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