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Corporations

Wyoming

QuestionAnswer
Corporation -A legal entity distinct from its owners --WY: because it's a distinct legal entity, a corp has the pwr to be a partner in a partnership, a member in a LLC, etc.
Characteristics of Corporations -Limited Liability for Owners, Directors, and Officers: Only corp itself can be held liable for corporate obligations --WY: Corp can be held liable for torts of persons when done within scope of employment (respondeat Superior)
Characteristics of Corporation Cont... -Centralized Management: brd of directors -Free Transferability of Ownership: SH can sell his shares to whomever he wants (can be restricted upon agrmt of SHs) -Continuity of Life -Taxation: C Corp=Double tax; S Corp=No double tax
Sole Proprietorship -a form of business in which one person owns all of the assets of the buiness -doesn't exist as an entity apart from its owner -owner is personally liable for business's obligations and business "entity" cannot continue beyond life of owner
Partnership -similiar to sole proprietorship except that there are at least 2 owners in partnership -generally not legal entities -partners personally liable for obligations -managment not centralized -ownership can't be transferred w/out consent of partner
Limited Partnership -a partnership that provides for limited liability of some investors (called "limited partners")-otherwise similar to partnerships -formed only by compliance w/ limited liability partnership statute -at least 1 general partner, full liability for debts
Limited Liability Partnership -designed to offer the limited liability of a corp and the flow-thrugh tax advantages of a partnership -formed only by filing appropriate docs w/ state, otherwise very flexible -owners may choose management, free transferability, etc
Constitutional Characteristics of A Corporation -"Person" -"Citizen" -"Resident" -"Domicile"
"Person" -corp entitled to DP of law & EP of law -corp entitled to raise atty-client priv, can't invoke priv against self-incrim -Unless context of stat or const'l provision req's application only to NATURAL person, a corp entitled to protection & rights affored
"Citizen" -A corp isn ot a citizen for purposes of the Privileges and Immunities Clause of Const. -Therefore, state-imposed restrictions on a foreign corps activities are valid if they are a reasonable exercise of state's police pwr
Foreign Corp -one conducting business in a particular state but not incorporated under that state's laws
"Citizen": Federal Diversity Jurisdiction -by fed stat a corp deemed to be a citizen of any state by which it has been incorporated AND of state where it has its principal place of business --Principal place of Bus= where corps high level officers direct, control, & coordinate the corps activity
"Resident" -a corp may be a resident of the state where it is incorporated, where it is doing business, & perhaps where it is merely qualified to do business
"Domicile" -a corps domicile is the state of its incorporation -a corp may have multiple domiciles, like residence, for some purposes, particularly for state taxation if the corp has its principal place of bus outside the state of its incorporation
Formation and Status of the Corp: Created Under Statute -created by complying w/ state corp law -most based on Revised Model Business Corp Act
WYOMING: Created Under Statute -Corporations are governed by the Wyoming Business Corporation Act (WBCA) which is based on the RMBCA -Thus, follow RMBCA except as specifically noted
Formation Terminology De Jure=formed in accordance w/ all applicable law: owners generally not personally liable for corp obligations -De Facto Corp Doctrine: not followed all applicable laws, but a good faith attempt
De Jure Corporation -incorporators (person who undertakes to form a corp) MUST file a document called the "articles of incorporation" w/ the state & MUST pay whaterver fees the state directs
Incorporator -a person who signs the articles of incorporation -Under RMBCA: only 1 incorporator is necessary, but may be more than 1. -may be natural persons or artificial entities (most states)
Contents of Articles: Mandatory Provisions -name of corp ("corp" "incorp" "co" "limited")cant be sim to name of another bus entity -number of sharescorp is auth'd to issue -st address of corp intial registered office & name of corp intial registered agent -name & address of each incorporator
Contents of Articles: Optional Provisions -articles may set forth any other provisions not inconsistent w/ law regarding managing the bus & regulating affaris of corp -RMBCA includes a # of features taht a corp need not adopt, but if they are they must be provided for in articles
Duration? -presupmtion of perpetual existence (it can last forever)
Conents of Articles: Purpose -Generally must have a statement of purpose -Some states, genearl purpose is presumed and the articles need not say anthing about the corps purpose -Ultra Vires=corp undertakes activities beyond the scope of its stated purpose
Ultra Vires -Common Law: void -Modern and RMBCA: ultra vires acts are enforceable
