LGLS Final Exam
Corporation - Answer-- business created under state law
- separate legal entity or "artificial person" (can enter in/out of contracts, litigation, etc.)
- owned by shareholders
- governed by officers and directors
- liable for torts committed by agents during scope of employment
public corporation - Answer-a corporation formed for government or public purposes, ex: US postal
service
private corporation - Answer-a corporation created for private purposes/benefits
ex: coca cola, delta
Advantages of a corporation - Answer-Limited liability
Perpetual life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital (selling bonds)
Disadvantages of a corporation - Answer-- Double taxation (taxes paid based on profit, shareholders pay
on dividends)
- Formalities to form, run and dissolve corporation (paperwork)
- Piercing the corporate veil exposes owners to personal liability
,Forming a Corporation - Answer-1. Select and reserve a name
2. Choose the state in which you wish to incorporate
3. Raise capital (find shareholders)
4. Contracts/paperwork by attorneys to form entity
5. Prepare and file
articles of incorporation - Answer-a written legal document that defines ownership and operating
procedures and conditions for the business
- Establish purpose, duration, capital structure
- Identifies registered agent and incorporators
- State issues charter or the certificate
- Amendments to make changes must be filed within the state
shareholder - Answer-Buys stock and is co-owner of corporation, but not considered agents
type 1 shareholder - Answer-indirect shareholders that purchase their stock from brokers
direct shareholder - Answer-shareholders that purchase their stock directly from the company
roles of shareholders - Answer-- own stocks
- Can elect or remove directors based on bylaws and profit by attending impt. meetings
- Amend articles of incorporation and bylaws
- Approve certain corporate matters
Rights of Shareholders - Answer-- attend meetings and vote
, - gain dividends
- receive important info.
corporate bylaws - Answer-- the basic rules governing how a corporation is organized and how it
conducts its business, like:
- delegating responsibilities and roles to officers
- voting process and meeting procedures
directors - Answer-- make corporate policies
- elect and remove officers (President, secretary, VP)
- declare dividends back to s/h's
inside directors - Answer-manage and oversee day to day activities
outside directors - Answer-oversee inside directors and provide insight or feedback
Rights of Directors - Answer-- conduct policy meetings
- inspect corporate records
- receive compensation for litigation/lawsuit fees
director and officer duty of care - Answer-the duty to make decisions diligently and to use corporate
funds appropriately, on behalf/representation of the company
duty of disclosure - Answer-If potential conflict of interest arises , officers and directors must provide
disclosure to the board
Corporation - Answer-- business created under state law
- separate legal entity or "artificial person" (can enter in/out of contracts, litigation, etc.)
- owned by shareholders
- governed by officers and directors
- liable for torts committed by agents during scope of employment
public corporation - Answer-a corporation formed for government or public purposes, ex: US postal
service
private corporation - Answer-a corporation created for private purposes/benefits
ex: coca cola, delta
Advantages of a corporation - Answer-Limited liability
Perpetual life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital (selling bonds)
Disadvantages of a corporation - Answer-- Double taxation (taxes paid based on profit, shareholders pay
on dividends)
- Formalities to form, run and dissolve corporation (paperwork)
- Piercing the corporate veil exposes owners to personal liability
,Forming a Corporation - Answer-1. Select and reserve a name
2. Choose the state in which you wish to incorporate
3. Raise capital (find shareholders)
4. Contracts/paperwork by attorneys to form entity
5. Prepare and file
articles of incorporation - Answer-a written legal document that defines ownership and operating
procedures and conditions for the business
- Establish purpose, duration, capital structure
- Identifies registered agent and incorporators
- State issues charter or the certificate
- Amendments to make changes must be filed within the state
shareholder - Answer-Buys stock and is co-owner of corporation, but not considered agents
type 1 shareholder - Answer-indirect shareholders that purchase their stock from brokers
direct shareholder - Answer-shareholders that purchase their stock directly from the company
roles of shareholders - Answer-- own stocks
- Can elect or remove directors based on bylaws and profit by attending impt. meetings
- Amend articles of incorporation and bylaws
- Approve certain corporate matters
Rights of Shareholders - Answer-- attend meetings and vote
, - gain dividends
- receive important info.
corporate bylaws - Answer-- the basic rules governing how a corporation is organized and how it
conducts its business, like:
- delegating responsibilities and roles to officers
- voting process and meeting procedures
directors - Answer-- make corporate policies
- elect and remove officers (President, secretary, VP)
- declare dividends back to s/h's
inside directors - Answer-manage and oversee day to day activities
outside directors - Answer-oversee inside directors and provide insight or feedback
Rights of Directors - Answer-- conduct policy meetings
- inspect corporate records
- receive compensation for litigation/lawsuit fees
director and officer duty of care - Answer-the duty to make decisions diligently and to use corporate
funds appropriately, on behalf/representation of the company
duty of disclosure - Answer-If potential conflict of interest arises , officers and directors must provide
disclosure to the board
