Spring 2018
Business Law
Study Guide – Exam #3
Corporations and Officers and Directors
C Corporation- A C corporation is a corporation that does qualify for or has not elected to be
taxed as an S corporation. Where there is a C corp, there is double taxation; that is, a C corp pays
taces at the corporate level and the shareholders pay taxes on dividends paid by the corporation.
A corporation with more than 100 shareholders
Closely held corporation / privately held corporation- A private-for-profit corporation whose
shares are usually owned by a few shareholders, who are often family members, relatives, or
friends
Unicorns
Public corporation / publicly traded corporation- A corporation that has many shareholders
and whose securities are often traded on national stock exchanges
Typical corporate powers – ownership of property, right to contract, control of corporate
assets
Common stock- Equity security that represents the residual value of a corporation
Preferred stock- A type of equity security that is given certain preferences and rights over
common stock
Bonds- A long-term debt security that is secured by some form of property. The property
securing the bond is called collateral
Stock buyback by corporations
Liquidity of stocks and bonds of C corporations which are publicly traded v Unicorns and
privately held corporations
Articles of incorporation- The basic governing documents of a public corporation. It must be
filed with the secretary of state of the state of the incorporation
Bylaws- A detailed set of rules adopted by the board of directors after a corporation is
incorporated that contains provisions for managing the business and the affairs of the corporation
S corporations- Best of partnership law and best of corporate law, but you must stay small. Has
shareholders, directors and officers. Limited to 100 shareholders, but no limit on amount of
capital from those shareholders. Avoids imposition of income taxes at the corporate level while
retaining many corporate advantages.
B Corporations
Public benefit and mission driven corporations
Proxy- A shareholder’s authorizing of another person to vote the shareholders shares at the
shareholders meetings in the event of the shareholders absence
Artificial person- An entity created by law and given certain legal rights and duties of a human
being. It can be real or imaginary and for the purpose of legal reasoning is treated more or less as
a human being
Parent- A company that controls other, smaller businesses by owning an influential amount of
voting stock or control
Subsidiary- A company with voting stock that is more than 50% controlled by another
company, usually referred to as the parent company or the holding company
Offshore corporation- A corporation which is incorporated under the laws of a different
country than in the jurisdiction of the incorporation
Advantages of Delaware corporate laws- Benefit large corporations. Companies incorporated
