test_2_bus_law_2

test_2_bus_law_2 - Corporate Law A corporation is a legal...

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Corporate Law A corporation is a legal entity, has a life on its own Advantages of being Corporated 1. Limited Liability Stockholders, if played by the rules of the game. All what they can loose is what they paid for their stock. 2. Much easier to transfer ownership 3. The corporation can have a perpetual existence (last forever) 4. Potential tax advantages What do you need to do in order to create a Corporation – Requirements of the NC Business Corporation Act 1) Perpetual existence 2) Purchase and sell property. 3) Sue and be sued in the name of the corporation 4) It can lend money for corporate purposes 5) Corporation has any other power necessary to accomplish the … of the corporation. (a) Must file the Articles of Incorporation with the Secretary of State (b) Articles of Incorporation must be signed by the Incorporator --What must be included in the Articles of Incorporation 1) Name = can not be deceptively similar to another successful business which is already in existence 2) The Purpose for the formation of Incorporation = state something like “the purpose of XYZ is to own and operate a convenience store” ---- a problem with something like that is you don’t leave yourself a window to expand ----- for example, if XYZ were to own and operate a Motel, it would be acting Ultra vires : beyond the scope of its power, so does not have power to own and operate a motel, giving any claimant the ability to go against personal assets of the stockholder who is responsible for the company acting Ultra vires ------- Better wording is “XYZ has the purpose of owning and operating in lawful business” 3) What is the duration of the company = how long is the company going to last (as long as we are making money). Ordinarily the Articles would state that the Corporation is in existence for Perpetuity 4) Capital Stock Structure = would cover things such as: (a) Classes of stock – common, preferred, voting, non voting---- it would also include the rights of those classes of stock (b) Number of Shares Authorized to be issued – should authorize an amount in which it leaves an opportunity for there to be another investor to join the corporation (Let’s assume we have issued 100,000 shares for 10 dollars each: $1M. So company authorizes the number of 100,000. But store is very profitable and they decide to build and operate more stores in other cities. No oppty however to issue more stock)
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(c) Establish Par Value – important for 1 reason ---- a company can not (is not supposed to) sell stock for less than Par value - ----- we state that the Par value is $500, meaning the company can never sell stock for less than $500…therefore if we sell stock for $300, so BELOW par we have sold Watered Stock -------- can establish Par value at a nominal amount or stating that there is No-Par value, this approach is more intelligible -------- companies believe that the public thinks stock will be worth more if it has a Par value of some amount Stated Capital is the Par Value of the stock issued by the company
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test_2_bus_law_2 - Corporate Law A corporation is a legal...

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