question

Where does the regulation for corporations come from?

answer

The Indiana business corporation law

question

What is a requirement for the formation of a corporation?

answer

(i) People (ii) Paper (iii) Act

question

Who are the people needed to form a corporation?

answer

A corporation only needs an incorporator(s) who sign and file the articles and call first meeting of shareholders

question

What papers are needed for the formation of a corporation?

answer

(i) Articles of incorporation; (ii)Statement of purpose and duration; (iii) Capital structure or stock

question

What information is included in the articles of incorporation?

answer

(i) Corporate name, which must be distinguishable from other corporations and contain the words: (a) Corporate, (b) Incorporation, (c) Limited, (d)company; (ii) Corporate address;(iii) Names and address of incorporators; (iv) Address of a registered office in Indiana; (v) Name of a registered agent in Indiana at that office

question

What is the purpose of the articles of incorporation?

answer

(i) Creates a contract between the corporation and shareholders; (ii) Creates a contract between the corporation and the state

question

If a corporation does not have a statement of purpose, what is its default purpose?

answer

In Indiana every corporation has the purpose of engaging in any lawful business, unless a more limited purpose is stated in the articles

question

What is the ultra vires rule?

answer

Typically if a corporation has a specific statement of purpose they must abide by the purpose. If they choose to go beyond the statement of purpose they are committing an ultra vires act, or an act beyond the scope of the articles The corporation could void the contract as beyond its capacity, however it is mostly dead now

question

What stock information must a corporation include when it incorporates?

answer

The corporation must include: (i) # of authorized shares; (ii) Information on # of stocks; (iii) Voting rts;(iv) Preferences if sep. classes of stock exist; (v) Must designate one or more classes of stock with unltd voting rights; (vi) Must designate one or more classes entitled to receive the asset on dissolution

question

What is issued stock?

answer

The number of shares the corporation actually sells

question

What is outstanding stock?

answer

Shares that have been issued and not reacquired by the corporation

question

What acts are required to create a corporation?

answer

The incorporator must file articles with the sec. of state. Acceptance by the sec of state is conclusive proof of valid formation and corp existence begins when the articles are file. Subscribers hold org meetings, where bd of directors are elected, the bd selects officers and adopts any bylaws and conducts other appropriate bus

question

What governs the corporations?

answer

Corporations are creatures of statute and are governed by the laws of the state, or the Indiana business corporation law

question

What is the liability of a corporation?

answer

A corporation is a separate legal person and can be sued and can sue. The officers and directors are generally not personally liable for debts or torts of the corporation

question

What are the liabilities of shareholders in a corporation?

answer

Shareholders are not personally liable for debts or torts of the corporation, or they have limited liability and are generally only liable to the extent of their investment into the corporation

question

What is the relationship between the corporation and its shareholders?

answer

The corporation and its shareholders have a contract relationship in which the articles, bylaws, provisions of stock certificates and the IBCL are embodied

question

What other circumstances may a corporation be found even if it fails to properly file?

answer

i. De facto corporation ii. Corporation by estoppels

question

What is a de facto corporation?

answer

In order to be a de facto corporation one must: i. Have a relevant incorporation statute (IBCL) ii. The parties made a bona fide attempt to comply with it; and iii. Some exercise of corporate power

question

What is a corporation by estoppels?

answer

If an entity deals with a business as a corporation, relying only on the credit of the corporation, the entity is stopped from denying the business's corporate status.

question

What is the liability for acting as a corporation when none exists?

answer

The persons purporting to act as a corporation knowing that no corporation exists are jointly and severally liable for all resulting liabilities

question

What are important factors about a corporations bylaws?

answer

(i) corp formation does not require adoption of bylaws; (ii) Incorporators or bd of directors are the ppl who adopt the initial bylaws; (iii) Only bd of directors can repeal or amend the bylaws; (iv) article controls in conflicts b/w bylaw and artciles; (v) Bylaws can contain any provision consistent with the IBCL; (vi) Bylaws are part of the k between corp and SH

question

When will courts interfere with internal management?

