Cunningham F06 corporations outline

Cunningham F06 corporations outline - Corporations I. Forms...

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Corporations Outline Page 1 I. Forms of Business Organization A. A corporation is a means of organizing a business enterprise. All default rules can be changed by agreement. The major characteristic of the corporate form is centralization of power in a Board of Directors. The BD manages the affairs of the business for the SH. Characteristics Corporation Partnership L.L.C. Generally Rules of the state corporate code (CC) are accepted by default. Rules of State CC are NOT accepted by default. Formation State Corporate Code applies by default for AI. Often filling out & filing of paperwork is farmed out to specialized firms. Articles of Incorporation (AI) is more detailed. File something that looks like the AI with a State office. Continuity Perpetual existence. Default rule = termination upon death of a partner. Bkptcy may trigger dissolution. Management Centralized: Exclusive legal power to run the corp. rests with Bd. Diffused: Everyone has equal voice in how business is run. Tailored to needs of the business. Investor Liability Limited. SH are shielded from personal liability beyond their investment. Creditor cannot recover personally from SH. Full: Creditors can recover personally from each partner. Limited Transferability of Interest Freely Only by consent of all the partners Income Taxation “Double taxation”— both corporation & SH pay tax on dividends “See through”— only one level of taxation. Not taxed. Treated as a partnership.
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Corporations Outline Page 2 B. .Separation of ownership (SH) from control (BD) causes several problems: 1. Contract should be entered into to define the relationship; 2. The State CC fills out the terms of the k by default; 3. Extra-contractual duties, like fiduciary duty, is a matter of corporate, not k, law. Any implied terms or gaps are filled in by the default rules. 4. Fiduciary Duty : BD has to look out for the interests of the SH and act as a RPP in the situation. There is also a duty of loyalty, so that if the BD interests conflict with SH interests, BD interests must be subordinated. (see Coffee, 26-34). II. The Process of Incorporation A. Formation of corporations, partnerships, LLCs is not substantively different: 1. Prepare Articles of Incorporation (relatively standardized), that set out: a) The power structure; b) Who the managers and owners are; c) What percentage each owns; and d) How much each makes. 2. File AI with State agency. B. A lawyer must consider many different issues including: 1. Who is the client? Who can invoke attorney-client privilege. 2. Can you represent several people in a single transaction? What if their interests don’t fully intersect? 3. Who should own how much? 4. Who will be on the BD? 5.
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Cunningham F06 corporations outline - Corporations I. Forms...

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