General Flashcards
What is a corporation?
A legal entity distinct from its owners, the shareholders.
What are the four key characteristics of a corporation?
- Perpetual existence
- Centralized management
- Limited liability
- Free transferability of ownership interest
What does perpetual existence mean in the context of a corporation?
It survives the death or replacement of its owners (shareholders).
What is meant by centralized management in a corporation?
Management of its assets and business is conducted through a board of directors.
What is limited liability for shareholders?
Shareholders are generally shielded from personal liability for the corporation’s debts and obligations.
What is free transferability of ownership interest in a corporation?
Ownership interests (shares) can be freely transferred.
What is one potential advantage of the corporate form?
Facilitates the raising of significant amounts of capital.
What is one potential disadvantage of the corporate form?
Subject to double taxation.
What is double taxation in the context of corporations?
Profits are taxed as corporate income and then taxed again as personal income when distributed as dividends.
Who is responsible for governing a corporation?
Corporate directors.
What is the role of corporate officers?
Manage the conduct of the corporate business and serve as agents of the corporation.
What is the relationship between shareholders and management in a corporation?
Shareholders are owners but generally do not exercise control over management.
True or False: The presence of a corporation in a legal context always indicates that corporate law is being tested.
False.
On the MEE®, which law should be treated as governing law for corporations?
Model Business Corporation Act (MBCA or ‘Model Act’).
