Chapter 36

fictitious legal entity created according to statutory requirements (most dominant) (owners are shareholders)

state statutes that regulate the formation operation and dissolution of corporations

treated as artificial person can sue be sued enter into contracts hold titles to transfer property and be found civilly and criminally liable for law violations

share holders are only liable to the extent of their capital contributions and no personal liability

free transferable

corps have no end can be voluntarily terminated by shareholder and can be involuntarily terminated by creditors

consists of Board of Directors and corporate officers.

double taxation

government owned formed to meet as specific government/political purpose USPS water, schools

owned by non governmental private parties

• Private corps are for profit and
• corps that are charitable educational purpose are non for profit and cannot give dividends cash to member and directors.

many share holders and they rarely participate in the management of corps

few shareholders owned by family/friends involved in management decisions (shareholders)

• select a state (only one small in state do bus and large in state w/ best laws)
• select a name (not trademarked and words used must correlate with business)
• Articles of incorps: Incorporators to sign the articles of incorporation

• name of corp
• # of shareholders
• address of corps office and registered agent
• name and address of each incorporator

can be done w/o shareholder approval

begins when articles of incorp are filed with secretary of state (conclusive proof)

the state can

clause allows the corp to engage in any activity permitted by law

rules adopted by board of directors after corp is incorp

• equity securities (stocks)
• and Debt Securities (debentures, bonds, notes)

• Express Powers (given by us/state const, stat/fed rules and articles of incorp/bylaws
• Implied Powers (allows corp to exceed its expressed powers in order to accomplish its corp purpose (incidental powers) )
• Ultra Vires Act (act by corp that is beyond expressed/implied powers)

• shareholders can sue for injunction to prevent the corp engaging in act (if sue must use own money and earnings go to company)
• the corp or shareholders can sue board of directors and officers that cause the damages
• attorney general of state can dissolve corp take action

• voluntary dissolution (can be dissolved if no business is done or no shares issued, dissolved by vote of majority must file articles of dissolution)
• administrative dissolution
• judicial dissolution

• failed to file annual report
• failed for 60 days to maintain registered agent in state
• did not pay franchise fee
• period of duration of corp stated in corp articles ended
• *if corp does not cure defaults in 60 days secretary of state issues a certificate of corp default

• is a court proceeding instituted by the state by doing
• -procured its articles of incorp through fraud
• -exceeded/abused authority conferred on it by law
• (committed ultra vires act)

• voluntary dissolution carried out by board of directors
• involuntary a court appointed carries out liquidation/windup

• 1.) expenses of liquidation (lawyers) and creditors
• 2.) preferred shareholders
• 3.) common stock holders

promoter someone who promotes the corporation until novation (meet up w/ 3rd & promoter of corp to create agreement)