answer

Typically courts will not interfere with the internal management contained in a corporation's bylaws unless personal liberty or property rights are jeopardized

question

What is a promoter?

answer

A promoter is a person acting on behalf of a corporation not yet formed, and undertakes to bring about the existence of the corporation

question

What is the liability of a corporation on preincorporation contracts?

answer

A corporation is not liable on pre-incorporation contracts until it accepts the contract by adoption or ratification (this can be express or implied)

question

What liability does the promoter have on pre-incorporation contracts?

answer

Unless the contract clearly provides otherwise, the promoter remains liable on pre-incorporation contracts until there has been an agreement of the promoter, corporation and the other contracting party that the corporation will replace the promoter under the contract (this is considered novation)

question

What relationship does the promoter have to the pre-incorporated entity?

answer

A fid relationship to the corp to be created, and its SHs:(i) If a promoter sells property to the corp which was acq'd pre-promoter, entitled to FMV;(ii) If the promoter sells property to the corp which was acq'd post-promoter, entitled to purchase price;(iii) A corp is not liable to the promoter for compensation unless it is expressly agreed

question

What is a foreign corporation?

answer

A corporation that is incorporated outside of Indiana, and transacting business means the regular course of intrastate business activity, not occasional or sporadic activity

question

What is required to transact business in Indiana?

answer

i. Must obtain a certificate of authority from secretary of state and ii. appoint a registered agent and maintain a registered office in Indiana

question

What happens if a foreign corporation transact business in Indiana without qualifying?

answer

There are civil fines up to $10,000 and the corporation cannot sue in state, but can be sued

question

What is issuance of stock?

answer

Issuance of stock occurs when the corporation sells or trades its own stock, as a way to raise capital for the corporation

question

What are subscriptions?

answer

A subscription is a written offer to buy stock from a corporation

question

What is a subscriber?

answer

A subscriber is a person who agrees in writing to purchase shares of stock either before or after incorporation

question

What is the revocability of a subscription?

answer

Generally, subscriptions are irrevocable for six months unless provided otherwise

question

When is a subscriber obligated under a subscription agreement?

answer

A subscriber is obligated by the subscription agreement only when the board accepts the subscription

question

What kind of consideration must the corporation receive when it issues stock?

answer

The board of directors have broad discretion to issue shares in exchange for any tangible or intangible or benefit If the stock is issued for a promise to render services or a promissory note, then it must be reported to shareholders

question

What occurs once the shares are issued?

answer

The shares are considered fully paid and non assessable and the shareholder is only liable for the payment of any consideration

question

What are preemptive rights in stocks?

answer

Preemptive right is the right of an existing shareholder to maintain its percentage of ownership by buying stock whenever there is a new issuance of stock in the corporation

question

When do preemptive rights exist?

answer

Preemptive rights only exist if it is provided for by articles, the bylaws, or by contract

question

What is required to issue stocks properly?

answer

Shares of corporate stock may, but need not, be represented by certificates. If no certificates are issued, the shareholder must be given written information stating number, name and class of stock

question

What other classes of stock are available?

answer

i. Fractional shares - these only have voting rights ii. Scrip - these are non-voting fractional shares that may be accumulated to make a whole share

question

When is a corporation required to have a board of directors?

answer

In general, a corporation must always have a board of directors; however, a corporation of 50 or fewer shareholders may dispense with the board

question

How many members of the board of directors is required for a corporation?

answer

One or more adult natural persons with the number specified in or fixed in accordance with the articles or bylaws

question

How are directors elected and how long are their terms?

answer

The shareholders elect the directors at the annual meeting. Directors hold office until their term expires and their successor is elected. Unless otherwise provided in the bylaws, directors are elected by a plurality of the votes

question

Who selects the person who fills a vacancy on the board?