Ultra Vires Act May be raised -3 situations: 1)a SH may sue corp to enjoin a proposed UV act 2)corp may sue a officer/director for dmgs arising from commission of a UV act authorized by officer/director & 3)state may bring action against corp to have it dissolved for committing UV
Ultra Vires continued... -if an officer/director is found liable for committin an UV act, the officer/director may be held personally liable for damages -UV act will be enjoined only if equitable to do so (innocent 3rd party)
Ultra Vires Act: Charitable Donations -Common Law=outside scope of any bus purpose -Modern and RMBCA: allow corps to make charitable donations
Ultra Vires Act: Loans -Common Law: corp did not have pwr to make loans to EEs, officers or directors -Modern and RMBCA: allow such loans
WYOMING: Loans -corp may not lend money to or guarantee an obligation of a director unless: 1)loan/guarantee is auth by SHs or 2)corps Brd of Directors determines that loan/guarantee benefits corp & approves either specific loan or general plan auth loans or guarantee
Ultra Vires Act: Initial Disclosures -articles may provde the names & addresses of the person who will serve as the corps initial directors until new directors are elected
After Articles Filed -initial directors hold organizational meeting to adopt bylaws, elect officers, & transact other business -if articles don't name initial director, the incorporators call organizational meeting
Bylaws -may contain any provision for managing corp (not inconsistent with law/articles of incorp) -adopted by directors, but can usually be modified/repealed by EITHER directors or SHs (can reserve this pwr exclusively with SHs)
So...What does it take to form a Corp??? 1.People:incorporators(execute Articles & Deliver to Sec of State) 2.Paper-articles of Incorp 3.Act: incorporators have notarized articles delivered to Sec of State & pay req'd fees. --Now have De Jure Corp --Brd of directors hold organizational meeti
Captial Structure -art must incl: auth stock, # of shares per class & info on voting rights & preferences of each class -Auth Stock=max # of shares corp can sell -Issued Stock= # of shares corp actually sells -Outstanding stock=shares that have been issued & not reacqui
De Facto Corporation -failed to form de jure corp, so they will be personally liable for what the bus does
Common Law Req'ts of De Facto Corp -must be a corp law under which org could've been legally incorp (i.e. RMBCA) -must be colorable compliance w/ incorporation laws. Colorable=good faith attempt to comply w/ state law -corp must act like a corp
Limitations on De Facto Doctrine -RMBCA provides that persons who purport to act as or on behalf of a corp knowing that there was no incorporation are liable for all liabilities created in so acting -persons who do not know that there is no incorporation will not be liable
Corporation by Estoppel -persons who treat entity as a corp will be estopped from later claiming that entity wasn't a corp -can be applied either to an outsider seeking to avoid liability on a K w/ purported corp or to purported corp seeking to avoid liability on a K w/ outside
Piercing the Corporate Veil (PCV) -crts hold Shs, officers or directors personally liable for corporate obligations becasue the corp is abusing the legislative privilege by conducting business in the corp form
Elements Justifying Piercing the Corporate Veil 1)when corp fomalities are ignored 2)when the corp is inadequately capitalized at the outset; and 3) to prevent fraud
PCV: Ignoring Corporate Formalities -If a corp is the "alter ego" "agent" or "instrumentality" of a sole proprietor or of another corp, its separate identity may be disregarded -Alter Ego: Shs treat assets of corp as their own
PCV: Inadequate Capitalization -SHs personally liable for their corp obliagations if at incorporation they fail to provide adequate capitalization -SHs must "put at the risk of the bus unencumbered capital reasonably adequate for its prospective liabilites"
Inadequate Capitalization: Factors to Consider -scope of the contemplated operations of the corp -potential liabiliity foreseeable form the operations --Parent-subsidiary corp: test-whether the subsidiary may reasonably expect to achieve independent financial stability from its operation
PCV: Avoidance of Existing Obligations, Fraud or Evastion of Statutory Provisions -corp entity will be disregarded at any time it is necessary to prevent fraud or to prevent an individual SH from suing the corp entity to avoid his existing personal obligations
Debt Securities -represents a creditor-debtor relationship w/ corp whereby corp has borrowed funds from "outside creditor" and promises to repay the creditor -debt security holder has NO OWNERSHIP INTEREST in the corp
Equity Securities -an instrum representing an investment in the corp whereby the holder becomes a PART OWNER of the business -equity securities are shares of the corp and the investor is called a Shareholder
WY: Classification of Shares -brd may classify unissued shares inot classes or series within a class, or may reclassify unissed shares of a class or series into one or more classes or series w/in a class w/out SH approval
Created by: sachav3