Pg 40 Flashcards
What is a public corporation or a government corporation?
A corporation that is created and controlled by the government whose purpose is to perform some government or public function.
Can a corporation still be a public corporation if it doesn’t exercise government powers?
Yes, if it is created for some public purpose and it is controlled by the government
If a state university is funded by both private and public funds and governed by a board of trustees that is appointed by the governor of the state, can that be a public corporation?
Yes, and so could an agency for public broadcasting
What are examples of things that are not public corporations?
Hospitals that are founded by private benefactors for public charity. Even if the state contributes to their support and has some control over their affairs, they are private entities.
What is a publicly held corporation?
Business corporations like IBM or Microsoft that have numerous shareholders and the shares are publicly traded and sold on national and public securities exchanges. Directors do not usually manage the affairs of the business, but instead hire professionals to do it. These are highly regulated.
If you are in charge of a growing regional chain that could grow quicker with better access to funds, and the owners are willing to part with a portion of their ownership interest to raise funds to grow the business, what would you likely do with your business?
Make it a publicly held corporation
Why is choosing a publicly held corporation a serious venture?
Because you must be able to authorize and issue an extremely large number of shares of stock
What is a close corporation or a closely held corporation or private corporation?
Corporations that are held by private individuals with relatively few shareholders who shares are not generally traded in securities markets. The shareholders are usually the key employees or major investors, and even though it is a corporation, it is operated more like a partnership. Management and ownership are mostly the same. These are often small enterprises like family businesses. They don’t usually do much buying and selling of stock in a corporation because there’s no real market for it and the owners are usually friends, family, or key employees.
Do all states recognize close corporations?
No, only some
What is the stipulation for a close corporation with regard to shareholders?
They usually have a max number of shareholders (California says 35), and some states that you can never have more than one class of stock. If you add more classes of stock, the close corporation is converted to a general stock corporation and loses the special privileges of a close corporation.
Can a close corporation make a public offering of its stock?
No
General stock corporations have to begin with a single class of stock, but can they then authorize additional classes to be added later?
Yes, and this is something that a close corporation cannot do
If you want to be a close corporation, what is the law that you must follow?
The state law of your particular state, and each state has its own criteria
If you want to be a close corporation, where do you find the limit for shares that your corporation can issue?
In the articles of incorporation.
What is a one person company?
When all stock is owned or controlled by a single shareholder. This is very dangerous because if you file for bankruptcy then the court will often say the company is really an alter ego of the individual, so they will not provide limited liability to just one person. You need two people that are both owners and somewhat engaged in the business.
