FACT PATTERN 1: ORGANIZATION OF A CORPORATION- LEGAL SIGNIFICANCE OF FORMATION OF CORPORATION Flashcards
What choice of law governs the internal affairs of a corporation?
Internal affairs of a corporation are governed by law of the state in which the corporation is formed
If a company is incorporated in CA but the company only does business in Iceland what law will govern the internal affairs of the corporation?
CA’s laws. the choice of law is where it is incorparated
Is a corporation considered to be a separate legal person?
Yes
As a separate legal person what can the corporation do, and what can be done to the corporation?
It can sue and be sued, hold property, be a partner in a partnership, make charitable contributions, etc.
How is a corporation taxed?
It is taxed on its profits; in addition, shareholders are taxed on distributions. So there is “double taxation.”
Can we form a corporation and avoid having to pay income tax at the corporate level?
yes, we can form an S corporation. Can get a pretty close treatment to pass through taxation
What are the requirements to have an S corporation?
- no more than 100 shareholders,
- all of whom are human and U.S. citizens or residents.
- There is only one class of stock and it is not publicly traded.
Are the directors or officers liable for what the entity does? Why or why not?
No, limited liabilty
Are the shareholders (owners) liable for what the entity does? Why or why not?
No, limited liability
What does limited liability mean for shareholders?
shareholders generally can only lose the amount that they invested in the company.
generally, who is liable for what the corporation does?
The corporation is responsible for it’s debts but not the owners.