answer

The board of directors selects the person to fill the vacancy, if less than quorum is available then it is by majority vote, unless otherwise provided

question

May director terms be staggered?

answer

Yes, the articles of incorporation may, but need not, authorize staggered terms by dividing directors into two or three groups

question

What ways may the board take valid action?

answer

i. Unanimous written consent to act without a meeting; or ii. A meeting at which a quorum is present NOTE: conference calls qualify as a meeting if all directors can hear each other simultaneously, as being present

question

What notice is required for a director's meeting?

answer

The notice requirement may be defined in the bylaws, but at least 48 hours notice is required for special meetings, failure to give can be waived in writing or by attending without objection

question

How many board members is required to create a quorum?

answer

A quorum requires a majority of all directors to do business unless a different percentage is required by the by laws, however, this can never be less than 1/3. If a quorum is present, however, passing a resolution requires only a majority vote of those present

question

When can directors be removed from the board?

answer

Directors can be removed with or without cause by the board of directors, or as otherwise provided in the articles or bylaws

question

What is the role of the board of directors?

answer

All corporate authority must be exercised by or under the authority of, and the business and affairs of the corporation must be managed by, the board of directors

question

What can't the board delegate to a committee?

answer

i. Amending articles or bylaws ii. Fill vacancies on the board iii. Declare distributions to shareholders iv. Recommend fundamental corporate changes v. Issue shares vi. Change share rights

question

What is proper board of director compensation and how is it determined?

answer

The board may fix its own compensation, but it must be reasonably proportioned to the services and the corporations ability to pay - if not, waste of corporate assets and breach of duty of loyalty might be brought against the board

question

What duty of care does the board have to the corporation?

answer

Directors must discharge their duties in good faith, with the care an ordinarily prudent person would exercise under similar circumstances, and in a manner the director reasonably believes to be in the corporation's best interest

question

What is the business judgment rule?

answer

Directors are not liable for any action taken, or any failure to act, unless director failed to perform to the standard of an ordinarily prudent person and the failure constitutes willful misconduct or recklessness

question

Who can directors rely on for reasonable investigations? (5)

answer

i. Officers ii. Employees iii. Legal counsel iv. Accountants v. Committees of the board

question

What may the board take into account when determining the best interest of the corporation? (6)

answer

i. Shareholders ii. Employees iii. Suppliers iv. Customers v. Communities where facilities are located vi. And other pertinent factors

question

What is the duty of loyalty required by the board of directors?

answer

Directors of a corporation act in a fiduciary capacity. They must act in good faith and with a reasonable belief that what they do is in the best interest of the corporation

question

What is the standard when a director is part of an interested transaction with the corporation?

answer

The interested director transaction is voidable unless the director shows: (i)The deal was fair to the corporation when entered; or; (ii) Director's interest and relevant facts were disclosed or known and the deal was approved by: (a) The board of directors; or (b) Shareholders NOTE: interested directors count towards quorum, but approval requires majority of directors without interest

question

May a director compete with a corporation he is director of?

answer

No, however if a director does, the corporation has the remedy of a constructive trust of profits of competing venture

question

What is the corporate opportunity doctrine?

answer

A director cannot usurp corporate opportunity for personal profit, unless the corporation is unable or unwilling to ttake it

question

What is required for an opportunity to be a corporate opportunity?

answer

The opportunity must be within the corporate business line, else it is not a corporate opportunity. If it is a corporate opportunity, then financial inability is generally not a defense and the corporate has a remedy of constructive trust of any profits earned

question

What directors are liable for the breach of loyalty?

answer

A director is presumed to have concurred with board action unless the director: i. Objects at the beginning of the meeting ii. Enters his or her dissent or abstention in the minutes; or iii. Delivers his or her written notice of dissent or abstention at the meeting

question

When can directors not be liable for a passed resolution?

