business law chap 15

2 factors that temper the liability issue:

1. lenders ask principals for a personal guarantee to pay back debt with personal assets and 2. some cases courts will remove the corporate veil to let other parties have access to other shareholders assets

Bonds

A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The city issued bonds to raise money for putting in new sewers.

Corporation

A fictitious legal entity that exists as an independent "person" separate from its principals

Promoter

A person or persons who organize and start a corporation, negotiate and enter into contracts in advance of its formation, find the initial investors to finance the corporation, and so forth.

shareholder

A person who invests in a corporation by buying stock and is a partial owner

Business judgment rule

A principle that protects corporate officers and directors from liability when they have made an unwise decision that results in a loss to the corporation, but they have acted in good faith, had no private financial self-interest, and used diligence to acquire the best information related to the decision

S corporation

A unique government creation/corporation that looks like a corporation but is taxed like sole proprietorships and partnerships;

Non-Profit Corporation

An organization that does not pay taxes and does not exist to make a profit.

political

Corporations are entitled to full constitutional protection for ______ speech

Which of the following will help a venture capital firm to exit from the corporation with a substantial return?

Exit strategy

Officers

Individuals appointed by the board of directors to carry out the directors' set course of direction through management of the day-to-day operations of the business

Directors

Individuals responsible for oversight and management of the corporation's course of direction

The "S" in an S corporation references a subchapter in the: ______.

Internal Revenue Code

Revised Model Business Corporation Act (RMBCA)

Model act drafted by the American Law Institute and adopted by over half of the states as a template for compiling their own statutes governing corporations.

Which of the following is the most common category of a corporation?

Privately held corporation

Piercing the corporate veil

The action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations.

C Corporation

The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders; they are double taxed; taxation occurs at both corporate level, when incomes earned, and the individual level, when its distributed as a dividend (profit) to shareholders

Corporate veil

The personal liability shield; the corporate protection that entitles shareholders, directors, and officers to limited liability; can be pierced for improper conduct of business or fraud.

Alien Corporation

a corporation chartered by a foreign government and conducting business in the United States

foreign corporation

a corporation in any state in which it does business except the one in which it is incorporated

domestic corporation

a corporation in the state in which it is incorporated

public corporation

a corporation whose stock anyone may buy, sell, or trade

unanimous consent resolution

a single document signed by each principal to dispose of necessary tasks such as electing directors or issuing stock

articles of incorporation

a written legal document that defines ownership and operating procedures and conditions for the business

A corporation's promoter _ usually set forth director removal provisions.

bylaws

Failing to read reports and financial records are examples of a director neglecting to properly oversee the corporation, and thus may result in a breach of the duty of _

care

a _ is made up of a small group of board members who work to oversee or perform a given task and then report back to the full board.

committee

venture capital firms

companies that invest in start-up businesses with high growth potential in exchange for a share of ownership

Business corporation law

covers such matters as the structure of the corporation, oversight of the activity of the corporation's managers, rights of the principals in the case of the sale of assets or ownership interests, annual reporting requirements, and other issues that affect the internal rules of the business venture.

Which of the following has been a popular state in which a business can incorporate?

delaware

Not consulting an attorney, a CPA, or other professionals would be an example of a director failing to act with:

diligence

are responsible for the oversight and management of a corporation's course of direction.

directors

Privately held corporation

does not allow investment by the general public and normally has fewer stockholders

Generally speaking, the president has __ authority to bind the corporation in transactions involving the normal course of business.

implied

Officers, directors, and controlling shareholders are known as: ______

insider

Federal

laws regulate the offering or trading of ownership interests to the public and set certain standards for internal governance for some companies

A vice president of a corporation is generally thought to have some __ authority to bind a corporation.

limited implied

A special meeting of the directors can occur so long as a ___ is followed in accordance with the corporation's bylaws.

notification procedure

Professional Corporation

ownership is restricted to a particular profession licensed in a certain field

The Dallas Transit System, Inc. would be an example of a(n)______ corporation

public

The New York Stock Exchange is an example of a __ stock exchange

public

The president of a corporation may normally hire and fire the following:

secetary

Articles of incorporation are usually filed with the: ______

secretary of state's office

Which of the following elects directors of a corporation?

shareholder

S corporations are taxed at the: ______.

shareholder level.

The owners of a corporation are called:

shareholders

Corporations are created through a(n) __ law filing and formation is governed by state statute

state

bylaws

states leftover issues needed to be overseen by the principal