ch37

West's Business Law with Online Research Guide, 9th Edition

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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. 37: Corporations – Formation and Financing - No. 1 West’s Business Law (9th ed.)
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Retained Earnings: Corporate profits not distributed to shareholders. Ch. 37: Corporations – Formation and Financing - No. 2 West’s Business Law (9th 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. 37: Corporations – Formation and Financing - No. 3 West’s Business Law (9th ed.)
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CORPORATE POWERS The express powers of a corporation are found in the following sources, and any conflict between sources is to be resolved according to the following priorities: (1) United States Constitution takes priority over (2) State Constitution(s) , which take priority over (3) State Statutes , which take priority over (4) Articles of Incorporation filed by the corporation in the state of incorporation, containing information about the corporation’s organization and functions, which take priority over (5) Corporate By-Laws adopted by the corporation’s shareholders, which take priority over (6) Resolutions of the Corporation’s Board of Directors – policy statements adopted periodically by the board. Implied Powers:
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ch37 - BASICS OF CORPORATIONS Corporation A legal entity...

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