answer

i. The director is absent from the meeting ii. There was good faith reliance on a. Book value of assets; or b. Opinion of a competent employee, officer, professional, or committee of which the director relying was not a member; or c. Financial statements by auditors

question

What are the requirements for officers of a corporation?

answer

i. Officers are agents of the corporation iii. The corporation must have at least one person serving as an officer iv. The corporation must delegate to one of the corporate officers the duties of secretary of the corporation

question

How are officers selected and removed from office?

answer

i. Officers are selected and removed by the board of directors ii. An officer may resign at any time by delivering notice

question

What are the outcomes when an officer or director seeks indemnification for costs, attorneys' fees or fines ?

answer

i. No indemnification when the board is held liable to court or received benefits ii. Mandatory indemnification when the defendant is wholly successful in defending the action

question

Under what actions is it permissible for a corporation to indemnify the officer or director?

answer

i. When there is a situation that might lead to settlement ii. When the individual acted in good faith and with the reasonable belief that actions were in the company's best interest, or if criminal, reasonably believed conduct was lawful

question

Who determines if a person is indemnified in a permissive situation?

answer

The disinterested board of directors or disinterested committee of two or more, or special legal counsel

question

When will courts pierce the corporate veil?

answer

Courts are reluctant to disregard corporate existence, but will pierce the veil where the corporate form is so ignored, controlled or manipulated that it is the mere instrumentality of another, and the misuse constitutes fraud or injustice

question

What factors do the court look at when analyzing whether to pierce the corporate veil or not?

answer

(i) Public or closed corporation; (ii) Under capitalization; (iii) Formalities of corporation has been disregarded; (iv) Fraudulent misrepresentation; (v) Identity of shareholders, officers, directors; (vi) Co-mingling of funds; (vii) Absence of corporate records; (viii) Payment of individual obligations

question

When do shareholders manage the corporation, instead of directors?

answer

Shareholders may manage the corporation directly if there are 50 or fewer shareholders. The shareholders can eliminate the board and run the corporation

question

What duty do managing shareholders have to the corporation?

answer

The shareholders owe a duty of care and loyalty. Shareholders in a closed corporation owe each other fiduciary duties under the standard of utmost good faith and loyalty

question

What is a derivative suit?

answer

A derivative suit is an action for an injury to the corporation, where the shareholder is suing to enforce the corporation's claim NOTE: always ask if the corporation could have brought the suit?

question

What are the policy reasons behind derivative suits?

answer

i. Avoid multiple suits for the same issue ii. Protects creditors iii. Protects all shareholders iv. Adequately compensates all shareholders

question

What are the implications of a derivative suit?

answer

i. If the shareholder is successful, then they can receive costs and attorney fees from the corporation ii. If the shareholder is unsuccessful, they will not be able to recover costs' and attorneys' fees and might be liable to the corporation for their costs' and attorneys' fees

question

What is required for a shareholder to bring a derivative suit?

answer

(i). SH adequately & fairly rep int of SHs (ii) person owned stock @ T claim arose or got by operation of law from someone who did, & own stock throughout the litigation (iii) person files verified complaint; (iv) person makes written demand on bd that corp bring suit, unless futile

question

What must directors do when a demand for action is made by a shareholder?

answer

The bd may est a committee of 3 or more disinterested directors to review if the claim should be pursued: (i) determination of committee is binding unless, not disinterested no good faith; (ii) If suit is brought, will be dismissed if committee of disinterested directors determined in good faith not to pursue

question

When is settlement permitted in a derivative suit?

answer

Settlement or dismissal is not permitted without court approval

question

When can a shareholder bring a direct action against a corporation?

answer

This is limited to closed corporations and requires: i. There will not be exposure to multiple suits ii. There is not material prejudice to creditors; and iii. It will not interfere with a fair distribution among all parties

question

Who can vote at a shareholder meeting?

answer

The record shareholder as of the record date has the right to vote

question

Who is the record shareholder?

