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chapter 25 notes

by: Llamaq Bhuriwala

chapter 25 notes LEB 320F

Llamaq Bhuriwala

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About this Document

it covers the whole chapter
Brad Gold
court cases
75 ?




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This 2 page Bundle was uploaded by Llamaq Bhuriwala on Monday April 25, 2016. The Bundle belongs to LEB 320F at University of Texas at Austin taught by Brad Gold in Spring 2016. Since its upload, it has received 24 views. For similar materials see LEB in Business Law at University of Texas at Austin.


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Date Created: 04/25/16
- Chapter 25: Corporation: Nature, Formation, and Power • Ordinarily, the corporate veil is pierced only under exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice - States have sensibly, given shareholders of small corporations roughly the same flexibility to establish the management structure of their firm that they would have if the firm were a partnership or a limited liability company. • Most important in business is to protect yourself; it provides you with substantial information of what can go wrong • Liability protection vs taxation; the business is liable • C corporation- (1) Corporate entity protects its employees from personal liability by paying their fees - It pays corporate taxes - It pays taxes on their income - Also paying double taxation- the corporation has to pay taxes and the employees have to pay taxes also; taxed at the company level and income • S Corp- No double taxation in this Corp; only the shareholder of the business are taxed - Doesn’t mean the taxes are less; don’t assume the double taxation is more - Government restricts a little slightly for S-Corp - Percentage paid out reflects the percentage ownership • LLC Corp- Limited Liability company - Taxed like a socoruruce - Part like a partnership and it minimizes business entity formalities - Reducing formality requirements also reduces liability protection Ex: Mom and Pop shop- LLC- running the business but no formalities - Taxed as a partnership; most investors don’t want liabilities for tax purposes • Sole proprietorship- No liability protection • For either a C-Corp or Delaware Corporation - 1 person can own all the stock, sole member of director, be the only manage or the employee - When you state your purpose; that’s your liability protection - When you create your entity, you create your stock • Why Delaware Corporation? - (1) The contract filling fees in Delaware are really low - (2) Part of Delaware’s economy is attracting business; Very comprehensive laws- to deal with any business issue • Main ways of messing it up- can be done by Corporate Veils Piercing - Companies can create walls to protect them from taxes; to keep personal and financial separate - If you mingle personal and your business entities then you are piercing the Veil of Corporation - Once the veil is pierced, your liable protection is damaged - Ex: using Company card to use for Personal reasons rather than the business ones • Non-Profit Corporation - 25 • 501c3 • A corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. • A nonprofit corporation doesn't pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives.


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