Exam 2: Corporations Flashcards
How is a corporation formed?
Formally; a corporation is a creature of statute, an artificial “person”
What is the tax form for a “C” corporation
Form 1120
What are a corporations constitutional rights?
- Equal Protection
- Access to courts, sued or be sued
- Due Process
- Freedom from unreasonable search and seizure and double jeopardy
- Freedom of speech
What are corporations liable for under the doctrine of respondeat superior?
“let the master respond for the agent’s actions”
Liable for the torts committed by its agents or officers within the course and scope of their employment.
Domestic Corporation
Corporation doing business in its state of incorporation
Foreign Corporation
Corporation doing business in a state other than its home state
Alien Corporation
Corporation formed in another country doing business in the United States
Public Corporation
Corporation with a political or governmental purpose, for the public good
Private Corporation
Corporation held by individuals for their own benefit and profit
Close Corporations
- Shares held by few shareholders
- More informal management, similar to a partnership
- Restriction on transfer of shares
“S” Corporation
Taxed under Schedule S of the IRC, avoiding the double taxation. Corporation is domestic, fewer than 100 shareholders, only one class of stock
Subscription Agreements (hint: preliminary)
Continuing contract with investors for them to purchase stock in a yet-to-be created corporation
Promoters
the persons who take the preliminary steps of organizing the venture and attracting investors via subscription agreements
Who is liable for subscription agreements?
The promoter is personally liable for pre-incorporation contracts on behalf of the corporation, unless 3rd party agrees to hold future corporation liable.
- held liable until Novation (new contract)
Articles of Incorporation
primary enabling document filed with the Secretary of State that includes basic information about the corporation.
Incorporators
Person(s) who execute the articles of incorporation
Contents of the Articles of Incorporation
- Shares of the Corporation
- Registered Office and Agent
- Incorporators
- Duration and Purpose [perpetually until dissolved; any legal activity]
What are the filed article of incorporation called?
Corporate Charter
What happens at the first organizational meeting?
- appoint the first board which then approved by laws
- elects/hire officers
- adopts pre-incorporation contracts and activities
De Jure Corporation
substantial statutory requirements are met; cannot be attacked by state or 3rd parties
De Facto Corporation
statutory requirements NOT met, but promoters made good faith effort to comply with corporate law; corporate status can only be attacked by the state
Corporation By Estoppel
if it acts like a corporation, cannot avoid liability by claiming no corporation exists.
Where are a corporation’s express powers found?
- State and Federal Statutes
- Corporation’s Articles of Incorporation
What are corporation’s implied powers?
Power to perform all acts reasonably necessary to accomplish corporate purpose:
- borrow and lend money
- extend credit
- make charitable contribution
Ultra Vires Act
“without authority”; Corporate act that is beyond the express or implied powers of the corporation.
Remedies available for an Ultra Vires Act
- Shareholders can bring action for corporation
- Corporations can recover damages from its officers and directors
- Attorney general of state may bring action to dissolve corporation for an ultra vires acts
Piercing the Corporate Veil
When a court “in the interest of justice or fairness,” holds shareholders personally liable for corporate acts.
What factors do courts consider when looking to pierce the corporate veil?
- 3rd parties tricked into dealing with a corporation rather than the individual
- corporation is set up never to make a profit or remain insolvent or is under capitalized
- statutory formalities are not followed