answer

The record shareholder is the person shown as the owner in the corporate records.

question

What is the record date?

answer

The record date is a voter eligibility cut-off, upon death the shareholder's executor can vote for the shares, and the shareholder may vote by proxy

question

What is a proxy?

answer

A proxy is a: i. Writing ii. Signed by record shareholder iii. Directed to secretary of corporation iv. Authorizing another to vote the shares

question

What is required for a voting trust?

answer

(i) Written trust agreement controlling how the shares will be voted; (ii) Copy to corp w/ a beneficiary list; (iii) Xfer legal title of shares to the voting trustee; (iv) Orig SHs receive trust cert & retain all SH rights except for voting; (v) irrevocable for max of 10 years, unless coupled with an interest

question

What is required for voting agreements?

answer

A written agreement under IBCL, enforceable among participants only

question

When must shareholder meetings be held?

answer

An annual meeting must be held to elect directors. If it is not held, a shareholder can petition the court to order one after six months from end of fiscal year or 15 months from last meeting

question

How are special shareholder meetings called?

answer

i. The board ii. Person designated in the articles or bylaws iii. Holders of at least 25% of the voting shares if corporation has 50 or fewer shareholders

question

What is required in the notice for a shareholder meeting?

answer

i. When the meeting will take place ii. Where the meeting will take place iii. Purpose of the meeting

question

What happens if notice is not given to all shareholders?

answer

The action taken at the meeting is void unless those not sent notice waived the notice effect

question

What ways can shareholders take a valid corporate act?

answer

i. Unanimous written consent of the holders of all voting shares; or ii. A meeting at which a quorum is present a. Quorum is decided by the # of shares represented not the # of SHs, and req a majority of shares unless provided otherwise

question

When may shareholders use cumulative voting?

answer

Cumulative voting is only available in voting for directors and only if provided for in the articles and bylaws. Cumulative voting is a device to give small shareholders a better chance of electing someone to the board

question

How does cumulative voting work?

answer

Multiply the number of shares owned times the number of directors to be elected to decide the number of votes

question

What is the rule for stock transfer restrictions?

answer

Stock transfer restrictions will be upheld provided that they are reasonable under circumstances, which means they are not an undue restraint on alienation

question

What is required to make a stock transfer restriction valid?

answer

i. The restriction must be conspicuously noted on the certificate ii. The transferee has actual knowledge of the restriction

question

What records must be delivered for inspection when requested by a shareholder?

answer

(i) Articles and amendments; (ii) Bylaws and amendments; (iii) Communications to shareholders for last three years; (iv) Directors and officers names and addresses; (v) Every shareholder minute for three years and directors minutes that affect stock rights; (vi) Financial statements for last three years; (vii) Secretary of state biennial report

question

What must be delivered if a request is in good faith and with a proper purpose is made by a shareholder?

answer

i. Accounting records ii. Back shareholder minutes, all of them iii. Committee records iv. Director minutes, all of them v. Shareholder list, alphabetized by class

question

Where must the records on request and the records for good faith and proper purpose request be maintained?

answer

i. Records that must be provided upon request must be maintained at the corporation's principal office ii. The records that must be provided if good faith and a proper request are made must be maintained at any reasonable location

question

When and how must the demand and inspection be made?

answer

The inspection must be made in writing at least five days before inspection, and the inspection must take place at the principal offices or any reasonable location

question

What happens if a corporation fails to provide the records on request?

answer

The demander is allowed attorney fees and court order for inspection

question

What is a distribution?

answer

Any payment to shareholders other than salary - can be cash or stock dividend, stock redemption or any other transfer of property for the benefit of shareholders

question

Who has the power to make distributions?

answer

The power to make distributions is within the board of directors

question

How can someone win an action to compel declaration of distribution?

