Special Types

Question 1

Closely held corp

Answer 1

• small # Sh
• shares not publicly traded
• frequent overlap for officers and directors
• relaxed or modified corp governance structure
• restrictions on the sale or transfer of shares
• requires special notation in CoF (must state This corp is a close corp)
• no min or max share requirements

Question 2

maangement of CHC

Answer 2

• liberal management structure- 1) BoD

2) some modified management structure as specified in CoF or by a properly adopted Sh agreement

Question 3

SH agreement-CHC

Answer 3

• entered into by ALL corp’s SH when a modified or customized corp governance structure is adopted
• bindin and enforceable against all SH regardless of the manner in which the shares are acquired
• binding on all SH regardless of whether Sh was ware of the SH’s agreement
• binding on SH even if shares were acquired through transfer or assignment

Question 4

Foreign Corp

Answer 4

• incorporated in another state (not country)
• special requirements to do business in TX:
  1) must file an application of registration with TX SoS
  2) if fails to file, they are precluded from filing suit as a result of any business transacted in TX
• still subject to being sued for liab incurred in TX

Question 5

professional corp (PC)

Answer 5

• corp w/ stated purpse taht legally limits its function to rendering professional services
• Sh must be a member of the profession
• Sh in PC are not shielded from malparctice liability

Question 6

S Corp

Answer 6

• special election a corp makes under Subchapter S of the IRC.
• puts a regular corp into a special category that confers different tax treatment than a regular C corp
• pass through taxation- is not taxed as a separate stand alone entity

Question 7

qualify as an S corp

Answer 7

1) have 1 class of stock
2) have no more than 100 SH
3) ALl SH must be US residents

Question 8

TX Franchise Tax

Answer 8

-“privilege tax” or margin tax or revised franchise tax
-based on TP’s margin- caluclated by subtracting the greatest of three proposed deductions from total revenue
(Revenue minus ANY OF:
1) cost of goods sold
2) wages and benefits
3) 30% of revenue)

Question 9

Entites Subject to franchise tax

Answer 9

• charterd, organized, or doing business in TX are sub to this tax
• S corp
• C corp
• Pship
• LLP
• LLC
• profess assoc
• PC
• business trusts
• joint ventures
• holding copanies

Question 10

NOT subject to franchise tax

Answer 10

• sole proprietorship
• general partnership
• passive entities as defined under TX law
• grantor trust

Question 11

calculating the tax

Answer 11

• 1% of the taxable margin
• (Revenue minus ANY OF:
  1) cost of goods sold
  2) wages and benefits
  3) 30% of revenue)