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CORPORATION - CORPORATION A separate legal entity created...

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CORPORATION A separate legal entity created by statute and owned by shareholders. I. Characteristics a. Requires formality to create – File Articles of Incorporation with the Secretary of State – Adopt Bylaws b. Sources of Funding i. Equity & Debt Securities ii. Common Stock iii. Preferred Stock iv. Debt c. Liability i. Liability of shareholders – normally limited to amount of investment. May have personal liability if creditor pierces the corporate veil. ii. Liability of Directors & Officers – based on a breach of fiduciary duty. Officers are agents of the corporation. Liability for negligence but not honest errors of judgment, i.e. Business Judgment Rule iii. Limited liability – shareholders have limited liability. Means there is only so much liability given to a specific person. d. Management & Control i. Centralized Management – directors responsible for overall management & policy – officers carry out policies determined by directors. Directors elect officers.
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