Chapter 19 Business Law Term

Like a partnership

A close corporation is often operated like what?

S corporation

A close corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as an _ _.

Public corporation

A corporation formed by the government to meet some political or governmental purpose. Cities and owns that incorporate are common examples. Ex: U.S Postal Service, AMTRAK.

Alien corporation

A corporation formed in another country but doing business in the United States is referred to in the U.S as....

Foreign corporation

A corporation formed in one state but doing business in another (referred to in the second state).

Doctrine of Respondeat Superior

A corporation is liable for the torts committed by its agents or officers within the course and scope of their employment. This principle applies to a corporation exactly as it applies to the ordinary agency relationships. It follows the doctrine of _ _.

Person

A corporation is recognized as a "_", and it enjoys many of the same rights and privileges under state and federal law that U.S citizens enjoy.

Domestic corporation

A corporation that is referred to by its home state (the state in which it incorporates).

Benefit corporation

A for profit corporation that seeks to have a material positive impact on society and the environment.

Corporation

A legal entity created and recognized by state law.

Benefit enforcement proceeding

A right of private action by shareholders of a benefit corporation. They use this to sue the corporation if it fails to pursue or to create public benefit.

Corporation (Corp.), Incorporated (Inc.), Company (Co.), or Limited (Ltd.)

All states require the corporation's name to include what?

Taxed like a partnership

An S corporation is treated differently than a regular corporation for tax purposes. It's taxed like __ so the corporate income passes through to the shareholders, who pay personal income tax on it.

Yes, they are

Are businesspersons liable for all pre-incorporation contracts made with investors, accountants, or others on behalf of the future corporation?

Express powers

Are found in its articles of incorporation, in the law of the state of incorporation, and in the state and federal constitutions, corporate bylaws and the resolutions of the corporation's board of directors.

Certificate of authority

Asking for permission to do business in other states.

Ultra vires

Beyond the power. In corporate law, acts of a corporation that are beyond its express or implied powers are called _ _ acts.

No, it cannot.

Can a new's corporation's name be the same as the name of an existing corporation doing business within the same state?

Shareholder agreement

Control of a close corporation can also be stabilized through the use of a _ _. It can provide for proportional control when one of the original shareholders dies.

Nonprofit corporations

Corporations formed for purposes other than making a profit are called _ _. Ex: Private hospitals, educational institutions, charities, and religious organizations.

Close corporations - professional nature

Generally incorporate in the state where their principal shareholders live and work

By purchasing a share of stock

How does a person become a shareholder of a corporation?

Seven

How many classifications of corporations are there?

One or more owners.

How many owners can a corporation have?

De jury corporations

If a corporation has substantially complied with all conditions precedent to incorporation, the corporation is said to have _ _ (rightful and lawful existence).

Retained Earnings

If invested property, will yield higher corporate profits in the future and thus cause the price of the company's stock to rise. Individuals shareholders can reap the benefits of these retained earnings.

De factor corporation

If the defect in formation is substantial, however, such as a corporation's failure to hold an organizational meeting to adopt bylaws, the outcome will vary depending on the jurisdiction.

Private corporations

In contrast to public corporations, these are created either wholly or in part for private benefit - for profit.

Implied powers

In the absence of express constitutional, statutory, or other prohibitions, the corporation has the implied power to perform all acts reasonably necessary to accomplish its corporate purposes.

Bylaws

Internal rules of management adopted by the corporation at its first organizational meeting.

No

Is soliciting orders via the Internet considered "doing business" within a state?

Board of directors

Members are elected by the shareholders. They make the policy decisions and hires corporate officers and other employees to run the daily business operations.

Close corporations

Most corporate enterprises in the U.S fall into the category of close corporations. One whose shares are held by members of a family or by relatively few persons. Also referred to as closely held, family, or privately held corporations. No trading market.

Pierce the corporate veil

Occasionally, the owners use a corporate entity to perpetrate a fraud, circumvent the law, or in some other way accomplish an illegitimate objective. In these situations, the courts will ignore the corporate structure and expose the shareholders to personal liability.

Publicly held corporation

Often called a public company. Any corporation whose shares are publicly traded in a securities market, such as the New York Stock Exchange.

Limited Liability

One of the key advantages of the corporate form.

Shareholders

Owners of a corporation

Commingled

Personal and corporate interests are mixed together to such an extent that the corporation has no separate identity.

Professional corporations

Professionals such as physicians, lawyers, dentists, and accountants can incorporate. These are typically identified by the letters P.C, S.C, or P.A

Alter-Ego Theory

Sometimes, courts pierce the corporate veil under the theory that the corporation was not operated as a separate entity, but was just another side (or alter ego) of the individual or group that actually controlled the corporation.

Double taxation

The company pays tax on its profits. Then if the profits are passed on to the shareholders as dividends, the shareholders must also pay income tax on them (unless the dividends represent distributions of capital).

Corporation by Estoppel

The doctrine most commonly applies when a third party contracts with an entity that claims to be a corporation but has not filed articles of incorporation.

Incorporators

The person or persons who execute (sign) the articles.

Agent

The person who can receive legal documents on behalf of the corporation

Articles of incorporation

The primary document needed to incorporate a business. It includes basic information about the corporation and serve as a primary source of authority for its future organization and business functions.

Delaware

The state has historically had the least restrictive laws and provisions that favor corporate management. Many corporations have incorporated here.

Nonprofit corporations or municipal corporations

Today, cases that allege ultra vires acts usually involve what?

True

True or False: A shareholder can sue the corporation, and the corporation can sue a shareholder.

True

True or False: Although the corporation substitutes itself for its shareholders when conducting corporate business and incurring liability, its authority to act and the liability for its actions are separate and apart from the individuals who own it.

True

True or False: Corporations may also be held liable for the criminal acts of its agents and employees, provided the punishment is one that can be applied to the corporation. Although they cannot be imprisoned, they can be fined.

True

True or False: Profits are subject to income tax by various levels of government.

Pass on to shareholders in dividends or retain them as profits

Two options when a corporation earns profits.

Holding company (parent company)

Used to reduce or defer their U.S income taxes. At its simplest form, this is a company whose business activity consists of holding shares in another company. Typically the holding company is established in a low-tax or no tax offshore jurisdiction.

1 - Select a state of incorporation 2- Secure the corporate name 3 - Prepare the articles of incorporation 4 - File the articles of incorporation with the secretary of state

What are the basic steps of incorporation formation?

Purpose, accountability, transparency

What are the differences in benefit corporations compared to traditional corporations?

Location, purpose, and ownership characteristics

What does classification of a corporation normally depend on?

Like a sole proprietorship or a partnership

What does management of a close corporation resemble of?

Serious management problems

What does transfer of one shareholder's shares to someone else cause?

The number of shares of stock

What else must the articles specify?