Chapter 41

A state may require a foreign corporation to "qualify" to conduct intrastate business within the state. What level of "doing business" is necessary to require the NC corporation to "qualify" in VA? (if doing One of More of these 5 things)

(if doing One of More of these 5 things) 1) Maintaining an office in the state. 2) Entering into contracts related to local business or sales. 3) Owning or using real property for business purposes. 4) Maintaining an inventory of goods to fill orders. 5) Performing service activities in the state.

How much contact is required for Virginians to impose its taxes on a foreign corporation? In other words, A state will not violate the Due Process clause or the Commerce Clause if the tax...

- is applied to an activity with a substantial connection with the taxing state; -is fairly apportioned -does not discriminate against interstate commerce -is fairly related to the services provided by the state

Depending on the amount of "contacts" that a foreign corporation (i.e., incorporated in North Carolina) has with residents of another state (Virginia), those contacts may be enough to:

- subject the NC corp. to lawsuits in VA courts; - subject the NC corp. to VA taxes; - require the NC corp. to "qualify" (to conduct business) in VA.

With regard to Due Process, is the foreign corporation "doing business" in the state? If so, the foreign corporation can be subjected to the laws of the state.

-to subject the corporation to a lawsuit in the state. -to subject the corporation to taxation in the state. -to require the corporation to "qualify" to carry on its activities (to conduct business) in the state.

What is required for a foreign corporation to qualify to do business in the state? (5 things)

1) Apply for a Certificate of Authority 2) Pay an application fee ($25) 3) Maintain a registered office and a registered agent in the state 4) File an annual report 5) Pay an annual fee ($50 - $850, depending on the number of authorized shares)

What are the consequences if a foreign corporation is doing business in the state and fails to qualify?

1) Class 1 Misdemeanor (Code of VA §13.1-613) 2) May not commence a lawsuit in any state court (Code of VA §13.1-758(A)). 3) Each officer, director and employee who "does any such business" in VA knowing that a certificate of authority is required is liable for a penalty of between $500 - $5,000 (Code of VA §13.1-758(D)).

Imaginary wall - the corporate veil - between a corporation and its shareholders that Protects shareholders from personal liability for a corporation's actions. However, a court may pierce the corporate veil to allow a Plaintiff to sue the individual shareholders. the Result? Shareholders' loss of limited liability! Two requirements must exist in order to pierce the corporate vail:

1) Domination of a corporation by its Shareholders: -A majority of the shareholders exercise their influence and cause the corporation to act in a certain way (may be good or bad). ---i.e., to purchase new equipment (good), or ---i.e., to pay the s/h's personal living expenses (bad). 2) Domination is for an improper purpose: -Causing the corporation to act in the best interests of the majority s/hs. --i.e., corporation pays s/h's personal living expenses; failing to observe corporate formalities (to hold annual meetings). Three types: defrauding creditors, circumventing a statute, or evading an existing obligation.

A state law that regulates business activities of a foreign corporation is constitutional if:

1) It serves a legitimate state interest 2) The legitimate state interest outweighs the burden on interstate commerce

MBCA lists several activities that are NOT "doing business" within a state. What are they? (5 things)

1) Soliciting orders (by mail or with employees) in the state that require acceptance outside the state (i.e., Amazon.com). 2) Selling through independent contractors. 3) Owning real or personal property for investment purposes. 4) Conducting an isolated transaction (i.e., sale to one customer) that is completed within 30 days. 5) Maintaining a bank account.

With regard to the Commerce Clause, a state law that regulates a foreign corporation's business activities will NOT violate the Commerce Clause (i.e., will not unduly burden interstate commerce) IF...

1) The state law serves a legitimate state interest; 2) The state law is the least burdensome means of achieving that interest 3) The legitimate state interest outweighs the law's burden on interstate commerce.

Which of the following activities meet the requirements for doing business in a state? A) Owning real or personal property for investment purposes. B) Maintaining a bank account C) Maintaining a store for product sales. D) Soliciting product orders through a catalog. E) All of the above

C. ). All of the other activities do NOT meet the requirements for doing business within a state for purposes of conferring jurisdiction over a foreign corporation.

A state may impose its laws on a foreign corporation if imposing its laws does not violate: A) The Takings Clause B) The Commerce Clause C) The First Amendment D) The Due Process Clause of 14th Amendment E) B and D only.

E

Ex. of valid income tax: imposed on a % of total net income

Ex. of invalid tax: flat tax imposed on all trucks using state highways (disproportionately burdened interstate trucking co.'s).

A foreign corporation is one that operates in a country other than the one in which it is incorporated.

F. ALien

mere ownership of property in a state will not subject the foreign corp. to property tax.

False

Cole Inc. is owned by two people. Each owner built a home with money obtained by a loan from State Bank to Cole Inc. The corporate shield provides absolute protection to both owners from personal liability for repayment of the loans.

False. Given this evidence, a court probably could pierce the corporate veil because the owners commingled corporate and personal funds.

The Commerce Clause gives states the power to regulate intrastate commerce.

False. INtersate commerce does

ABC Corp. is incorporated in the state of Nevada and owns a vacant parcel of land in California. The mere ownership of vacant land in California is sufficient to subject ABC Corp. to California state income tax.

FalseMere ownership of vacant land would subject the corporation to Calif. property tax, but greater contacts are needed to subject it to Calif. state income tax.

Due Process Clause

Foreign corp. must have "sufficient minimum contacts" with the state (i.e., must be "doing business") before the state may exercise jurisdiction over the corporation.

Virginia Stock Corporation Act and the Virginia Non-Stock Corporation Act are the same thing with a different same as what two acts?

Model Business Corporation Act (MBCA) Model Nonprofit Corporation Act (MNCA)

Commerce Clause

Must not unduly burden interstate commerce.

In a close corporation, the controlling shareholders are usually the only people that manage and operate the company.

T

If a foreign corporation has not qualified to do business in a state, the state may still be able to exercise personal jurisdiction over the corporation through its "long-arm statute."

T. If there is an incidence that occurs between he two parties from there respective states.

Greater contacts are needed to subject a foreign corp. to state income and sales tax than that of property tax

TRU

Most states generally follow the Model Business Corporation Act (MBCA) or Model Nonprofit Corporation Act (MNCA)

TRU

Florida trucking co. causing accident in VA, Virginian can sue the Florida trucking company in VA (Will not have to go all the way to Florida to file suit). What are the stipulations that will make this Florida company have ot come all the way up to VA for court?

The burden on the corporation must be reasonable compared to the benefits it receives from conducting activities in the state. (Compare burden to benefit) Most states have enacted a "long-arm statute" that allow its courts to exercise personal jurisdiction over an entity that harms a state interest.

When can a state impose its laws on a foreign corporation?

When the states laws do not violate the constitution. 1)the Commerce clause *or* 2) the due processes clause.

It is possible to create a corporation without the government's permission.

f

International Shoe (1945): the US Supreme Court held that under the Due Process Clause of the 14th Amendment, sufficient minimum contacts with a state may include an

isolated event that harms a citizen or state interest, as long as subjecting the corporation to a lawsuit in the state does not violate "traditional notions of fair play and substantial justice." EX: Florida trucking co. causing accident in VA, Virginian can sue the Florida trucking company in VA (Will not have to go all the way to Florida to file suit)

A _______corporation is only taxed at the shareholder level, must have the consent of all shareholders, and is limited to one class of stock and 100 or less shares

subchapter s