USF BUL3320 Professor Katz Exam 3
Questions with Verified Answers
Public Corporations - ANSWER-A Public Corporation
• Created by A Government Authority (e.g., Federal or State)
• Carry Out Public Mission and/or Provide Products or Services
• May Include Services Provided by Private Enterprise
Examples:
U.S. Postal Service
AMTRAK
Cities and Counties
Private corporations - close corporations or closely held corporations - ANSWER-
Individuals Who Create a Business With Relatively Few Shareholders Are Closely
Held
Corporations
• Often the Shareholders, Directors and Officers the Same Individuals
• Often Shareholders Are Family Members
• Due to Small Number of Shareholders - Sale of Shares Governed By Buy-Sell
Agreement
Example: Father and Three Sons as Equal Shareholders Create a Nursery Business
Called Floral,
Inc. Each Shareholder is Also a Member of the Board of Directors. Father is the
President, Son
Victor is Vice President, Son Benjamin is Treasurer and Son Thomas is Secretary.
Pursuant to the Floral Buy-Sell Agreement, If a Shareholder Wants to Sell Shares
Must Offer
Shares to Corporation First; and Then to the Other Shareholders For a Purchase
Price Set in the
Agreement. If the Corporation and Other Shareholders Decide Not to Purchase
Shares, Selling
Shareholder Can Offer Shares to Third Party.
Differences Between
Large Publicly Held
And Privately Held
Corporations - ANSWER-Publicly Held
• Shares Traded on Stock
Exchanges - Millions of
Shareholders
• Must Adhere to Regulations and
Reporting Standards Established
by the SEC
• Source of Funds Proceeds From
the Sale of Shares and Issuing of
Bonds
—————————————————
,Privately Held
• Shares Traded by Small
Number of Private Investors
• Until Reach $10 Million in
Total Assets and More Than
500 Shareholders Not Subject
to SEC Regulations
• Source of Funds Proceeds
From the Sale of Shares Or
From Venture Capitalists
Nonprofit Corporations - ANSWER-• A Nonprofit Corporation Is An Entity In Which
All Profits Remain in
the Corporation. This Means There Are No Dividends. Only Salaries,
Wages, Fees Can Be Paid Out.
• Nonprofit Corporations Must Be Registered With the State With
That Designation.
In Florida:
• Any Lawful Purpose Not For Profit
• The Florida Statute Lists a Number of Valid Purposes Including
Charitable, Benevolent, Religious and Civic - Florida Statutes Title
XXXVI Section 617.301
• Some Not For Profits Qualify For IRS Tax-Exempt Status - Most
Common 501(c) Organizations
• Generally, the Nonprofit Corporation Must Serve a Charitable
Purpose Per IRS (Broad Definition)
• Apply to the IRS to Be Granted This Status
• If Granted Not Subject to Federal Income Taxation
• Contributions Made by Donors Income Tax Deductible
Professional
Corporations - ANSWER-• A Corporation of Licensed Professionals -
Attorneys, CPAs, Physicians, Etc.
• Only Licensed Professionals in the Licensed
Field of the Corporation Are Allowed to Be
Shareholders - Ex. A Legal Professional
Corporation - Only Licensed Attorneys Can Be
Shareholders
• Liability of Professional Shareholders Limited to
their own "individual acts of negligence,
wrongful acts, or misconduct or for acts
committed by employees under their direct
supervision." Fl. Stat. Title XXXVI, § 621.07.
Forming a Corporation - ANSWER-Many formalities - made easier by the availability
of online filing
Need an incorporator - an individual or entity to file the appropriate documents
And incorporator does not have to be a shareholder, director or officer of the
corporation
,Can be a lawyer or company that specializes in incorporating businesses
Forming a Corporation - Chose a State to Incorporate - ANSWER-Unless
Compelling Reason, Most Convenient to
Incorporate In State In Which the Business
Operations of the Corporation is Located And/Or
Where the Shareholders Live - Particularly True
For Close Corporations
Larger Corporations - Fortune 500 - Tend to
Chose Delaware Because of Dedicated Chancery
Court, Privacy, Ease of Incorporation and No
State Income Tax If Corporation Does Not Do
Business In State
Commercially
Available
Corporation Kits
Make Filing Easier - ANSWER-• State Specific Incorporation Kits Are
Commercially Available
• The Kit Includes Fill in the Blank
Forms That Must be Filed with the
Secretary of State
• Since Most of the Required
Documents Are Standard, They Are
Accepted When Filed With the
Secretary of State
Articles of Incorporation - ANSWER-Must Be Filed With Corporate Division of
Secretary of State
• Name of Corporation
• Address of Principal Place of Business
• Registered Agent - Name and Address
• Business Purpose of Corporation - If Professional Corporation
Must Be Specific - i.e., to Provide CPA Services - If Not Can
State "For Any Lawful Purpose"
• Names of Officers and Directors (Optional)
• Effective Date of Corporation - Deemed to Be Effective When
Filed Unless AOI States Other Date
• Number of Shares of Stock Issued - Arbitrary Number More a
Formality Than a Strict Requirement - More of an Indication
That Entity is Corporation
• Signature of Incorporator
Corporate By-Laws - ANSWER-Shareholders Are the Owners of the
Corporation.
