Legal Final
Ultra Vires Act
"beyond powers" >acting beyond their express or implied powers
De Facto corporations
"corporation in fact" >has not substantially met the requirements >courts recognize as a corporation to avoid unfairness to third parties
De Jure corporation
"lawful corporation" has met the substantial elements of the incorporation process >minor errors
Respondeat Superior
"let the master answer" >Corporation is liable for actions of its employees
debt securities
(bonds) loans to a corporation >usually long-term loans on which corporation pays interest
equity securities
(stock) ownership in a company
What constitutional rights do corporations have?
5th and 14th: due process 4th: unreasonable search or seizure 1st: freedom of speech
incorporators
>apply for incorporation >only duty is to sign articles of incorporation and file the document with the secretary of state
Double taxation for corporations
>corporation pays taxes on profits (retained earnings) >shareholders pay taxes on dividends
public corporation
>created by government to help administer law >specific duties to fulfill (ex. post office)
nonprofit corporation
>do not have shareholders >provide services to members (ex. churches/ charitable donations)
closely held corporations
>do not offer stock to the public and shares are not easily transferrable >usually family/ friends
how corporations select a state to incorporate in
>flexibility to corporate management >rights for shareholders >restrictions on dividends >protection against takeovers
Corporations are separate legal entities. What does this mean?
>limited liability for shareholders >the corporation is liable for corporate actions >shareholders are only liable for their investments
shareholders of a S corporation
>no more than 100 >only individuals, trusts, and corporations can be shareholders >no partnership or nonresident alien shareholders
profit corporation
>operate for a profit >shareholders receive dividends >market price of stock can increase
S corporation
>operates like a corporation, but has tax status of a partnership >FEDERAL tax law >only one class of shares
Corporations express powers
>perpetual existence >sue/ be sued >acquire property >make contracts/ borrow or lend money >charitable donations >make rules for management >the power to take an necessary actions to execute express powers
professional corporations
>professionals incorporate to enjoy limited liabilty >courts can impose personal liability for malpractice within the corporation > ex. dentists, doctors, etc.
requirements of a de facto corporations
>promoters, subscribers, incorporator made a good faith effort to comply with the incorporation statue >organization has conducted business as a corporation
remedies for an Ultra Vires Act
>shareholders can sue >sue corporate directors or officers for damages >state attorney general can have corporation dissolved or prevent them from fulfilling the ultra vires contract
Corporate powers
>state incorporation statutes >articles of incorporation >state grants powers
selection of corporate name
>statues require corporations to indicate in the name that the business is incorporated by using corporation, company, limited, or incorporated >subject to approval by the state
pubically held corporations
>stock is publicly traded and easily transferrable
corporation by estoppel
a defective corporation that has conducted business with a third party cannot deny its status as a corporation to escape liability
certificate of authority
allows corporations to conduct business in states other than the one they are incorporated in
promoters
begin the creation/ organization process by arranging for necessary capital, financing and licenses > make subscription agreements > prepare incorporation papers > enter into contracts to establish the new corporation > liable for reincorporation contracts
Shareholders elect _____
board of directors
certificate of incorporation
document certifying that the corporation is incorporated in the state and is authorized to conduct business
Shares of a corporation are ______
easily transferable
defective corporation
error or omission was made during incorporation process >shareholders might be held personally liable
private corporation
for private purposes
When can corporations use the Ultra Vires defense?
if neither party to the contract has performed any terms of the contract
where do professional and closely held corporations usually incorporate?
in the state where stockholders live
Lifespan of a corporation?
indefinite; does not die with shareholders
subscribers
make offers to purchase stock during the incorporation process >become shareholders when the corporation incorporates or their offer is accepted
common stock
no preferences >entitled to dividends in proportion to the number of shares >right to vote in corporate elections >lowest priority
Board of directors elect _____
officers to run day-to-day activities
domestic corporations
operate in the state in which it is incorporated
articles of incorporation
provides basic information about the corporation >includes: name of corporation, address of the registered office, name of the registered agent, names and addresses of the incorporators
bylaws
rules and regulations that govern internal management >articles of incorporation determine who can amend bylaws (shareholders, directors, or both)
first organizational meeting
shareholders meet to elect the corporate board of directors and pass corporate bylaws
_____ generally governs corporations
state law
Corporations implied powers
come from Statement of Corporate Powers
alien corporations
conduct business in countries other than the one in which it is incorporated
foreign corporations
conduct business in states other than the one in which it is incorporated
piercing the corporate veil
courts impose personal liability on shareholders when they engage in illegal or wrongful acts >lacked adequate capital when initially formed >did not follow statutory mandates >shareholders personal or corporate interests are commingled such that corporation has no separate identity
preferred stock
preferences with respect to assets and dividends >get paid dividends first >receive a percentage of dividends associated with the face value of their stock