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Chapter 39 corporations

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Chapter 39 Corporations Corporations • Definition: an artificial being created by operation of law, with an existence separate from the individuals who own and operate it. • Other Advantages: • Limited liability; • Centralized management; • Ability to raise capital; and • Transferability of shares. Corporations • Disadvantages • Expense; • Formalities; and • Regulations. Corporations • Corporations are treated as artificial persons that can: • sue or be sued in the corporations’ own name; • hold title to and transfer property; and • enter into and enforce contracts. Piercing The Corporate Veil • If a court “pierces the corporate veil,” the corporate entity is disregarded and the wrongdoers can be sued individually. • The following factors may persuade a court to pierce the corporate veil: • the corporation was created never to make a profit or had insufficient capital at the time of its formation; • the corporation does not observe statutorilyrequired corporate formalities; and • personal and corporate interests are commingled. Corporate Taxation • Corporate profits are taxable. Corporations may do one of two things with corporate profits – retain them or pass them on to shareholders in the form of dividends. • Dividends: corporate profits distributed to shareholders in proportion to their shares held. • Retained earnings: corporate profits that are not distributed. Constitutional Rights • A corporation is a ? ...
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