BusLaw11.038 - BASICS OF CORPORATIONS Corporation A legal...

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BASICS OF CORPORATIONS Corporation: A legal entity formed in compliance with the statutory requirements of its state of incorporation, owned by shareholders whose liability is limited to their investment in the corporation, and managed by (i) a board of directors elected by the shareholders and (ii) officers employed by the board of directors. Directors: Persons elected by shareholders and responsible for overall management of the corporation. Officers: Persons hired by the board of directors and responsible for operations of the corporation. Shareholders: Owners of the corporation in proportion to their ownership of corporate stock outstanding. Corporate Taxation: Corporate profits are taxable to the corporation when they are distributed in the form of dividends, but not when they are “reinvested” in the corporation as retained earnings. Dividends: Corporate profits distributed to shareholders in proportion to their shares held. Ch. 38: Corporations: Formation and Financing - No. 1 Clarkson et al.’s Business Law (11th ed.)
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Retained Earnings: Corporate profits not distributed to shareholders. Ch. 38: Corporations: Formation and Financing - No. 2 Clarkson et al.’s Business Law (11th ed.)
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CORPORATE RIGHTS AND LIABILITY Constitutional Rights: A corporation is a “person” for purposes of most rights guaranteed by the U.S. Constitution ( e.g. , due process, double jeopardy, freedom of speech). However, corporations do not enjoy Fifth Amendment protection against self- incrimination or the protection of the Privileges and Immunities Clause. Tort Liability: A corporation is liable, under the doctrine of respondeat superior , for the torts committed by its agents or employees within the course and scope of their duties. Criminal Liability: A corporation may be liable for the criminal acts of its agents or employees, as long as the criminal sanctions can be applied to the corporation ( e.g. , fines). Ch. 38: Corporations: Formation and Financing - No. 3 Clarkson et al.’s Business Law (11th ed.)
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DOMESTIC, FOREIGN, AND ALIEN CORPORATIONS Domestic Corporation: A corporation incorporated in a given state and doing business in that same state. Foreign Corporation: A corporation doing business in a given state, but incorporated in another state. Alien Corporation: A corporation doing business in a given state, but incorporated in a foreign country (or otherwise formed, as provided for by the laws thereof). Foreign and alien corporations do not automatically have the right to do business in a state other than the one in which they are incorporated. They may be required to obtain a certificate of authority from any other state in which they want to do business. A corporation doing business in two or more jurisdictions can be a domestic corporation in one jurisdiction, and a foreign corporation in the other(s). The distinction depends on in which jurisdiction the corporation’s activity is being assessed.
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