Law School Resources

Case Briefs, Hypos, Class Notes, Outlines, & Analysis

















Law School Resources

Corporations

I.                   Formation

II.                Financing the Corporation

III.             Corporate Structure

IV.              Closely Held Corporations

V.                 Publicly Held Corporations

VI.              Fiduciary Duties

I.                   Formation

A.                   Incorporation

1.      Benefits

a)      Limited Liability

b)      Ability to Raise Capital

c)      Liquidity

d)      Continuity of Existence

e)      Centralization of Management

2.      Drawbacks

a)      Double Taxation

b)      No Flow Through Loss

c)      Limits on Earnings Retention

d)      Requires Regular Filing of Documents

3.      Minimizing Double Taxation

a)      Capital Gains Treatment

b)      Sub Chapter S Corporation

(1)   < 75 Shareholders

(2)   Single Class of Equity Stock

(3)   No Passive Activities Earnings; Max 25% investment in other activities

(4)   Owners taxed regardless of distribution.

c)      Zero-out Income

 

B.                    Duty of Care

1.      Shareholders

2.      Consumers

3.      Employees

 

C.                   Ultra Vires

1.      Purpose

2.      Powers

3.      Defective Corporations Piercing the Veil

 

D.                   Promoters

 

E.                    Premature & Defective Corporations

1.      De jure Papers filed; Inc. not complete

2.      De facto Colorable attempt to Inc.

3.      Estoppel Suppliers treat entity as Corp.

 

F.                    Piercing the Corporate Veil Generally req. 2 elements

1.      Corporate Form

2.      Disregard/Wrong

3.      Agency

4.      Statute

5.      Insider Advantage

 

II.                Financing the Corporation

A.                   Equity

1.      Common Stock

a)      Owners of Corporation

b)      Entitled to Pro Rata Distribution of Dividends

c)      Entitled to residual/net assets upon dissolution

d)      Voting Stock

e)      Paid off after Dissolution

2.      Preferred Stock

a)      Priority over Common Stock

(1)   Dividends; and/or

(2)   Liquidation

b)      Percentage of Par Value; Generally Par = $100;

ex) 5% preferred stock = $5 dividend per share

c)      Liquidation rights usually more than par

d)      Can be Cumulative Accumulates value to be paid out at future date.

e)      Partially Cumulative Preferred Only accumulates for earnings that year.

f)        Participating v. Not Participating

3.      Preferred Cumulative

4.      Preferred Participating MBCA 6.01

a)      Preference AND Right to get Pool of Residual Profits as Common Stock right

b)      Provides Security of Preferred Stock

c)      Option to enjoy large stock growth

d)      Option of Convertible Stock

e)      More expensive Rate of Return

5.      Preferred Partially Cumulative

a)      Generally non-voting; unless permitted by K

b)      May be redeemable buyback option with redemption formula

c)      Less Risky

d)      Less Controlled

e)      Fixed amount of income unless there is a Participation Right

...more