answer

This is tough to win and requires: i. A very strong showing of abuse of discretion established by bad faith. Or ii. illegal conduct

question

What are classes of stock for dividend distribution purposes?

answer

i. Preferred (these get predefined amount before common shareholders get a cut) ii. Participating (they get preferred amount and participate equally in common share dividends) iii. Cumulative (continue to accrue dividends year to year until they are paid) iv. common

question

How does the board make determination for dividends?

answer

i. Board must determine the financial soundness of the corporation ii. A distribution may not be made, if the corporation is not able to pay its debts in due course, or total assets are less than sum of liabilities plus preferred shareholders' dissolution rights

question

What happens if the board makes dividend payments in violation of the solvency rule?

answer

The directors are personally liable to the corporation for the excess amount

question

What is the date of distribution of dividends?

answer

The board may fix a record date, declaration date and payment date for distributions. The record date is the date set for determining eligible shareholders. If no record date is set, then the date the board authorizes the distribution is used

question

Where may the source of distributions come from?

answer

Dividends are to be paid from unreserved and unrestricted earned surplus, and cannot be paid out of capital except in dissolution Dividends constitute the debt of corporation on par with general unsecured creditors

question

What is a fundamental corporate change?

answer

It is a change of extraordinary occurrences, that they generally require a board resolution to pass and approval by shareholders of the shares entitled to vote

question

What is the dissenter's rights of appraisal?

answer

The dissenting shareholder right of appraisal is the right of a shareholder to force the corporation to buy shares back at fair value

question

When will a shareholder have dissenting shareholder rights of appraisal?

answer

(i) Sale of sub assets in the ord course of biz (ii) Merger or consolidation of 2 or more corps (iii) Xfer of shares in a share exchange if the SHs corp is being acq'd; (iv) acq'r accorded voting rights and owns a maj of voting shares; (v) article or bylaws auth any other Xaction for which dissenter's rts are triggered

question

What actions must the shareholder take to perfect their dissenter's rights?

answer

(i) SH entitled to vote on event (ii) B4 SH vote, SH file w/ corp written notice of objection & intent demand payment; (iii) abstain or vote against change (iv) After receipt of dissenter's notice, make written demand to be bought out & deposit certs as req'd by notice; (v) The corp closely held

question

What is considered fair value for shares?

answer

The fair value is the value of shares immediately before the event occurs, or highest price paid in control share acquisition

question

What is required for a merger?

answer

(i) Bd of directors must approve of plan of merger, and submit it to SHs; (ii) SHs must approve the merger, from both corps; (iii) If approved, the articles of merger must be filed with sec of state; (iv) The surviving corp succeeds to all rts and liabilities of the constituent corps

question

When is shareholder approval not required for merger?

answer

No shareholder approval is required in short-form merger, where a 90% or more owned subsidiary is merged into a parent corporation, or where surviving corporation shareholders have same proportionate ownership and no more than 20% more issuable shares is created

question

What is required for transfer of all or substantially all of the assets not in the ordinary course of business?

answer

(i) Bd of directors resolution from both corps, & submittal to selling corp's SHs; (ii) Approval by selling corps SHs; (iii) File articles of exchange in share exchange; (iv) Acq'ing corp generally is not liable for debts of the acq'd corp unless the deal says otherwise or corp purchasing assets is merely a continuation of the selling corp

question

When does the control share acquisition rule apply?

answer

The rule applies only to non-publicly traded corps with: (i) 100 or more SHs; and (ii) Principal office or substantial assets in IN; and (iii) Either, [a] > than 10% of SHs in IN; or [b] > than 10% of share in IN; or, [c] 10,000 SHs in IN

question

What is the triggering event for control share acquisition?

answer

If a shareholder attempts to acquire shares in the corporation in any 90 day period which puts the shareholder over one fifth, one third or one half ownership interest, the shares acquired during the 90-day period are called control shares

question

What happens to control shares?

