative litigation

Answer 27

shareholder asserts a claim on behalf of the corporation or the shareholders at large

Question 28

class action