Shareholders Elect the Board of
Directors Who Make Policy Decisions
and Oversee Officers They Appoint
, (Sometimes by Vote) Who Run the Day
to Day Activities of the Corporation
Corporate Governing Details Set Forth
In Bylaws
Corporate Formalities - ANSWER-Corporation - Separate Entity Apart From
Shareholders
Integrity of Separateness Demonstrated
by Following Corporate Formalities
• Shareholder Meetings
• Electing Board of Directors
• Issuing Resolutions of Votes on Major
Decisions
• Maintaining Minutes of Meetings
Corporate Bylaws - Mainly Administrative - ANSWER-States Such As Florida Do Not
Require
the Filing of Corporate Bylaws
Bylaws - Administrative and Governing Details
• Board of Director Responsibility - Elections - Term of Office
• When Shareholder and Board of Director Meetings Will Be Held - Quarterly,
Semi-Annually, Etc.
• Officers - How Many - Authority - Elected or Appointed
• Voting Rules for Shareholders and Directors
• How Books Are to Be Kept
• Establishing Check Writing Authority - Authority to Enter Into Contracts
Binding Corporation
De Jure Corporation - ANSWER-De Jure Corporation. A Legally
Recognized Corporation By Virtue of
Complying with the State Procedure
of Incorporation - Generally,
Corporate Existence (and Privileges)
Can Not Be Challenged by Private
Parties or the State.
De Facto Corporation - ANSWER-De Facto Corporation. An Entity Seeking to
Incorporate Failed to Fully Comply With Every
Requirement of the Applicable Corporate Statutes.
Generally, A Court Will Afford the Entity Corporate
Status If 1) The Entity Could Have Been
Incorporated Under Applicable State Statute; 2) A
Good Faith Effort Was Made to Comply with
Statute; and 3) The Entity Has Been Conducting
Business as a Corporation. Technical Glitch the
Reason Not a De Jure Corporation.
Corporation by Estoppel - ANSWER-Corporation by Estoppel. An Equitable Remedy.
A Third Party Has Dealt With Business Based On
Belief That Dealing with a Corporation. If Later
Questions with Verified Answers
Public Corporations - ANSWER-A Public Corporation
• Created by A Government Authority (e.g., Federal or State)
• Carry Out Public Mission and/or Provide Products or Services
• May Include Services Provided by Private Enterprise
Examples:
U.S. Postal Service
AMTRAK
Cities and Counties
Private corporations - close corporations or closely held corporations - ANSWER-
Individuals Who Create a Business With Relatively Few Shareholders Are Closely
Held
Corporations
• Often the Shareholders, Directors and Officers the Same Individuals
• Often Shareholders Are Family Members
• Due to Small Number of Shareholders - Sale of Shares Governed By Buy-Sell
Agreement
Example: Father and Three Sons as Equal Shareholders Create a Nursery Business
Called Floral,
Inc. Each Shareholder is Also a Member of the Board of Directors. Father is the
President, Son
Victor is Vice President, Son Benjamin is Treasurer and Son Thomas is Secretary.
Pursuant to the Floral Buy-Sell Agreement, If a Shareholder Wants to Sell Shares
Must Offer
Shares to Corporation First; and Then to the Other Shareholders For a Purchase
Price Set in the
Agreement. If the Corporation and Other Shareholders Decide Not to Purchase
Shares, Selling
Shareholder Can Offer Shares to Third Party.
Differences Between
Large Publicly Held
And Privately Held
Corporations - ANSWER-Publicly Held
• Shares Traded on Stock
Exchanges - Millions of
Shareholders
• Must Adhere to Regulations and
Reporting Standards Established
by the SEC
• Source of Funds Proceeds From
the Sale of Shares and Issuing of
Bonds
—————————————————
,Privately Held
• Shares Traded by Small
Number of Private Investors
• Until Reach $10 Million in
Total Assets and More Than
500 Shareholders Not Subject
to SEC Regulations
• Source of Funds Proceeds
From the Sale of Shares Or
From Venture Capitalists
Nonprofit Corporations - ANSWER-• A Nonprofit Corporation Is An Entity In Which
All Profits Remain in
the Corporation. This Means There Are No Dividends. Only Salaries,
Wages, Fees Can Be Paid Out.
• Nonprofit Corporations Must Be Registered With the State With
That Designation.