answer

Control shares are statutorily stripped of voting rights unless voting rights are restored by a vote of disinterested shareholders

question

What is a business combination?

answer

It is broadly defined to include any kind of transaction which would allow a potential acquirer to use the corporation's assets to finance an acquisition (leveraged buyout) There are no dissenter's rights for this

question

When does the business combination apply?

answer

i. Applies only to publicly traded corporations and is designed to prevent two tier or bust up takeovers ii. Applies to Indiana corporations with more than 100 shareholders that own a class of voting shares registered with the SEC

question

Who has the right to amend articles of incorporation?

answer

Generally the share holders

question

When may the board of directors amend the articles of incorporation without shareholder approval?

answer

Unless the article provides otherwise: i. Extend duration of the corporation ii. Delete initial directors iii. Delete the initial registered agent or office iv. Make minor name changes v. Cancel treasury shares vi. Increase common shares if percentage ownership remains the same

question

Do shareholders have dissenters rights?

answer

No, but if an amendment harms a class of stock, the amendment must be approved by the shares of that class itself as well as by the overall majority of all shares entitled to vote

question

What ways may a corporation dissolve?

answer

i. Voluntary ii. Involuntary iii. Administratively

question

How can a corporation voluntarily dissolve?

answer

i. If the corporation has not commenced business, a majority of the incorporators or the board of directors may dissolve ii. After business beings, corporation can dissolve upon recommendation of board and a majority vote of the shareholders

question

How may a corporation involuntarily dissolve?

answer

(i) SHs petition b/c (a) Bd deadlock harms corp or prevents conduct of biz (b) SH deadlock & failure to fill a vacant bd position for 2 terms (ii) corp insolvent & creditor has unsatisfied judgment against corp or corp commits debt in writing & corp insolvent; (iii) AG petition, if corp received articles by fraud or abused auth

question

How might a corporation be administratively dissolved?

answer

This must be done by the secretary of state for: i. Failure to deliver biennial report ii. Failure to pay taxes or penalties

question

After filing articles of dissolution, what are the wind up steps?

answer

i. Gather all assets ii. Convert them to cash iii. Pay creditors iv. Distribute remainder to shareholders pro rata by share unless there is a dissolution preference

question

How does a dissolved corporation dispose of claims prior to the SoL?

answer

i. Known claims - written notice to creditor stating amount of claim, if no objection within time set, the claim is fixed (must sue within 90 days) ii. Unknown claims - publishes notice in general circulation paper, claims are barred after 2 years from publicatioin

question

What is the order of distribution upon dissolution?

answer

i. First pay secured creditors ii. Second pay unsecured creditors (including unpaid dividends to shareholders) iii. Third pay preferred shareholders iv. Finally common shareholders

question

Where do rules for an LLC come from?

answer

The Indiana business flexibility act of 1993

question

What is the advantage of an LLC?

answer

i. Members get limited liability ii. It is a pass through tax treatment like a partnership or S Corp

question

How does one form an LLC?

answer

i. File articles of organization, have registered agent and location ii. Name must contain the phrase LLC, or limited liability company iii. May have one or more members

question

How is the management structured in an LLC?

answer

Management can be like a partnership or a corporation, members runs LLC in proportion to capital contributions unless otherwise provided in the operating agreement

question

What is the liability of an LLC?

answer

i. Profits/losses are split per the operating agreement, otherwise by proportion to capital contribution ii. Members get limited liability for all obligations, except their own torts iii. The LLC is vicariously liable under agency principals

question

How should one analyze a corporation question?

answer

(i) Legal func of the corp?; (ii) Doctrine of ltd liability ; (iii) Piercing corp veil (PUFFICAP); (iv) Records for SH inspection (ABCDEFS, ABCDS); (v) Fid duties of officers, directors and SH in closed corps; (vi) Derivative actions; (vii) SH dissenters rts available?; (viii) Parties bring action for dissolution; (ix) Differences between different business orgs

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