Formation Flashcards
How is a corporation formed?
The owners submit articles of incorporation with the secretary of state
How is an LLC formed?
The owners submit articles of organization or a certificate of formation with the secretary of state
What document governs the internal rules of a corporation?
Bylaws
What must generally be included in articles of incorporation? (4 things)
(1) Corporation name
(2) Number of authorized shares
(3) Office and registered agent
(4) Incorporators’ names and addresses
What is a de jure corporation?
A corporation that has met all of the statutory requirements for formation
Is a de jure corporation allowed to conduct business as if it were a normal corporation?
Yes
What are the two doctrines that help absolve incorporators of personal liability for a deficiently filed corporation?
(1) De facto corporation
(2) Corporation by estoppel
What is the de facto corporation doctrine?
The doctrine that gives a deficiently filed corporation quasi-legal status
What are the requirements for a de facto corporation? (4)
(1) Proceeded in good faith
(2) Under a valid incorporation statute
(3) For an authorized purpose
(4) Executed and acknowledged articles of incorporation pursuant to that purpose
Who is a promoter?
The person that creates the corporation and enters into pre-formation contracts on behalf of the corporation
When is a promoter personally liable for pre-formation contracts?
A promoter is personally liable for all pre-formation contracts unless:
(1) the parties agree to only hold the the future entity liable; or
(2) there is a novation
Will adoption by a corporation absolve the corporation’s promoter of liability?
No
Who do promoters owe fiduciary duties to?
(1) Copromoters
(2) The to-be-formed entity
(3) The investors in the to-be-formed entity
What fiduciary duties do promoters owe?
(1) Duty of care
(2) Duty of loyalty
What is a subscription agreement?
An agreement in which investors will offer to exchange shares in the future entity for capital contributions
