Chapter 18 - Corporations
S Corporation
A close corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as this. If a corporation has this status, it can avoid the imposition of incomes taxes at the corporate level while retaining many of the advantages of a corporation, particularly limited liability.
Crowdfunding
A cooperative activity in which people network and pool funds and other resources via the internet to assist a cause or invest in a venture.
Public Corporation
A corporation formed by the government to meet some political or governmental purpose. Cities and towns that incorporate are common examples.
Alien Corporation
A corporation formed in another country but doing business in the United States.
Foreign Corporation
A corporation formed in one state but doing business in another is referred to in the second state as this.
Domestic Corporation
A corporation is referred to this by its home state (the state in which it incorporates).
Outside Director
A director who does not hold a management position.
Inside Director
A director who is also an officer of the corporation.
Benefit Corporation
A for-profit corporation that seeks to have a material positive impact on society and the environment.
Dividend
A form of retained earnings. When a corporation earns profits, it can either pass them on to shareholders in the form of these or retain them as profits.
Corporation
A legal entity created and recognized by state law.
Stock
Also called equity securities. represent the purchase of ownership in the business firm.
Voting Trust
An agreement (a trust contract) under which a shareholder assigns the right to vote his or her shares to a trustee, usually for a specified period of time.
Preferred Stock
An equity security with preferences. Usually, this means that holders of this have priority over holders of common stock as to dividends and payment on dissolution of the corporation.
Publicly Held Corporation
Any corporation whose shares are publicly traded in a securities market, such as the New York Stock Exchange or the NASDAQ.
Venture Capital
Capital provided to new businesses by professional outside investors, typically groups of wealthy investors and securities firms.
Business Judgement Rule
Directors and officers are expected to exercise due care and to use their best judgement in guiding corporate management, but they are not insurers of business success. Under this rule, a corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgement and bad business decisions.
Shareholder's Derivative Suit
If the corporate directors fail to bring a lawsuit, shareholders can do so "derivatively" in what is known as this.
Retained Earnings
If these are invested properly, they will yield higher corporate profits in the future.
Stock Certificate
In the past, corporations commonly issued these that evidenced ownership of a specified number of shares in the corporation.
Ultra Vires
Meant "beyond the power." In corporate law, acts of a corporation that are beyond its express or implied powers are this.
Shareholder Agreement
One way the close corporation can effect restrictions on transferability is by selling them out in this. This can also provide for proportional control when one of the original shareholders dies.
Close Corporation
One whose shares are held by relatively few persons, often members of a family.
Private Equity Capital
Private equity firms pool funds from wealthy investors and use this to invest in existing corporations. Usually, these buy an entire corporation and them reorganize it.
Bond
Represent the borrowing of funds. They are issued by business firms and by governments at all levels as evidence of funds they are borrowing from investors.
Stock Warrant
Rights given by a company to buy stock at a stated price by a specified state. Usually, when preemptive rights exist and a corporation is issuing additional shares, it gives its shareholders these. They're often publicly traded on securities exchanges.
Holding Company
Some U.S. corporations use these to reduce or defer their U.S. income taxes. Sometimes referred to as a parent company, a company whose business activity consists of holding shares in another company.
Securities
Stocks and bonds - evidence an ownership interest in a corporation or a promise or repayment of debt by a corporation.
Proxy
The agent's formal authorization to vote the shares. These materials are sent to all shareholders before shareholders' meetings.
Piercing the Corporate Veil
The courts will ignore the corporate structure by this and exposing the shareholders to personal liability.
Quorum
The minimum number of members of a body of official or other group who must be present for business to be validly transacted.
Articles of Incorporation
The primary document needed to incorporate a business.
Common Stock
The true ownership of a corporation is represented by this. This provides an interest in the corporation with regard to control, earnings, and net assets.
Bylaws
Usually, the most important function is the adoption of these, which are the internal rules of management for the corporation.
Watered Stock
When a corporation issues shares for less than their fair market value, the shares are referred to as this. Usually, the shareholder who received this must pay the difference to the corporation (the shareholder is personally liable).
Commingled
When personal and corporate interests are mixed together, to such an extent that the corporation has no separate identity.
Preemptive Rights
With these, a shareholder receives a preference over all other purchases to subscribe to or purchase a prorated share of a new issue of stock. Generally, these must be exercised within a specific time period (usually, thirty days).