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Corporations > Setting Up a Corporation > Flashcards

Setting Up a Corporation Flashcards

1
Q

To form a corporation, you need what 3 things?

A

A person

A paper

An Act

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2
Q

With regard to the “person” requirement when setting up a corporation, what is that person called and what must they do?

A

They’re called an incorporator

They execute the articles and deliver them to the Secretary of State

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3
Q

How many incorporators does a company need in order to establish it? And does this person(s) need to be human or can they be another corporation?

A

One incorporator required

A person or an entity can serve as an incorporator

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4
Q

Does the incorporator need to be a citizen of the state in which they are incorporating the new entity?

A

No

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5
Q

With regard to the “paper” (Articles) requirement of setting up a corporation, what information must the articles contain?

A

Name of the company

The corporation’s name must include “corporation,” “company,” “incorporated,” or “Limited” in its name

State the registered agent

Registered office address (in same state as incorporation)

Information about authorised stock

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6
Q

If the corporation has different classes of stock, what do many states require the articles to state?

A

State the different classes of stock

Number of shares per class

Voting rights and preferences attached to such stock

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7
Q

At what point is the corporation said to be “formed?”

A

The incorporator must send the articles and the fee to the Sec of State. Once the Secretary of State ACCEPTS FILING, the corporation is formed.

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8
Q

What is a de jure corporation?

A

A company that’s been formed in accordance with applicable laws

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9
Q

After a de jure corporation is formed, what “act” must take place?

A

An organisational meeting

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10
Q

Who runs the first organisation meeting?

A

If directors named in the articles, they run it. If not directors, the incorporator runs the meeting during which they elect the directors.

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11
Q

The person running the organisation meeting must “complete the organisation of the corporation.” This mean what?

A

Appoint officers

AND

Adopt the initial Bylaws

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12
Q

Are Bylaws filed with the State?

A

No, they are internal

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13
Q

If Bylaws and articles conflict, which prevails?

A

Articles

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14
Q

Who can amend, appeal or adopt new Bylaws?

A

Shareholders

OR

The Board

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15
Q

If a company only does business in State B, but they were incorporated the in State Y, which state laws govern?

A

Always the state of incorporation (State Y)

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16
Q

What is a B Corp?

A

A Benefit Corporation, formed for profit, but also to purpose a broader social policy cause.

17
Q

How will you know whether a company is a B Corp?

A

The articles will state it

18
Q

How does a B Corp account for whether they pursued a broader social purpose?

A

Must file annual benefit reports assessing how it pursues its social mission

19
Q

What is the benefit of qualifying as an S Corp and what are the 4 requirements?

A

S Corps do not pay income yes at the corporate level.

Requirements are:

  1. No more than 100 SH
  2. All SH are U.S. citizens/resident
  3. One class of stock
  4. Not publicly traded
20
Q

What happens if the incorporator fails to correctly form a corporation?

A

They may form a partnership and create individual liability

21
Q

If the incorporators fails to form the corporation, in which two circumstances will they avoid creating a partnership?

A

De Facto Corporation

Corporation by Estoppel

22
Q

What two things should you note to the examiner when discussing whether a person may be able to claim formation of a De Facto Corporation or a Corporation by Estoppel?

A
  • A person asserting such doctrines must be unaware of the failure to form a de jure corporation
  • The Doctrines are abolished in many states
23
Q

What 4 factors do you need to rely on the doctrine of De Facto Corporation?

A
  1. Need a relevant corporation statute
  2. Parties made a good faith, colourable attempt to comply with it
  3. Some exercise of corporate privilege
  4. COURT MUST UPHOLD the De Facto Corporation—it’s not automatic
24
Q

When does a Corporation by Estoppel apply?

A

Only in contract cases

25
Q

What is the effect of a Corporation by Estoppel

A

If prevents anyone who has been dealing with the corporation as though it existed from denying its existence (applies to both incorporators and third parties dealing with the company).

26
Q

Is a corporation liable for a pre-incorporation contract?

A

Yes, but only if it ADOPTS THE CONTRACT.

Therefore liability does not automatically attach.

27
Q

How can a Corporation “adopt” a pre-incorporation contract?

A

Express adoption (by the Board)

Implied adoption (corporation accepts the benefit of the contract)

28
Q

For pre-incorporation contracts, when does the contract promoter cease to be liable?

A

At three parties must agree to NOVATION

29
Q

If the corporation agrees to adopt the contract, does that mean the promoter is no longer liable for the pre-incorporation contract?

A

No, stop liable because you need formal NOVATION between all three parties

30
Q

What is the rule regarding foreign corporations?

A

Foreign corporations TRANSACTING business in the state MUST QUALIFY and pay PRESCRIBED FEES.

31
Q

Who is a “foreign” corporation?

A

Any company outside of its state of incorporation

32
Q

For the purpose of determining the requirements for a foreign company, what does “transacting business” mean?

A

Means the regular course of INTRASTATE (not inter-State) business activity.

33
Q

With regard to a foreign company “transacting business” include owning property in the foreign state or conducting occasional transactions?

A

No, because it’s not regular business activity.

34
Q

What does it mean to “qualify” in the state?

A

Foreign corporation must get a certificate of authority from the Sec of State. They do this by providing the Sec of State with information from their articles, which proves good standing in their home state.

35
Q

Does the foreign company need any presence in the foreign state to “qualify?”

A

Yes, they must appoint a registered agent and maintain a registered office in the state.

36
Q

What happens if a foreign corporation transacts without qualifying?

A

Could be liable to:

  • Civil fine

AND

  • The foreign corporation cannot a claim in the state
37
Q

Broadly, what are the requirements for “qualifying” as a foreign corporation in a certain state?

A

Prove “good standing” to Sec of State

Obtain certificate of authority from Sec of State

Pay prescribed fee

Appoint registered agent

Maintain registered office in the state.

Corporations (5 decks)

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