Law Chapter 38 – Corporations formation and financing

Public corporation
Corporation created by the government to help administer law

– Often have specific government duties to fill

Private corporations
Corporations for private purposes

– Do not have government duties to fill

For profit corporations
Objective is to operate for profit

– Shareholders profits can occur as dividends or market price of the stock can increase

Nonprofit corporations
May earn profits but do not distribute them to shareholders because they do not have shareholders

– Provide services to their members and reinvest most of their profits in the business

Domestic corporation
A corporation in the particular state in which it is incorporated
Foreign corporation
A corporation in states in which it conducts business but is not incorporated
Alien corporation
A business incorporated in another country

– Ex. A U.S. corporation that wants to do business in Canada is an alien corporation in that country.

Publicly held corporation
Stock that is available to the public

– Managers of these corporations generally do not hold large percentages of the coporation’s stock

S corporation
A type of closely held corporation that enjoys the tax status of a partnership

– Income is taxed when it is earned

– Formed under state law just like normal corporations

– Shareholders report their income from corporation only once as personal income

– Shareholders may deduct corporate losses from their personal income, reducing their taxes in case of loss

Promoters
Begin the corporate creation and organization process by arranging for necessary capital, financing, and licenses

– Prepare the corporation’s incorporation papers

– Are not agents of the infant corporation because they cannot serve as such for something that does not exist yet

Incorporator
An individual who applies to the state for incorporation on the behalf of a corporation

– RMBCA requires only one incorporator to incorporate a business

Certificate of incorporation
Document certifying that the corporation is incorporated in the state and authorized to conduct business
Bylaws
Rules or regulations that govern the corporation’s internal management
Debt securities or bonds
Represent loans to a corporation by another party
Equity securities
Stock owners actually own part of the corporation