Organization of a corporation

Question 1

What does it take to form a corporation?

Answer 1

people- incorporators
paper- articles of incorporation
act

Question 2

Paper: corporate name: magic words

Answer 2

corporation
company
incorporated
limited

Question 3

Paper: what names must be included in articles of incorporation? 4

Answer 3

1) corporate name
2) incorporator name and address
3) director name and address
4) name of registered agent (legal rep) and address of registered office

Question 4

Paper: what must articles of incorporation include?

Answer 4

1) names and addresses
2) statement of purpose
3) capital structure (stock)

Question 5

Doing something beyond the scope of corporation’s purpose is an ultra vires activity. How do we handle ultra vires today?

Answer 5

1) ultra vires Ks are VALID
2) shareholders can seek an INJUNCTION
3) responsible managers are LIABLE to the corporation for ultra vires losses

Question 6

Articles of incorporation must include capital structure, including

Answer 6

1) authorized stock
2) number of shares per class
3) info on voting rights and preferences of each class

Question 7

What is authorized stock?

Answer 7

maximum number of shares the corporation can sell

Question 8

What must incorporators do?

Answer 8

execute articles and deliver them to secretary of state

Question 9

Act: what happens if incorporators have notarized articles delivered to the Secretary of State and pay required fees and Secretary of State’s office accepts the articles for filing?

Answer 9

that’s conclusive proof of valid formation and at that point we have a de jure corporation

Question 10

Who holds an organizational meeting?

Answer 10

The Board of Directors

Question 11

What happens at an organizational meeting?

Answer 11

The Board of Directors selects officers and adopt bylaws

Question 12

There’s double taxation on corporations. What is it taxed on?

Answer 12

It is taxed on its profits and shareholders are taxed on distributions

Question 13

What’s is an S Corporation?

Answer 13

It’s a way to avoid having to pay income tax at the corporate level. Has no more than 100 shareholders. There is one class of stock and it is not publicly traded

Question 14

Are directors or officers liable for what the entity does?

Answer 14

No.

Question 15

Are shareholders / owners liable for what the entity does?

Answer 15

No

Question 16

Who is liable for what the corporation does?

Answer 16

The corporation itself.

Question 17

What happens if proprietors fail to form it de jure corporation?

Answer 17

Will be personally liable for what the business does because it’s just a partnership

Unless de facto corporation or corporation by estoppel

Question 18

DFC requirements

What happens if meet reqs?

Answer 18

One. There is a relevant incorporation statute. There is.

Two. The parties made a good-faith, colorable attempt to comply with it.

Three. Some exercise of corporate privileges. Acting like we have a corporation.

Anyone asserting this doctrine must be unaware of failure to form a did your corporation.

Business is treated as a corporation for all purposes except in action by the state

Question 19

Corporation by Estoppel

What is it and what does it apply to?

Answer 19

One who treats a business as a corporation maybe Estopped from denying that it is a corporation

it can also prevent that improperly formed corporation from avoiding liability by saying it was not properly formed

Anyone asserting this doctrine must be unaware of failure to form de jure corp

Only applies to contract not tort cases

Question 20

What is the status of the two doctrines DFC and Corporation by estoppel?

Answer 20

Abolished in many states

Question 21

Are corporations required to have bylaws

Answer 21

No

Question 22

Are bylaws filed with the state

Answer 22

No they’re internal

Question 23

Who adopts the initial bylaws?

Answer 23

The board of Directors at the organizational meeting

Question 24

Who can amend or repeal the bylaws of the corporation?

Answer 24

Shareholders or in many states the board also can

Question 25

Bylaws conflict with the articles of incorporation which controls?

Answer 25

Articles

Question 26

Preincorporation contracts: who is a promoter?

Answer 26

A person acting on behalf of the corporation not yet formed. She might enter contract on behalf of the corporation not yet formed

Question 27

When will Corporation be liable on preincorporation contracts?

Answer 27

When it adopts the contract.

Question 28

Preincorporation contract: how can a corporation adopt the contract?

Answer 28

Express: board takes an action adopting the contract

Implied: corporation accept the benefit of the contract

Question 29

Preincorporation contract: unless the contract clearly says otherwise the promoter is liable on the preincorporation contract until there is a

Answer 29

Novation: an agreement of the promoter the corporation and the other contracting party that the corporation replaces the promoter under the contract

Question 30

Preincorporation contract: what if the corporation adopts the contract but there is no novation?

Answer 30

Both the corporation and the promoter are liable because there has not been a novation