LEGL Ch. 14

alien corporation

a corporation created under the authority of a foreign country -generally treated the same as a foreign corporation under the law

foreign corporation

a corporation is referred to as this in states other than the one in which it is incorporated

domestic corporation

a corporation is referred to as this in the state in which it is incorporated

articles of partnership

a formal agreement between partners that is explicitly stated among the parties and drafted

limited partners(hip)

-basically has all the attributes of a partnership except that one or more of the partners are designated as limited partners -this type of partner is not responsible for the debts of the business organization -not permitted to be involved in the control or operations of the limited partnership

benefit corporation

-combines the aspects of non-profit and profit organizations in a way intended to permit the business to make profit while pursuing explicit, socially oriented goals -not referred to as B corp -built on impetus that traditional corp. forms place to much emphasis on profit maximization

sole proprietorship (creation, continuity, control, liability, taxation)

-easiest and least expensive organization to create -creation: no formal documentation...business licenses only -continuity: so long as proprietor desires, but no ownership transfer control: total control by proprietor liability: 100% liable for all debts/liabilities taxation: only personal income tax

Limited liability company/partnership def (LLC/LLP)

-increasingly popular organizational alternative -have more flexibility than S corporations and do not have to struggle with the complexities of a limited partnership -treated as non taxable entities -have characteristics of a partnership and a corporation -first passed in Wyoming -LLP: often used by professionals (i.e. doctors, lawyers, and accountants)

Non profit corporations

-must always be corporations -do not have shareholders -have board of directors and officers

ways to avoid double taxation

1) deduct reasonable salaries paid to corporate officials to determine taxable income 2) expense accounts--ex: company credit card 3) interest-bearing loans serve as a company expense 4) to not pay dividends and to accumulate the earnings

Alli v. US

Dr. Alli and his wife claimed that the corporate structure shielded them from decisions made in the name of the corporation -this court concluded that Dr. Alli and his wife did not act though the corporation was independent from their personal assets -the court also found that the corporate form has been used to commit a wrong by failing to adhere to obligations to keep BSA's properties in a decent and safe condition for tenants -"piercing the corporate veil"

Citizens united v. federal election commission

SC affirmed a corporation's speech protections under the constitutions first amendment by striking down a federal law that limited spending on political advertising -corporations and individuals reasonably have a largely equal claim to rights and protections under the law

Burwell v. hobby lobby stores

SC was compelled to determine whether for-profit corporations are "persons" within the meaning of Religious Freedom Restoration Act -court found that indeed closely held corporations are persons that have a right to the free exercise of religion

proxy

an agent appointed by a shareholder for the purpose of voting the shares

partnership (def)

an agreement between two or more persons to share a common interest in a commercial endeavor and to share profits and losses

corporation (def)

an artificial, intangible entity created under the authority of a state's law

dissolution

any change in the ownership of an organization that changes the legal existence of the organization -crucial issue within continuity factor

joint and severally liable

any one partner is on the hook for the full amount of liability (no matter how much of the business you own) -plaintiff can choose any partner to sue or sue all (can pick)

alter-ego theory

by which the corporate veil can be pierced-may be used to impose personal liability upon corporate officers, directors and stockholders -occurs when corporate entity is disregarded so that a unity of ownership and interest that separates the corporation has ceased to exist -if the owners are not respecting the distance between themselves and the corporation: through... 1) failure to observe corporate formalities (ex: no board of directors) 2)co-mingling of funds 3) undercapitalization- must leave the corp enough money to do its business/pay debts

double tax

corporations endure this type of taxation where the corporate profit is taxed before dividends are declared and there is also a personal income tax against shareholders after dividends are declared

S Corporation

corporations with a small ownership structure; have a tax break, meaning that they do not have to pay double taxation -Can have up to 100 shareholders -shareholders in S corp are responsible for accounting on their individual income tax returns for their respective shares of their organization's profits or losses (information return)

continuity

how does the organization's existence relate to its owners -associated with stability and durability

partnerships (creation, continuity, control, liability, taxation)

creation: automatic based on business conduct; modified by agreement--no permission needed continuity: dissolved whenever one partner withdraws control: each partner has equal voice; modified by agreement liability: all partners have unlimited liability for entire debt; joint and severally liable taxation: all business income subject to personal taxation, divided equally

limited partnerships (creation, continuity, control, liability, taxation)

creation: created by an agreement, must be registered with the secretary of state/certificate filed in office where business is conducted continuity: dissolved when general partner withdraws, however does not if limited partner assigns his interest to another control: general partners have total control; limited partners cannot participate in management liability: general partners have unlimited liability but limited partners are not personally liable for the partnership's debt-will not exceed the amount of their investment

Limited liability organizations

creation: filing articles of organization with secretary of state by "organizers," not incorporators continuity: owners of LLC are called members rather than shareholders; dissolved when a member withdraws, but may be continued by those remaining (90 days to decide)- unlimited life control: equal management by members unless manager is designated or agreement is made otherwise liability: members are agents but only liable for their investment taxation: all business income subject to personal taxes; non taxable as an entity

corporation +S Corp (creation, continuity, control, liability, taxation)

creation: incorporators apply for state charter with articles of incorporation (more costly than partnerships) continuity: perpetual, so long as it can conduct business--existence is separate from shareholders control: shareholder obligations limited to investment, elect directors; directors set objectives and appoint officers; officers manage daily operations liability: limited personal liability...shareholder obligations limited to investment, absent other commitments taxation: corporate income taxed; corporation files its own tax return; shareholders taxed only on income distributed as dividends-->"double taxation"

federal communications commission v. at&t inc.

even though a corporation is treated the same as an individual under most aspects of the law, there are some rights that only individuals can possess -the court determined that corporations do not have personal privacy rights, at least in the way intended by congress

assumed-name statute

if partners choose to name their corporation something other than that of the partners, the partners must give notice as to their actual identity under the state's _____________

derivative suit

if the majority interest of a closely held corporation is acting illegally or oppresses the rights of the minority shareholders, a lawsuit known as a _____________ may be brought by the minority on behalf of the corporation

officers

include the president, vice president, secretary and treasurer of a corporation and are charged with managing the daily operations in attempt to achieve the stated organizational objectives or goals

shareholders

involved in a corporation; elect the board of directors; investors

hybrid forms of business

limited partnerships S corporations limited liability companies limited liability partnerships

publicly held

may be owned by hundred, if not thousands, of persons -ex: a business whose stock is traded on a public exchange

piercing the corporate veil

occurs when the courts find that the corporate organization is being misused -when this veil of protection has been pierced, the shareholders are treated like partners who have unlimited liability for their organization's debts -when the owners stop treating the corporation as a separate person

closely held organizations

owned by only a few persons

general partners

remain personally liable for the organizations debts in a limited partnership -can be involved in control and operations

directors

set the objectives or goals of the corporation and appoint the officers

corporate bylaws

sets out the rights and responsibilities of each of these parties (shareholders, board of directors and corporate officers)--agreement on ownership versus management structure

3 basic forms of business organizations

sole proprietorships partnerships corporations

What is the most critical factor when selecting a form of business organization?

taxation

creation

the legal steps necessary to form a particular business organization

DPA ("deferred prosecution agreement")

used to encourage self-reporting and remediation of illegal acts before a criminal case is commenced -a reason that criminal prosecutions for corporate wrongdoing may be declining -these increased after Arthur Andersen case -concern that the overuse of DPAs could lead to an overly lenient environment for addressing corporate malfeasance