18.2 Formation and Powers and Piercing the Corporate Veil

Corporation by estoppel

An entity that has not attempted to incorporate, but holds itself out to others as a corporation

Acts that are beyond the express or implied powers of a corporation are called _____ acts.

Ultra vires

When a corporation is not operated as a separate entity, this is called the

alter ego theory

De Facto Corporation

an entity that has not substantially complied with all statutory requirements

De jure corporation

an entity that has substantially complied with all statutory requirements for incorporation

Stock may be described as:

an ownership interest in the corporation

The corporation's internal rules of management are called the .

bylaws

The type of corporation most at risk for piercing the corporate veil is the:

close corporation.

One of the first steps in the incorporation process is ______

deciding where to incorporate

As of 2016, companies are not allowed to use crowdfunding to offer and sell securities.

false

If a corporation cannot point to a document that articulates its express power, the corporation does not have the power.

false

venture capital

financing provided by professional outside investors to new business ventures

Private equity capital

funds invested by professional firms for an existing business venture

crowdfunding

funds that come from a cooperative network usually through the internet

When a business association holds itself out to others as being a corporation when it has made no attempt to , the firm normally will be from denying corporate status. When this occurs, courts will treat the entity as a corporation, but only for the purposes of resolving dispute.

incorporate estopped a single

Today most ultra vires acts involve:

nonprofit corporations

A court will disregard the corporate form and the corporate in five circumstances: first, if a party is into dealing with the corporation rather than the individual; second, if the corporation is set up to always be or is capitalized; third, if the corporation is formed to an existing legal obligation; fourth, if the corporation fails to follow the statutory corporate ; and fifth, if the personal and corporate interests are so that the corporation has no separate identity.

pierce veil tricked insolvent thinly evade formalities commingled

The articles of incorporation must include information such as the name, number of shares, and the name of its _______ , or person designated to receive legal documents on its behalf.

registered agent

Corporations normally are financed by . One type of security consists of borrowing funds and is called a . The other main type of security consists of ownership in the corporation and is called a , or equity security.

securities bond stock

common stock

stock that gives the owner a residual position in the financial structure of the business along with the greatest risk of loss and the greatest potential for gain

Preferred stock

stock that gives the owner priority as to payment of dividends and distribution of assets on dissolution

Bonds normally have a fixed payment and a maturity date when the principal is returned to the bondholder.

true

Private equity firms use their private equity capital to invest in existing corporations.

true

To pierce the corporate veil is to expose the shareholders to personal liability.

true

The express powers of a corporation come from which three sources?

us and state constitutions articles of incorporation bylaws