BUL 3320 CH 36 Exam Questions with
Complete Solutions
*advantages of a corporation* - ANSWER--Can raise an almost limitless amount of
capital by selling shares of its stock
-Shareholders may sell their stock or die without affecting the corporate entity
-Corporation is solely liable for the debts of the business.
-Shareholders have no personal responsibility, absent personal guarantees
disadvantages of a corporation - ANSWER--Formation can be more complicated and
costly
-requires more formalities
-by default, the corporation is a separate legal entity and must pay taxes
-Shareholders also must pay taxes on dividends (i.e. double taxation of the same
income)
-Reduced individual control of the business
-Hostile takeover (if a public company)
-Compliance with securities laws
*C Corporation* - ANSWER--the default form of corporations
-double taxation
*S Corporation* - ANSWER--A closely-held corporation that is taxed like a
partnership
-flow-through taxation
Requirements for S Corporations - ANSWER--a domestic corporation (incorporated
in the same state)
-in CA, 100 or fewer shareholders (example of restricting shareholders)
-have to have only one class of stock (no more)
-must be citizen or resident of US
-shareholders must be individuals, estates, or certain trusts
-shares cannot be owned by others corporotions or partnerships
*Public Corporation* - ANSWER--owned/formed by government entities
-ex: City of LA, UCLA
-Apple is a publicly held corporation (different from a public corporation)
*Private Corporation* - ANSWER--formed by privately owned business
-Private corporation are classified either by profit or non-profit
*Profit Corporation* - ANSWER--considered profit if you are seeking to conduct
business for a profit (regardless if you ever do)
*Non-Profit Corporation* - ANSWER--even if you generate profits, you can still be a
non-profit corporation
, -non-profit corporations are prohibited from making distributions to shareholders
two ways to finance a corporation: - ANSWER-equity
debt
Professional Corporations - ANSWER--Certain professionals can form professional
corporations
-Only licensed professionals are allowed to be members (members not
shareholders)
Domestic Corporations - ANSWER-Corporation incorporated in the state
Foreign Corporations - ANSWER--Corporation incorporated in another state
-States can require foreign corporations who want to conduct business in the state to
obtain a certificate of authority from the state
-Cannot file a lawsuit unless certificate obtained
-Can defend a lawsuit even without certificate
Alien Corporations - ANSWER-Corporation incorporated in a foreign country
Incorporation - ANSWER--The process of forming a corporation in a state (can only
be incorporated in 1 state)
-Follow state's incorporation statute
*Process of Incorporation* - ANSWER-1. select corporate name
2. people
3. articles of incorporation
4. bylaws
5. organization meeting
1. select corporate name - ANSWER--Name must contain "corporation, company,
incorporated, or limited," or an abbreviation thereof.
-Cannot use a word or phrase indicating corporation has a purpose other than those
stated in articles of incorporation
-Can't use a name already taken, federally trademarked, or similar to federally
trademarked name
-Domain name verification
2. people - ANSWER--incorporators sign and file the documents
-Can be a person or business entity
3. articles of incorporation - ANSWER--Basic governing documents of the
corporation.
-Filed with the state
-Once filed, corporate status begins
-Can be amended with approval of board of directors and shareholders
4. bylaws - ANSWER--these are not required
-Govern the internal management, control, voting of the corporation.
-More detailed than articles
Complete Solutions
*advantages of a corporation* - ANSWER--Can raise an almost limitless amount of
capital by selling shares of its stock
-Shareholders may sell their stock or die without affecting the corporate entity
-Corporation is solely liable for the debts of the business.
-Shareholders have no personal responsibility, absent personal guarantees
disadvantages of a corporation - ANSWER--Formation can be more complicated and
costly
-requires more formalities
-by default, the corporation is a separate legal entity and must pay taxes
-Shareholders also must pay taxes on dividends (i.e. double taxation of the same
income)
-Reduced individual control of the business
-Hostile takeover (if a public company)
-Compliance with securities laws
*C Corporation* - ANSWER--the default form of corporations
-double taxation
*S Corporation* - ANSWER--A closely-held corporation that is taxed like a
partnership
-flow-through taxation
Requirements for S Corporations - ANSWER--a domestic corporation (incorporated
in the same state)
-in CA, 100 or fewer shareholders (example of restricting shareholders)
-have to have only one class of stock (no more)
-must be citizen or resident of US
-shareholders must be individuals, estates, or certain trusts
-shares cannot be owned by others corporotions or partnerships
*Public Corporation* - ANSWER--owned/formed by government entities
-ex: City of LA, UCLA
-Apple is a publicly held corporation (different from a public corporation)
*Private Corporation* - ANSWER--formed by privately owned business
-Private corporation are classified either by profit or non-profit
*Profit Corporation* - ANSWER--considered profit if you are seeking to conduct
business for a profit (regardless if you ever do)
*Non-Profit Corporation* - ANSWER--even if you generate profits, you can still be a
non-profit corporation
, -non-profit corporations are prohibited from making distributions to shareholders
two ways to finance a corporation: - ANSWER-equity
debt
Professional Corporations - ANSWER--Certain professionals can form professional
corporations
-Only licensed professionals are allowed to be members (members not
shareholders)
Domestic Corporations - ANSWER-Corporation incorporated in the state
Foreign Corporations - ANSWER--Corporation incorporated in another state
-States can require foreign corporations who want to conduct business in the state to
obtain a certificate of authority from the state
-Cannot file a lawsuit unless certificate obtained
-Can defend a lawsuit even without certificate
Alien Corporations - ANSWER-Corporation incorporated in a foreign country
Incorporation - ANSWER--The process of forming a corporation in a state (can only
be incorporated in 1 state)
-Follow state's incorporation statute
*Process of Incorporation* - ANSWER-1. select corporate name
2. people
3. articles of incorporation
4. bylaws
5. organization meeting
1. select corporate name - ANSWER--Name must contain "corporation, company,
incorporated, or limited," or an abbreviation thereof.
-Cannot use a word or phrase indicating corporation has a purpose other than those
stated in articles of incorporation
-Can't use a name already taken, federally trademarked, or similar to federally
trademarked name
-Domain name verification
2. people - ANSWER--incorporators sign and file the documents
-Can be a person or business entity
3. articles of incorporation - ANSWER--Basic governing documents of the
corporation.
-Filed with the state
-Once filed, corporate status begins
-Can be amended with approval of board of directors and shareholders
4. bylaws - ANSWER--these are not required
-Govern the internal management, control, voting of the corporation.
-More detailed than articles
