Business Law Chapter 39

Quixotic Company claims to be a corporation but it is not. Rachel signs a contract with Quixotic that is not performed. In Rachel's suit against Quixotic, a court will likely recognize the firm as

A CORPORATION BY ESTOPPEL.

Mari buys 500 shares of common stock in National Livestock Traders, Inc. As a shareholder of record, Mari owns a proportionate interest in terms of

control, earnings, AND net assets.

Start-Up Corporation substantially complies with all conditions precedent to incorporation. Start-Up has

de JURE existence.

Convenience Mart, Inc., is a closely held corporation. Convenience Mart is

generally allowed to RESTRICT THE TRANSFER of its stock.

Discount Factory Outlets, Inc., issues bonds. Bonds

have maturity dates.

To qualify as a professional corporation, Medical Clinic, P.C.,

must be a CORPORATION formed by professionals.

Ruby Red Corporation has six shareholders, four of whom are members of the same family. All of Ruby's shareholders agree in writing to operate without shareholders' meetings. Under the Revised Model Business Corporation Act, this most likely warrants

no penalties or sanctions.

Omega Corporation makes and markets digital timers, clocks, and related products. Like other business corporations, Omega issues securities to

obtain financing.

Boutique Corporation would like to change its corporate status to avoid income taxes at the corporate level. To qualify, the shareholders must not be

partnerships.

Lita is a holder of preferred stock in Mighty Clean Detergents, Inc. Lita has priority over holders of Mighty common stock as to

payments of dividends.

Like the bylaws of other corporations, the bylaws of Farmland Equipment, Inc.,

were ADOPTED at its first organizational meeting.

Hailey and Ike hold the first organizational meeting of Java Kiosk Corporation. Probably the most important function of this meeting is

ADOPTING Java's bylaws.

Financial Innovations, Inc., issues bonds, which are also known as

DEBT securities.

Stan incorporates his scientific products business as Tech Precision Supply, Inc. This firm could have perpetual existence in

MOST states.

Fact Pattern 39-1A. Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder. With respect to Mountaintop and Niles, liability for this crime most likely rests with

Mountaintop AND Niles.

Wild & Scenic River Tours, Inc., is a corporation. Wild & Scenic has the implied power to

PERFORM ALL ACTS REASONABLY appropriate and necessary to accomplish its corporate purposes.

Suki is a registered agent for Trans-state Trucking, Inc. (TTI), which incorporated in Utah. As a registered agent, Suki

RECEIVES legal documents on behalf of TTI.

Sullivan and Taylor want to form a corporation to provide catering services. The first step in the incorporation procedure is to

SELECT A STATE in which to incorporate.

Fact Pattern 39-1B. Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors. Later, Bertram dies. With respect to the stock transfer restriction agreement, Bertram's death most likely

TRIGGERS the division provision.

Miracle Vacuum, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufacturing and distributing a newly patented appliance, (2) is owned by five shareholders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Miracle is

a CLOSELY HELD corporation.

Fact Pattern 39-1B. Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors. A reasonable purpose for a stock transfer restriction in a closely held corporation, like the agreement between Bertram, Claudia, and Dynah, is

a DESIRE TO LIMIT the participation of outsiders in the firm.

Gelato Ice, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Gelato is properly referred to as

a FOREIGN corporation.

A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate for a purpose other than making a profit. SDC is

a NONPROFIT corporation.

Niki owns O.K. Oil Corporation. Niki uses O.K.'s funds to pay her personal expenses, creates Pure Fuel Corporation to engage in the same business as O.K., transfers O.K.'s assets to Pure Fuel, and petitions O.K. into bankruptcy. This most likely warrants

a PIERCE of the corporate veil.

The abbreviation "P.A." in the name "Painless Dental, P.A." means that this organization is

a PROFESSIONAL association.

Rapid Pest Control itself out to others as being a corporation but makes no attempt to incorporate. Ponce signs a contract with Rapid Pest Control that is not performed. Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is

a corporation by estoppel.

Stable Hydraulics Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Stable is most likely

a de JURE corporation.

The shares of Capital Corporation are publicly traded in securities markets. Capital Corporation is

a publicLY HELD corporation.

Frida and Gregor want to market a new line of fishing gear. To avoid income taxes at the corporate level, they should form

an S corporation.

Felicity and Gideon want to form and do business as Home Healthcare Corporation. A corporation is

an artificial person.

Dag and Elke are holders of common stock in Fragrances, Inc. (FI). Like other holders of common stock, they have a residual position in the overall financial structure of FI, because they

are the last to receive payment for their investment.

Ivy and Justin want to form and do business as Kayak Adventures Corporation. A corporation can be owned by

artificial OR natural persons.

Eager Beaver Corporation fails to hold a meeting to adopt bylaws. Under this circumstance, Eager Beaver will still be treated as a legal corporation in those states that recognize the common law doctrine of

de FACTO corporation.

Caffeine Café, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of

each of the corporation's SHAREHOLDERS.

Digitech is a foreign corporation, which means that Digitech

may be REQUIRED TO OBTAIN a certificate of authority to do business.

Jim and Kiley are architects and members of J&K, P.C., a professional corporation. Jim supervises Luc, an employee of the firm. As a member, Jim

may be personally liable for MALPRACTICE committed by LUC.

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a legal entity created and recognized by

state law.

Fact Pattern 39-1A. Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder. Liability for Niles's act most likely rests with Orson to

the AMOUNT of Orson's investment in the firm.

Skyla and Terry want to form and do business as Unique Boutique Corporation. Most statutes governing the formation and use of corporations are guided by

the Revised Model Business Corporation Act.

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen's officers. As with other corporations, the responsibility for the overall management of Kleen rests with

the board of directors.