Business Structures Flashcards Preview

Regulation > Business Structures > Flashcards

Flashcards in Business Structures Deck (50)
Loading flashcards...
31

What items are required in a corporations Articles of Incorporation?

Name; purpose; powers of Corporation

Name of registered agent & incorporators

Stock share classes authorized; par values

Name of corporate officers NOT required

32

What is the biggest disadvantage of a corporation?

Double taxation

33

How are corporations formed by promoters?

Promoter issues prospectus; arranges capital; and is a fiduciary of the corporation.

A promoter may profit from work performed if the corporation is aware of it.

34

When is a corporation liable for pre-incorporation actions taken by a Promoter?

Promoter personally liable unless third party agrees to a novation and releases Promoter
from liability; UNLESS the corporation adopts.

35

In how many states must a corporation incorporate?

Corporations are only incorporated in one state

Become adomestic corp. in that state

Become aforeign corp. in any other state they do business in

36

Describe Common Stock dividends and their rights/liabilities in relation to shareholders/corporations.

Dividends are NOT a shareholder right

Once declared; dividends become a liability to corporation

37

What are key aspects related to the holding of Preferred Stock?

No voting rights

Get first rights to dividends and liquidation

Cumulative Preferred Stock dividends that go undeclared accumulate and Corporation must pay it before issuing dividends to Common Stockholders

Participating Preferred Stock gives shareholder right to dividends in addition to what they get as Preferred Stockholders

38

What aspects are related to all classes of corporate stock?

Valid consideration must be given for shares

Cash; property; or services performed

No promises to pay or perform services

39

What are the key aspects of Treasury Stock?

No Gain/Loss recognized on Treasury stock

Have no voting rights

Can be re-purchased below par

Cannot produce dividends

40

What is a stock subscription and what is required for it to be valid?

An offer to buy shares of stock

Must be accepted by corporation to be valid

Offer cannot be revoked for 6 months

Subscriber becomes liable once accepted

41

When is a corporation liable for torts by employees?

If committed within the normal scope of the employee's job

Even if they were disobeying orders

Per respondeat superior

42

What are the key aspects of a corporate officer?

Appointed by the Board of Directors

Act as Agents

Owe a fiduciary duty to the corporation

Can have legal fees paid by corporation for defense in lawsuit brought on them from carrying out their normal duties (exception- suit brought against officers by shareholders)

43

What are the key aspects of a corporation's board of directors (BOD)?

Elected by shareholders

Owe fiduciary duty to corporation

Must act in good faith to avoid being liable for bad judgment

Good faith is NOT a defense for negligence

44

What is Ultra Vires?

Corporation management acting beyond what the Articles of Incorporation allow

Shareholders can sue for Ultra Vires

45

When is inspecting Board minutes the right of a shareholder?

Shareholders can inspect Board minutes and records only if request is in good faith

46

Who must approve mergers and consolidations?

Boards must approve

Shareholders must approve by Majority

Disapproving shareholders can get an appraisal and get their stock back at current market price

Merger does NOT need creditor approval

47

What characterizes a Professional Corporation?

Shares owned only by licensed professionals (CPAs; attorneys; etc.)

Limited Liability for debts

Personal Liability for negligence

48

Who can and cannot own an S-Corporation?

CAN be owned by Estates; Trusts; and Individuals

CANNOT be owned by a C-Corporation

49

What is the primary advantage of an S-Corporation?

Avoidance of Double Taxation

50

What are the disadvantages of an S-Corporation?

No more than 100 shareholders allowed

One class of stock allowed

Shareholders must be US Citizens/Residents