Corporations

Question 1

Corporation Formation

Answer 1

(1) Incorporator
(2) Paper
(3) Act

Question 2

Incorporator

Answer 2

Person or entity who executes and delivers the articles of corporation

Question 3

Paper

Answer 3

(1) name with Inc
(2) incorporator info
(3) registered agent info
(3) stock, its levels and rights

Question 4

Act

Answer 4

notarize the paper and deliver to secretary of state

Question 5

de jure corporation

Answer 5

the corporation legally exists upon the filing and SOS acceptance for filing of the articles of incorporaiton.

Question 6

Complete the Organization of the Corproation

Answer 6

Board of Directors hold meeting to
(1) adopt initial bylaws
(2) appoint officers

Question 7

If Articles of Incorporation and Bylaws conflict

Answer 7

The Articles govern

Question 8

Bylaws can be amended

Answer 8

by the board or the shareholders

Question 9

Internal Affairs Doctrine

Answer 9

the duties of the corporate people are governed by the laws of the state of incroporation

Question 10

Entity Status

Answer 10

it is a legal person
can contribute to charity, sue, be sued

Question 11

B-Corp

Answer 11

formed for profit but formed for a social policy benefit
the articles must say that it is a benefit corproation, files areport for the mission,

Question 12

Double Taxation

Answer 12

corporation pays income tax, and the shareholders pay income tax

Question 13

S-Corp

Answer 13

subchater S of the IRS code,
does not pay federal income tax at the entity level.
no more than 100 shareholders, no entity shareholders, all be U.S. citizens
1 class of stock that is not publicly traded

Question 14

C-Corp

Answer 14

pays federal income

Question 15

Limited Liability

Answer 15

S/H not personally liability for any debts
Officers/Board not personally liable
Corporation itself is liable for the debts

Question 16

Defective Incorporation

Answer 16

thought corporation formed, but failed so liable because only formed a partnership
Except (1) de facto corporation (2) corporation by estoppel relieves personal liability

Question 17

De facto corporation doctrine

Answer 17

(1) unaware of failure to form a de jure corporation
(2) relevant incorporation statute, all states have this
(3) good faith, colorable attempt to comply
(4) exercise of corporate privileges like a corporation

the business is treated as a corporation for contract and tort purposes except in a pro warranto action by the state.

Question 18

Corporation by Estoppel

Answer 18

applies only to contracts when a party treats the corporation as a corporation and then sues saying it is not a corporation, estopped from saying that because treated as a corporation

Question 19

Pre-Incorporation Contracts

Answer 19

Corporation, not liable unless expressly or impliedly adopt a promoters contract
Promoter, is liable until express or implied novation (even if the corporation is formed and adopts)

Question 20

Express Adoption

Answer 20

board takes action adopting the K

Question 21

Implied Adoption

Answer 21

accepted benefits of the K

Question 22

Express Novation

Question 23

Implied Novation

Question 24

Foreign Corporation

Answer 24

corp. transacting business in another state or foreign country
transacting business means the regular course of intrastate business activity, includes systematic business there not just owning property or sporadic deals there.

Question 25

Foreign Corporation Qualifying to do business

Answer 25

must get a certificate of authority by registering with SOS, providing articles, proving good standing, registered agent and office

Question 26

Consequences of foreign corporation qualifying

Answer 26

civil fine cannot asset a claim in the state can be sued and defend it must pay the fines and meet the requirements to assert a claim

Question 27

Issuance of Stock

Answer 27

Pre-incorporation

Question 28

Subscriptions

Answer 28

offers to buy stock from corporation

Question 29

Preincorporation subscriptions

Answer 29

irrevocable for six months unless terms or all subscribers consent to revocation

Question 30

postincorporation subscriptions

Answer 30

revocable until accepted the board of directors accepts the offer

Question 31

Consideration for the Stock

Answer 31

any tangible or intangible property or benefit to the corporation ex. property, services already provided, discharge of debt, services in the future,

Question 32

Stock options for employees

Answer 32

valid

Question 33

par value

Answer 33

the corporate peppercorn the minimum issuance price, can receive more.

Question 34

no par value

Answer 34

no minimum issuance price board can issue stock for any price it sets

Question 35

treasury stock

Answer 35

company issued and reacquired, corp can resell at any price the board wants

Question 36

who determines the value for property or past services for issuance of stock

Answer 36

the board, puts value on the consideration, conclusive if made in good faith

Question 37

watered stock

Answer 37

stock is issued less than its par value board is liable because they knowingly authorized it, X is liable because they had notice of the deficit in the par value, a third party acting in good faith is not liable because they did not have notice of the water.

Question 38

preemptive rights

Answer 38

existing owner of a corp has right to maintain % of ownership by buying new issues of stock for money or equivalent (not property or services) must be expressly in the articles of incorporation for the right, if silent no preemptive right

Question 39

Fiduciary Duties of Directors to Corp

Answer 39

(1) A director must discharge their duties in good faith and with the reasonable belief that their actions are in the best interest of the corporation. (Loyalty) (2) A director must act with the care that a person in like position would reasonably believe appropriate under the circumstances. Note, it is not a prudent person standard. (Care)

Question 40

Duty of Care

Answer 40

Burden on the Plaintiff nonfeasance - director does nothing, lazy, fails to attend or know of company business - liable if nonfeasance caused company harm. (hard to prove because company may have lost money anyways) misfeasance - board makes a decision that hurts the business - causation is clear but subject to the business judgment rule

Question 41

Business Judgement Rule

Answer 41

Presumption that the board did appropriate homework before the action. Court won't inquire to the business decision if it was made in good faith, informed, and having a rational basis.

Question 42

Duty of Loyalty

Answer 42

Conflict of Interest business judgment rule doesn't apply to duty of loyalty because conflict of interest. Burden is on the Defendant Self-Dealing/interested director transaction