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Badm 300 ch 18 - Notes from online lecture

Notes from online lecture
Course

The Legal Environment Of Bus (BADM 300)

43 Documents
Students shared 43 documents in this course
Academic year: 2020/2021
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University of Illinois at Urbana-Champaign

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  • Nature and classification

    • Corporation: a legal entity created and recognized by state law
      • Can have one or more shareholders that are comprised of natural persons or other businesses
      • A legal “person” and enjoys the same rights and privileges as a natural person: - Access to court systems - Constitutional guarantees of free speech, due process, and freedom from unreasonable search and seizures
    • Corporate personnel
      • Responsibility for management of company rests with board of directors (elected by shareholders)
      • Board of directors makes policy decisions and hires officers to run corporation on a daily basis
      • Shareholders can sue corporation and bring a derivative suit on behalf of the corporation in some instances
    • Limited liability of shareholders
      • Generally, shareholders are not personally liable for corporate acts
      • In certain situations, the corporate veil of limited liability can be pierced, holding the shareholders personally liable - Commingling assets - Thin capitalization
    • Corporate earnings and taxation
      • Profits can either be kept as retained earnings or passed on to the shareholders as dividends
      • Corporate taxation
        • Can be taxed twice-- first to corporation, then to shareholders via dividends
      • Holding companies (parent company)
        • Company whose business activity consists of holding shares in another company
        • Typically, a holding company is established off shore
    • Criminal and tort liability
      • A corporation can be liable for the criminal acts of its agents and employees
      • Corporations can be fined and under the “responsible officer” doctrine, corporate officers may go to prison
    • Classification of corporations
      • Domestic
        • Corporation does business within its state of incorporation

  • Foreign

    • Corporation from one state does business in another state

  • Alien

    • Corporation formed in another country

  • Public and private corporations

    • Public corporations are formed by the government for some purpose
    • Private corporations are created either wholly or in part for private benefit (for profit) - Can be publicly held

  • Nonprofit corporations

    • Those formed for purposes other than making a profit

  • Close corporation

    • One whose shares are held by relatively few persons and is often operated like a partnership
    • Dispenses with most corporate formalities
    • Management of closely held corporations
      • Resembles that of a sole proprietorship or partnership
    • Transfer of shares
      • Because there are few shareholders, transfer of shares to an outsider can cause management problems
      • To avoid this situation, a close corporation can restrict the transferability of shares via the shareholder agreement
    • Misappropriation of closely held corporation funds
      • A majority shareholder in a close corporation may misappropriate company funds
      • The normal remedy for the injured minority shareholders is to have their shares appraised and to be paid the fair market value for them

  • S corporations

    • Must be domestic
    • Must not be a member of an affiliated group of corporations
    • Shareholders must be individuals, estates, certain trusts and tax-exempt organizations, or corporations
    • Avoids federal taxation of regular corporations at the corporate level
    • Only dividends are taxed to the shareholders as personal income

  • Professional corporations

    • Those formed by a group of professionals

  • Benefit corporations

  • A corporation that has substantially complied with all conditions precedent to incorporation

  • De facto corporations

  • If the defect in formation is substantial, the outcome will vary by jurisdiction

  • A state statute exists under which the corporation can be validly incorporated

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Badm 300 ch 18 - Notes from online lecture

Course: The Legal Environment Of Bus (BADM 300)

43 Documents
Students shared 43 documents in this course

University: University of Illinois at Urbana-Champaign

Was this document helpful?
- Nature and classification
-Corporation: a legal entity created and recognized by state law
- Can have one or more shareholders that are comprised of natural persons
or other businesses
- A legal “person” and enjoys the same rights and privileges as a natural
person:
- Access to court systems
- Constitutional guarantees of free speech, due process, and freedom
from unreasonable search and seizures
- Corporate personnel
- Responsibility for management of company rests with board of directors
(elected by shareholders)
- Board of directors makes policy decisions and hires officers to run
corporation on a daily basis
- Shareholders can sue corporation and bring a derivative suit on behalf of
the corporation in some instances
- Limited liability of shareholders
- Generally, shareholders are not personally liable for corporate acts
- In certain situations, the corporate veil of limited liability can be pierced,
holding the shareholders personally liable
- Commingling assets
- Thin capitalization
- Corporate earnings and taxation
- Profits can either be kept as retained earnings or passed on to the
shareholders as dividends
- Corporate taxation
- Can be taxed twice-- first to corporation, then to shareholders via
dividends
- Holding companies (parent company)
- Company whose business activity consists of holding shares in
another company
- Typically, a holding company is established off shore
- Criminal and tort liability
- A corporation can be liable for the criminal acts of its agents and
employees
- Corporations can be fined and under the “responsible officer” doctrine,
corporate officers may go to prison
- Classification of corporations
- Domestic
- Corporation does business within its state of incorporation

Students also viewed

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