Chapter 41 Corporations
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This 3 page Class Notes was uploaded by Mina Riazi on Saturday February 21, 2015. The Class Notes belongs to BLAW703 at Kansas taught by Jamison Shipman in Fall. Since its upload, it has received 117 views. For similar materials see Legal Aspects of Business Orginizations in Business at Kansas.
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Date Created: 02/21/15
Chapter 41 Corporations Classes 1 For pro t corporations a issue stock to shareholders who get dividends and gain from increased market value b Shareholders aren39t concerned in the management of the corporation 2 Not for pro t corporations a Do not issue stock or expect to make a pro t b No income tax c Regulated by the states 3 Governmentowned corporationsperform governmental as well as business functions Types 1 Regular corporation 2 Professional corporation 3 Lowpro t corporation 4 Nonpro t corporationstill liable for other taxes than federal and state tax such as sales tax no shareholders All corporations have directors that set the strategic course of the business Must have a minimum of one director but it varies by state All must have of cers that run the strategic course of the business Rights a Owners have none only voting of directors b Directors have the right to set strategic course of business c Of cers have the right to run the business Focus a Regular and professional corporations are focused on making a pro t b Lowpro t corporations are focused on doing social good and making some pro t c Nonpro t corporations are focused on doing social good only Regulation of Foreign and Alien Corporations a Foreign corporationrefers to where you39re incorporated and if you do business outside the state b Domestic corporationwhen doing business in the state that has granted its charter c Due Process Clauseforeign corporations need to have enough contact with the state before a state can exercise jurisdiction over the corporation d Commerce Clause i Federal government regulates interstate commerce ii States don39t have power over foreign corporations who just have interstate commerce iii A foreign corporation39s activities can be regulated by the state if they enter into a state to do intrastate business in a stateunless it unduly burdens interstate commerce Not unduly burden 1 the law serves a legitimate state interest 2 the state has chosen the least burdensome means of promoting of promoting that interest 3 the legitimate state interest outweighs the statute s burden on interstate commerce iv Doing business generally if a corporation is doing business in the state it is subject to the state39s laws 1 Purpose of determination a To determine whether a corporation is subject to a lawsuit in a state court b To determine whether the corporation is subject to the state39s tax c To determine if the corporation must qualify to carry on its activities in the state d To see if the state can regulate the corporation39s internal affairs e Subjecting Foreign corporations to suit i Must meet minimum contacts testcourt weigh the corporation39s contacts within the state against the burden of the corporation Even an isolated event may be enough to give jurisdiction on a state39s courts f Taxationforeign corporation can be taxed unless it violates the Due Process Clause or Commerce Clause i No violation of commerce class if 1 Tax is applied to an activity that is mostly in connection with the taxing state 2 Is fairly apportioned 3 Does not discriminate against interstate commerce interstate commerce has more taxes or something 4 Is fairly related to the services provided by the state ii A state can tax an interstate sale if the foreign corporation has buyers in the state and a physical presence in the state building store etc g Qualifying to do businesscorporations may have to qualify to conduct business within a state i Not a qualifying business 1 soliciting orders that require con rmation outside the state 2 Its an isolated transaction that only happens one and is completed within 30 days ii Qualifying business Maintaining an of ce of business Selling personal property Contracts with local business or sales Using real estate to conduct intrastate business Maintaining inventory in the state to ll orders U39lIgtLJMJII I h Regulation of a Corporation39s Internal Affairs i States usually regulate the internal affairs of corporations that are incorporated in their state ii A corporation may do most of its business outside its incorporated statepseudoforeign corporation Some states heavily regulate their internal affairs as if they where domestic corporations 4 Regulation of Foreign Nonpro t Corporationsnonpro ts and forpro t corporations have the same requirements and penalties Piercing the corporate veil a Once a shareholder has made their contribution investment they are no longer liable to the corporation Contracts and debts are not the shareholders b Piercino the corporate veilwhen the court to promote justice and to prevent inequity disregards the separation of the corporation and its shareholders Furthermore shareholders may lose their limited liability c Requirements to pierce the veilneed both i Domination of a corporation by its shareholders 1 Corporate formalities are followed 2 Separate books and records of the corporation and subsidiary 3 Pay for personal expensesshows domination 4 Capitalization corporation has low equity and high debt 5 Not conducting businessshell entities that are made by the dominant company 6 Corporation is using assets for personal reasons ii Use of that domination for an improper purpose d Improper purpose i Defrauding creditors 1 Thin capitalizationinadequate capitalization in relation to the business39s risks and nature Creditors don39t have any protection against their claims with low capital 2 Looting a transferring corporate assets to shareholders that are undervalued gtFMV b the same shareholders of two companies may cause one corporation to loot the other c parent companies not liable for subsidiaries debt or obligations may cause the subsidiary to transact for its own bene t and hurt loot the subsidiary ii Circumventing a statute a corporation should not do something prohibited by a statute iii Evading an existing obligation 1 Reincorporating or forming a subsidiary to evade an onga on Nonpro t corporations a a member is not personally liable for corporation39s obligations or acts b only if the nonpro t organization is used to defraud creditors circumvent a statute or evade obligations will the court pierce its veil
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