In Florida:
• Any Lawful Purpose Not For Profit
• The Florida Statute Lists a Number of Valid Purposes Including
Charitable, Benevolent, Religious and Civic - Florida Statutes Title
XXXVI Section 617.301
• Some Not For Profits Qualify For IRS Tax-Exempt Status - Most
Common 501(c) Organizations
• Generally, the Nonprofit Corporation Must Serve a Charitable
Purpose Per IRS (Broad Definition)
• Apply to the IRS to Be Granted This Status
• If Granted Not Subject to Federal Income Taxation
• Contributions Made by Donors Income Tax Deductible
Professional
Corporations - ANSWER-• A Corporation of Licensed Professionals -
Attorneys, CPAs, Physicians, Etc.
• Only Licensed Professionals in the Licensed
Field of the Corporation Are Allowed to Be
Shareholders - Ex. A Legal Professional
Corporation - Only Licensed Attorneys Can Be
Shareholders
• Liability of Professional Shareholders Limited to
their own "individual acts of negligence,
wrongful acts, or misconduct or for acts
committed by employees under their direct
supervision." Fl. Stat. Title XXXVI, § 621.07.
Forming a Corporation - ANSWER-Many formalities - made easier by the availability
of online filing
Need an incorporator - an individual or entity to file the appropriate documents
And incorporator does not have to be a shareholder, director or officer of the
corporation
,Can be a lawyer or company that specializes in incorporating businesses
Forming a Corporation - Chose a State to Incorporate - ANSWER-Unless
Compelling Reason, Most Convenient to
Incorporate In State In Which the Business
Operations of the Corporation is Located And/Or
Where the Shareholders Live - Particularly True
For Close Corporations
Larger Corporations - Fortune 500 - Tend to
Chose Delaware Because of Dedicated Chancery
Court, Privacy, Ease of Incorporation and No
State Income Tax If Corporation Does Not Do
Business In State
Commercially
Available
Corporation Kits
Make Filing Easier - ANSWER-• State Specific Incorporation Kits Are
Commercially Available
• The Kit Includes Fill in the Blank
Forms That Must be Filed with the
Secretary of State
• Since Most of the Required
Documents Are Standard, They Are
Accepted When Filed With the
Secretary of State
Articles of Incorporation - ANSWER-Must Be Filed With Corporate Division of
Secretary of State
• Name of Corporation
• Address of Principal Place of Business
• Registered Agent - Name and Address
• Business Purpose of Corporation - If Professional Corporation
Must Be Specific - i.e., to Provide CPA Services - If Not Can
State "For Any Lawful Purpose"
• Names of Officers and Directors (Optional)
• Effective Date of Corporation - Deemed to Be Effective When
Filed Unless AOI States Other Date
• Number of Shares of Stock Issued - Arbitrary Number More a
Formality Than a Strict Requirement - More of an Indication
That Entity is Corporation
• Signature of Incorporator
Corporate By-Laws - ANSWER-Shareholders Are the Owners of the
Corporation.
Shareholders Elect the Board of
Directors Who Make Policy Decisions
and Oversee Officers They Appoint
, (Sometimes by Vote) Who Run the Day
to Day Activities of the Corporation
Corporate Governing Details Set Forth
In Bylaws
Corporate Formalities - ANSWER-Corporation - Separate Entity Apart From
Shareholders
Integrity of Separateness Demonstrated
by Following Corporate Formalities
• Shareholder Meetings
• Electing Board of Directors
• Issuing Resolutions of Votes on Major
Decisions
• Maintaining Minutes of Meetings
Corporate Bylaws - Mainly Administrative - ANSWER-States Such As Florida Do Not
Require
the Filing of Corporate Bylaws
Bylaws - Administrative and Governing Details
• Board of Director Responsibility - Elections - Term of Office
• When Shareholder and Board of Director Meetings Will Be Held - Quarterly,
Semi-Annually, Etc.
• Officers - How Many - Authority - Elected or Appointed
• Voting Rules for Shareholders and Directors
• How Books Are to Be Kept
• Establishing Check Writing Authority - Authority to Enter Into Contracts
Binding Corporation
De Jure Corporation - ANSWER-De Jure Corporation. A Legally
Recognized Corporation By Virtue of
Complying with the State Procedure
of Incorporation - Generally,
Corporate Existence (and Privileges)
Can Not Be Challenged by Private
Parties or the State.
De Facto Corporation - ANSWER-De Facto Corporation. An Entity Seeking to
Incorporate Failed to Fully Comply With Every
Requirement of the Applicable Corporate Statutes.
Generally, A Court Will Afford the Entity Corporate
Status If 1) The Entity Could Have Been
Incorporated Under Applicable State Statute; 2) A
Good Faith Effort Was Made to Comply with
Statute; and 3) The Entity Has Been Conducting
Business as a Corporation. Technical Glitch the
Reason Not a De Jure Corporation.
Corporation by Estoppel - ANSWER-Corporation by Estoppel. An Equitable Remedy.
A Third Party Has Dealt With Business Based On
Belief That Dealing with a Corporation. If Later
