Table of Contents
| Term/Concept | Definition |
|---|---|
| What is a corporation? | A corporation is a separate legal entity or legal person. |
| Legal entity | A legal entity has the capacity to enter into contracts, assume obligations, sue and be sued. |
| Corporate entity | A corporate entity is legally distinct from its members and can hold property and be sued. |
| What can be an owner? | Any legal entity, natural persons, partnerships, or corporations. |
| Who are corporate owners? | Shareholders. |
| Corporations are treated as | Artificial (legal) persons created by the state. |
| What can corporations do? | Sue or be sued, enter into contracts, hold property, be found liable for violations, exercise rights. |
| Who are part of corporate personnel? | Board of directors, officers, shareholders. |
| How do you become a shareholder? | By purchasing a share of stock in a corporation. |
| Shareholders have… | Limited liability unless they voluntarily assume personal liability. |
| Dividend | A distribution of corporate profits or income to shareholders. |
| Retained earnings | The portion of a corporation’s profits not paid out as dividends. |
| Domestic corporation | A corporation doing business in and organized under the laws of a specific state. |
| Foreign corporation | A corporation doing business in a state without being incorporated there. |
| Profit | Making an income ($) |
| Non-profit | Corporations formed for purposes other than making a profit. |
| Examples of non-profit | Hospitals, educational institutions, charities, religious organizations. |
| Alien corporation | A corporation formed in another country but doing business in the United States. |
| Publicly held | A corporation whose shares are publicly traded in securities markets. |
| Closely held (close) | A corporation whose shares are held by a family or relatively few persons. |
| Most corporate enterprises in the US are | Closed corporations. |
| Who can hold shares in a close corporation? | Members of a family, privately held corporations. |
| Closed corporations are also referred to as | Closely held, family, or privately held corporations. |
| Close corporation is similar to | A partnership. |
| Promotional activities | Steps taken to organize and promote a business before incorporating. |
| Incorporation | The legal process of forming a corporation. |
| Incorporation procedures | 1. Select a state of incorporation. 2. Secure the corporate name. 3. Prepare articles of incorporation. 4. File articles of incorporation. |
| Name is subject to | State approval. |
| Who runs a check for the proposed name? | The secretary of state. |
| Corporate name must include | The words “corporation,” “incorporated,” “company,” or “limited.” |
| Primary document needed to incorporate | Articles of incorporation. |
| Articles of incorporation must include | Name of the corporation, number of authorized shares, name and addresses of initial registered agent, name and address of each incorporator. |
| Who signs the articles of incorporation? | Incorporators. |
| Who has implied powers? | Corporate officers. |
| After incorporating, | The first organizational meeting must be held. |
| Most important function of organizational meeting | Adoption of the bylaws. |
| Bylaws cannot conflict with | The corporation’s statute or articles of incorporation. |
| Corporate powers | The express and implied powers necessary to achieve the corporation’s purpose. |
| Where are express powers found? | Articles of incorporation, state law, state and federal constitutions. |
| Order of priority in case of conflicts among documents | U.S. Constitution, state constitutions, state statutes, articles of incorporation, bylaws, resolutions of the board of directors. |
| Why does a corporation have implied powers? | To borrow funds, lend funds, extend credit, and perform other necessary acts within the business purpose. |
| Expressed powers | The specific powers listed in laws and documents. |
| Implied powers | Powers reasonably necessary and appropriate to accomplish the corporate purpose. |
| Who and what is a corporation liable for? | Torts committed by its agents or officers within the scope of their employment. |
| Are corporations liable for criminal acts? | Yes, but they can only be fined. |
| Piercing the corporate veil | When the court holds shareholders personally liable for corporate debts and obligations. |
| When do courts pierce the corporate veil? | When a party is misled, the corporation is set up never to make a profit, personal and corporate funds are commingled, or statutory formalities are not followed. |
| What do directors do? | Make corporate policy and hire officers. |
| Directors have | Rights, duties, and limited liability. |
| Duties of a director | Loyalty, care, and avoiding waste. |
| Officers have | Duties and limited liability. |
| Duties of officers | Loyalty and care. |
| Rights of directors | Participation in board meetings, inspection of records, indemnification. |
| Duty of care | Exercising due care in performing duties in good faith. |
| Duty of loyalty | Acting in the company’s best interest and avoiding conflicts of interest. |
| Shareholder rights | Elect directors, preemptive rights, inspection rights, derivative lawsuits, voting rights, dividends, right upon dissolution. |
| Liability of shareholders | Limited liability with exceptions (such as piercing the corporate veil). |
| Corporate governance | The relationship between a corporation and its shareholders. |
| Governance and corporate law | State laws that set up the legal framework for governance. |
| The most important structure of corporations | Board of directors. |
| Sarbanes-Oxley Act | A law that increases corporate accountability and imposes strict disclosure requirements and penalties. |
| Corporate dissolution | The termination of a corporation’s existence, either voluntarily or by government action. |
| Voluntary dissolution | Action taken by shareholders, incorporators, or initial directors to dissolve a corporation. |
| Administrative dissolution | The state administrator takes away the rights, powers, and authority of a business entity due to non-compliance. |
| Judicial dissolution | The termination of a corporation’s existence handled by the courts. |
| Rights and duties | Shareholders have ownership rights, while duties involve loyalty and care. |
| Equity shareholders | Main stakeholders with voting rights. |
| Preference shareholders | Shareholders with no voting rights. |
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Editorial Team. (2023, May 24). The concept of corporations and shareholders. Help Write An Essay. Retrieved from https://www.helpwriteanessay.com/blog/the-concept-of-corporations-and-shareholders/
