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30 Cards in this Set
- Front
- Back
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What 3 things are needed to form a corporation? |
1) Incorporator(s) 2) Articles of incorporation 3) Delivery of articles to the Secretary of State |
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What do incorporators do? |
1) Execute the articles 2) Deliver it to the secretary of state |
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What 6 things do the articles need to have? |
1) Corporate name 2) Name and address of each incorporator 3) Name and address of each initial director 4) Name of registered agent(company's legal representative) and address of the registered office 5) Statement of interest, unless presumed by state 6) Capital structure (stock) |
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What are the 3 types of stock? |
1) Authorized stock- maximum number of shares the corporation can sell 2) Issued stock- number of shares the corporation actually sells 3) Outstanding stock- shares that have been issued and not reacquired |
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De jure corporation |
Corporation by law, what is formed after the Secretary of State accepts the articles for filing |
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Which state law applies to a corporation? |
The state in which the corporation was formed |
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How can you form a corporation and avoid paying income tax at the corporate level? |
Form a S corp |
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What are the 3 requirements of a S Corporation? |
- no more than 100 SHs - all SHs must be human and USCs or US residents - there is 1 class of stock that is not publicly traded |
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Who has limited liability in a corporation |
Directors, officers, SHs SHs are generally only liable for the price of their stock |
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Who is liable for the what the corporation does? |
The corporation itself, even if there is only one SH |
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What are the 3 requirements of a De Facto Corporation? If found to be a DFC, what will the entity be treated as? |
1) There is a relevant incorporation statute 2) The parties made a good faith, colorable attempt to comply with it, and 3) Some exercise of corporate privileges (acting like we have a corporation It will be treated as a corporation for all purposes except in an action by the state |
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What is a de facto corporation? |
The proprietors failed to form a de jure corporation and must be unaware of the failure to assert 2 doctrines: De Facto Corporation and Corporation by Estoppel (^ to treat the partnership as a corporation) - proprietors are personally liable for what the business does (b/c what they have instead is a partnership |
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Incorporators put together the proper documents and mail them to the Secretary of Sate. Unbeknownst to them, the documents are lost in the mail. In the meantime, the business is being operated as a corporation, and enters a contract. Are the SHs personally liable on the contract? |
Yes, the shareholders will be personally liable on the contract unless the court applies De Facto Corporation doctrine. |
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What is corporation by estoppel? *ONLY APPLIES TO CONTRACTS CASES* |
One who treats a business as a corporation may be estopped from denying that it is a corporation. - also use to prevent an improperly-formed "corporation" from avoiding liability by saying it was not properly formed |
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You do business with people who hold their business out to be a corporation. They think it's a corporation and you do too. Turns out it's not a corporation. You sue the proprietors individually. Will you win? |
Under the doctrine of corporation by estoppel, you will not win against the proprietors because you are estopped to deny that the business was a corporation. |
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Where do De Facto Corporation and Corporation by Estoppel apply? |
Abolished in many states |
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Are bylaws a condition precedent to forming a corporation? |
No. They are an internal document (do not need to file with the state) |
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Who adopts the initial bylaws? |
The Board of Directors at the organization meeting |
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Who can amend or repeal the bylaws? |
1) SHs can always 2) In many states the BoD also can |
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If bylaws conflict with the articles, which controls? |
The articles, b/c the articles are the contract with the state |
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Who is a promoter? |
A person acting on behalf of a corporation not yet formed, who might enter into a contract on the not-yet-formed-corporation's behalf |
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Is a corporation liable on a pre-incorporation contract? |
It is not liable for the contract until it adopts the contract |
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On 1/10 P-promoter for a not-yet-formed-corp. leased a building from Don Draper and signs the lease "Apple Cars, Inc." On 2/20 Apple Cars, Inc. is formed. a. Is the corporation liable on the contract? b. Will P-promoter be liable? |
a. Yes, if it adopted the contract through express or implied action. Adoption makes the corp. liable to the promoter, but the promoter is still liable until novation b. Yes, if the corp. is never formed AND even if the corp. is formed and adopts the lease b/c there was no novation |
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2 ways to adopt a contract: |
1) Express: board takes an action adopting the contract (unanimous written agreement or at a meeting that satisfies quorum & voting requirements) 2) Implied- the corporation accepts a benefit of the contract |
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What is a novation? |
An agreement of the promoter, the corporation, and the other contracting party that the corporation replaces the promoter under the contract |
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When is the promoter liable on pre-incorporation contracts? |
Unless the contract clearly says otherwise, the promoter is liable on pre-incorporation contracts until there is a novation. *when there is adoption of the contract by the corporation, both the corporation and P are liable on the contract |
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What must a foreign corporation do to transact business in this state? |
1) Qualify 2) Pay prescribed fees |
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What is considered "transacting business?" |
Regular course of intrastate business activity NOT occasional/sporadic activity or simply owning property in the state |
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How does a foreign corp. qualify? |
For a foreign corporation to qualify to transact business it must: 1) get a certificate of authority from the Secretary of State. 2) It gives information from its articles and proves good standing in its home state. 3) It must also have a registered agent in this state and pay fees. |
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What happens if a foreign corporation transacts business w/o qualifying? |
1) civil fine, and 2) it cannot sue in this state (but it can still be sued and defend) -->Once the corporation qualified and pays back fees and fines, it can then sue here |
