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An artificial being, existing only in law and neither tangible nor visible.

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Corporation

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The people who are in charge of the overall management of the firm, who are elected by the shareholders. They make the policy decisions and hire corporate officers and other employees to run the daily business operations.

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Board of Directors

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Corporate shareholders are not personally liable for the obligations of the corporation beyond the extent of their investments.

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Limited Liability in Corporations

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When a court imposes personal liability on shareholders for the corporation's obligations.

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Pierce the Corporate Veil

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When a corporation earns profits, it can either pass them on to shareholders in the form of dividends or retain them as profits.

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Corporate Earnings

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Profits are retained and if invested properly, will yield higher corporate profits in the future and thus cause the price of the company's stock to rise.

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Retained Earnings

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All profits of a corporation are subject to income tax by various levels of government. Corporate profits can be subject to double taxation. The company pays tax on its profits. Then if the profits are passed on to the shareholders as dividends, the shareholders must also pay income tax on them.

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Corporate Taxation

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A company whose business activity consists of holding shares in another company. Typically it is established in a low-tax or no-tax offshore jurisdiction to reduce or defer their U.S. corporations.

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Holding Company

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A corporation is liable for the torts committed by its agents or officers within the course and scope of their employment.

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Tort Liability of Corporations

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Referred by the state it incorporates in.

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Domestic Corporation

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A corporation formed in one state but doing business in another state.

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Foreign Corporation

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A corporation formed in another country but doing business in the United States.

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Alien Corporation

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A legal document that grants a corporation permission to do business in a state other than its state of incorporation.

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Certificate of Authority

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A corporation formed by the government to meet some political or governmental purpose. An example of this are cities and towns that incorporate, the U.S. Postal Service, etc.

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Public Corporation

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Any corporation whose shares are publicly traded in a securities market, such as the New York Stock Exchange or the NASDAQ.

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Publicly Held Corporation

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Corporations created either wholly or in part for private benefit, or profit.

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Private Corporations

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Corporations formed for purposes other than making a profit. Private hospitals, educational institutions, charities, and religious organizations. They also various groups to own property and to form contracts without exposing the individual members to personal liability.

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Nonprofit Corporations

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A corporation whose shes are held by members of a family or by relatively few persons. the RMBCA gives considerable flexibility in determining its rules of operation. If all of a corporation's shareholders agree in writing, the corporation can operate without directors and bylaws, annual or special shareholders' meetings, stock certificates, or formal records of shareholders' decisions.

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Close Corporation

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A single shareholder or tightly knit group of shareholders usually hold the positions of directors and officers.

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Management of Close Corporations

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A close corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code. It can avoid the imposition of income taxes at the corporate level while retaining many of the advantages of a corporation, particularly limited liability.

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S Corporations

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1. The corporation must be a domestic corporation. 2. The corporation must not be a member of an affiliated group of corporations. 3. The shareholders of the corporation must be individuals, estates, or certain trusts and tax-exempt organizations. 4. the corporation must have no more than one hundred shareholders. 5. The corporation must have only one class of stock, although all shareholders do not need to have the same voting rights. 6. No shareholder of the corporation may be a nonresident alien.

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Requirements for S Corporation Status

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This corporation is taxed like a partnership, so the corporate income passes through to the shareholders, who pay personal income tax on it. This avoids double taxation.

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C Corporation

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Professionals such as physicians, lawyers, dentists, and accountants can incorporate.

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Professional Corporations

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A for-profit corporation that seeks to have a material positive impact on society and the environment.

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Benefit Corporations

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1. Purpose. Although the corporation is designed to make a profit, its purpose is to benefit the public as a whole, rather than just to provide long term shareholder value. The directors of a benefit corporation must, during the decision-making process, consider the impact of their decisions on society and the environment. 2. Accountability. Shareholders of a benefit corporation determine whether the company has achieved a material positive impact. 3. Transparency. A benefit corporation must issue an annual benefit report on its overall social and environmental performance that uses a recognized third party standard to assess its performance.

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Three Ways Benefit Corporations Differ From Traditional Corporations

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1. Select the state of incorporation 2. Secure the corporate name 3. Prepare the articles of incorporation 4. File the articles of incorporation to the secretary of state

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Incorporation Procedure

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The primary document needed to incorporate a business that includes basic information about the corporation and are a primary source of authority for its future organization and business functions. They must include: 1. The name of the corporation 2. The number of shares the corporation is authorized to use 3. The name and street address of the corporation's initial registered agent and registered office. 4. The name and address of each incorporator.

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Articles of Incorporation

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The internal rules of management adopted by the corporation at its first organizational meeting.

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Bylaws

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When a corporation has substantially complied with all conditions precedent to incorporation so that the corporation is rightful and lawful. The secretary of state's filing of the articles of incorporation is usually conclusive proof that all mandatory statutory provisions have been met.

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De Jure Corporations

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When a corporation has a substantial defect, such as not holding an organizational meeting to adopt bylaws.

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De Facto Corporations

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Acts of a corporation that are beyond its express or implied powers.

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Ultra Vires

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A director who is also an officer of the corporation.

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Inside Director

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A director who does not hold an officer position in a corporation.

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Outside Director

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The minimum number of members of a body of officials that must be present for business to be validly transacted.

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Quorum

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A corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgement and bad business decisions.

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Business Judgement Rule

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An agreement under which a shareholder assigns the right to vote his or her shares to a trustee, usually for a specified period of time. The trustee is then responsible for voting the shares on behalf of all the shareholder in the trust.

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Voting Trust

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Evidence of ownership of a specified number of shares in the corporation.

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Stock Certificates

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Rights to buy stock at a stated price by a specified date that are given by the company

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Stock Warrants

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A distribution of corporate profits or income ordered by the directors and paid to the shareholders in proportion to their respective shares in the corporation.

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Dividend

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When the corporation is harmed by the actions of a third party, the directors can bring a lawsuit in the name of the corporation against that party. If the directors fail to bring a lawsuit, shareholders can do so.

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Shareholder's Derivative Suit

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When a corporation issues shares for less than their fair market value.

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Watered Stock

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