Chapter 38 - Key Terms and Concepts

What is a remedy for an ultra vires transaction?

- The corporation can sue the responsible corporate officers. - The state attorney general may seek an injunction against the transaction or seek a dissolution order from a court. - The shareholders can sue on behalf of the corporation.

Business trust

- a business form created by a written trust agreement that sets forth the interests of the beneficiaries and the obligations and powers of the trustees - similar to a corporation; not personally liable for the debts or obligations of the business trust

Cooperative

- an association that is organized to provide an economic service, without profit, to its members or shareholders - can take the form of a corporation or partnership

Joint venture

- an organization created by two or more persons in contemplation of a limited activity or a single transaction - similar to a partnership

List advantages of the LLC

- limited liability - flexibility in taxation - investment management by foreign investors

List the effect of dissociation from an LLC

- member loses right to participate in management and the right to act as an agent for the LLC - member's duty of loyalty to the LLC terminates

What is required to prove de facto corporate status?

1. A state statute must exist under which a valid incorporation could take place. 2. The enterprise must be doing business as a corporation. 3. The parties made a good faith attempt to comply with a state incorporation statute.

Generally speaking, what would be included in the articles of incorporation?

1. The nature and purpose of the corporation. 2. The duration of the corporation. 3. The address of the corporation's registered agent.

The case of Crowder Construction Co. v. Kiser involved which kind of corporation?

A close corporation.

Which of the following IS NOT required to prove de facto corporate status?

Statutory corporate formalities were not followed.

When a court "pierces the corporate veil," what happens?

The court disregards the corporate entity and exposes the shareholders to personal liability.

Generally speaking, which of the following would NOT be included in the articles of incorporation?

The employment policy of the corporation.

Which of the following IS NOT a remedy for an ultra vires transaction?

The responsible officers can sue the corporation for damages.

Joint stock company

a business form similar to a corporation in some respects (transferable shares of stock, management by directors and officers, perpetual existence) but otherwise resembling a partnership

An example of a close corporation would be:

a corporation owned by five family members.

In simple terms, an "S" corporation could be defined as:

a corporation whose shareholders have limited liability but avoid corporate income taxes.

Limited liability company

a hybrid form that combines the limited liability aspects of the corporation and the tax advantages of a partnership; governed by state LLC statutes

A person who takes preliminary steps in organizing a corporation is known as:

a promoter.

Articles of organization

a required document that is filed with a central state agency; includes information as the name of the business, its principal address, name and address of registered agent, names of the owners, and information on how the LLC will be managed

Syndicate

an investment group that undertakes to finance a particular project; may be organized as a corporation or as a general or limited partnership

Stock may be described as:

an ownership interest in the corporation.

A corporation is a legal entity:

created and recognized by state law in most cases.

Operating agreement

decides how to operate the various aspects of a business; contain provisions relating to management, how profits will be divided, the transfer of membership interests, whether the LLC will be dissolved on the death or departure of a member

In corporate law, when a corporation acts beyond the scope of its authority, it is said to:

engage in ultra vires transactions.

With respect to constitutional rights, corporations:

enjoy many of the rights held by natural persons.

Articles of incorporation contain:

information about the corporation, including its organization and functions.

Preferred stock is a more conservative (less aggressive) investment than common stock because:

it is less volatile and more like a bond.

Disadvantages of the LLC

state LLC statutes are not uniform; businesses in more than one state may not receive consistent treatment in these states

Corporations are taxed by:

state and federal governments.

Today, most state statutes governing corporate formation are guided by:

the Revised Model Business Corporation Act.

An example of a public corporation would be:

the U.S. Postal Service.

The responsibility for the overall management of a corporation belongs to:

the board of directors.

Members

the owners of an LLC

The first step in the incorporation process is:

to decide which state to incorporate in.

A culpability score, under the Corporate Sentencing Guidelines, relates to:

wrongdoing by senior management, past corporate violations, and the extent of a corporation's cooperation with federal investigators.