ch 41 l201
special charters
early american corporations received these from state legislatures. these were granted one at a time by special action of the legislatures; few were granted.
subsidiary corporation
One that is owned by another corporation.
s corporation
a subchapter s. special type of close corporation. it is treated nearly like a partnership for federal income tax purposes. its shareholders report the earnings or losses of the business on their individual federal income tax returns., this means that this corporation's profits are taxed only once- at the shareholder level, eliminating the double-taxation penaty of incorporaiton. all shareholders must consent to this election. the internal revenue code requires this to have only one class of share and 100 or fewer shareholders. shareholders may be the only individuals or trusts.
close corporations
corporations with very few shareholders whose shares are not available to the general public. the controlling shareholders are the only managers of the business.
not-for-profit corporation
do not issue stock and do not expect to make a profit. they provide services to their members under a plan that elimaintes any profit motive. they have members rather than shareholders, and none of the surplus revenue from their operations may be distributed to their members. generally pay no income tax. can reinvest a larger share of their incomes in the business that can for-profit corporations.
domination
if a shareholder causes a corporation to act to the personal benefit of the shareholder. proved if the controlling shareholders cause the corporation to fail to observe corporate formalities. makes the corporation the alter ego of the shareholders. other courts say that domination makes the corporation an instrumentality of the shareholders. to prove this, it is not sufficient, or even necessary, to show that there is only one shareholder. many on-shareholder corporaiton will never have their veils pierced
improper use
may be defrauding creditors, circumventing a statue, or evading an existing obligation
general incorporation law
nearly all for-profit corporations are incorporated under this. all of the states require professionals who wish to incorporate, such as pyshicians, dentists, lawyers, and accountants, to incorporate under professional corporation acts.
government owned corporation
owned by governments and perform governmental and business functions. a municipality.
parent corporation
owns at least a majority of the shares of another corporation. liable for its own obligations and the subsidiary is liable for its own obligations, but the parent is not liable for its subsidiary's debts and the subsidiary is not liabel for the parents debts. able to elect the directors of the subsidiary corporation and therefore can contorl the management of the subsidiary, the parent may cause its subsidiary to transact with the parent in a manner that benefits the parent but harms the subsidiary
thin capitalization
proved when capitalization is very small in relation to the nature of the business of the corporation and the risks the business necessarily entails.
publicly held corporation
shares are generally available to public investors. tends to be managed by professional managers who owns small percentages of the corporation. nearly all shareholders of the typical publicly held corporation are merely investors who are not concernd in the managemetn of the corporation.
domination and improper purpose
the two requirements must exist for a court to pierce the corporation veil.
looting
transfers of corporate assets to shareholders for less than fair market value also defraud creditors. they do this by paying themselves excessively high salaries or by having the corporation pay their personal credit card bills. when such payments leave insufficent assets in the corporation to pay creditors' claims, a court will hold the shareholders liable to the creditors.
