Business Law: Chapter 39

Ultra vires

"beyond the power." In corporate law, acts of corporation that are beyond its express or implied powers are ultra vires acts

S corporation

A closely held corporation that meets the qualifying requirements specified in the Subchapter S of the Internal Revenue Code. It can avoid the imposition of income taxes at the corporate level while retaining many of the advantages of a corporation, particularly limited liability

Holding company

A company whose business activity consists of holding shares in another company

Public corporation

A corporation formed by the government to meet some political or governmental purpose

Alien corporation

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

Foreign corporation

A corporation formed in one state but doing business in another is referred to in the second state as a foreign corporation

Domestic corporation

A corporation is referred to as a domestic corporation by its home state (the state in which it incorporates)

Closely held corporation

A corporation whose shares are not publicly traded and all shares are held often by family members or a small group of persons personally known to each other

Publicly held corporation

A corporation whose shares are publicly traded in a securities market, such as the New York Stock Exchange or NASDAQ

Preferred stock

An equity security with preferences

Bond indenture

Because debt financing represents a legal obligation on the part of the corporation, various features and terms of a particular bond issue are specified in a specific lending agreement

Venture capital

Capital provided to new business ventures by professional, outside investors

Securities

Corporations are financed by the issuance and sale of these, which include stocks and bonds

Bylaws

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

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 pierce the corporate veil, exposing the shareholders to personal liability

Private equity capital

Private equity firms obtain their capital from wealth investors in private markets

Common stock

Provides a proportionate intersect in the corporation with regard to control, earnings, and net assets

Bonds

Represent the borrowing of funds by firms (and governments

Stocks

Represent the purchase of ownership in the business firm

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 of the individual or group who actually controlled the corporation

Articles of incorporation

The primary document needed to incorporate a business

Retained earnings

When a corporation earns profits, it can either distribute them to its shareholders in the form of dividends or retain the profits. These retained earnings, if invested properly, will yield higher corporate profits in the future and thus cause the price of the company's stock to rise

Commingled

When personal and corporate interests are mixed together to the extent that the corporation has no separate identity