S-Corporation, LLCs & Other Entities Flashcards
What is an S-Corporation?
A S-Corporation is a corporation that has special tax status. It has the same form as a C-Corporation and is typically governed by the same state corporate )laws. (Acing
How is a S-Corporation taxed
An S-Corporation is a “Pass through Entity”, so the entity does not pay the taxes. The owners pay proportionate share of taxes on their earnings. (Acing 217)
What certain restrictions is the S-Corporation subject to?
-May not have more than 100 shareholders.
-Shareholders must be individuals (estate, non-profit, some trusts)
-Shareholders cannot be non-resident alien
-May only have one class of stock (Acing 217)
Are S-Corporation directors, officer and shareholders subject to fiduciary duties?
Yes.
Are S-Corporations publicly held?
No. S-Corporations are not publicly held. (Acing 218)
The de facto corporation doctrine
Provides that a defectively formed corporation–that is, one that fails to meet the technical requirements for forming a de jure corporation–may attain the legal status of a de facto corporation if certain requirements are met.
What is the most important aspect of a de facto corporation>
That courts perceive and treat it in all respects as if it were a properly formed de jure corporation. For example, it can sue and be sued. The only exception is that the state may challenge its status. Often, the status of the company is crucial to determine whether the parties forming the corporation are individually liable.
Corporation by Estoppel
Corporation by estoppel is an equitable remedy and does not concern legal status. The general rule is where a body assumes to be a corporation and acts under a particular name, a third party dealing with it under such assumed name is estopped to deny its corporate existence.
What is the purpose of Corporation by Estoppel
The purpose of the doctrine is so that one who contracts with an association as a corporation is estopped to deny its corporate existence so as to prevent one from maintaining an action on the contract against the associates, or against the officers making the contract, as individuals or partners.
What is the difference between a De Facto Corporation and a Corporation by Estoppel?
The de facto corporation doctrine allows a defectively formed association to attain the legal status of a corporation. The corporation by estoppel doctrine prevents a party who dealt with an association as though it were a corporation from denying its existence.
Is a De Facto Corporation a real corporation?
A de facto corporation is an actual corporation. As to all the world except the State, it enjoys the status and powers of a de jure corporation.
Is a person that signs a contract on behalf of a company personally liable?
Generally, a person who signs a contract on behalf of a company that is not yet in existence becomes personally liable on that contract. However, a court can order that the company is instead liable if it finds that corporation by estoppel prevented the opposing party from arguing against the existence of a corporation.
