§ 1: The Nature of the Corporation

• A corporation is a creature of statute, an artificial “person.”

  • Most states follow the Model Business Corporation Act (MBCA) or the RMBCA, that are model corporation laws.

• The shares (stock) of a corporation are owned by at least one shareholder (stockholder).

• The corporation substitutes itself for the natural persons in conducting corporate business and incurring liability, but its authority and liability are separate and apart from the shareholders.

• In certain situations, the corporate “veil” of limited liability can be pierced, holding the shareholders personally liable.

Corporate Personnel

• Individual shareholders own corporation.

• Shareholders elect board of directors to manage corporation.

• Board of directors hires officers to run corporation on a daily basis.

• Body of shareholders can change constantly without affecting the continued existence of the corporation.

• Shareholder can sue corporation and be sued by corporation and bring suit for corporation in some instances (derivative action).

Corporate Taxation

• Corporate profits can either be kept as retained earnings or passed on to the shareholders as dividends.

• Corporate profits are taxed under federal and state law as a separate “person” from its shareholders.

• Regular “C” corporations are taxed twice: at the corporate level and at the shareholder level.

Constitutional Rights of Corporations

• A corporation is an artificial “person” and has constitutional rights to:

  • Equal protection;

  • Access to the courts, can sue and be sued;

  • Right to due process before denial of life, liability or property.

• A corporation is an artificial “person” and has constitutional rights to:

  • Equal protection;

  • Access to the courts, can sue and be sued;

  • Right to due process before denial of life, liability or property.

Torts and Criminal Acts

• A corporation is liable for the torts committed by its agents or officers within the course and scope of their employment under the doctrine of respondeat superior.

• Corporation can be liable for criminal acts, but only fined. Responsible officers may go to prison.

Corporate Sentencing Guidelines

• Federal Organizational Corporate Sentencing Guidelines provide specific sentencing guidelines for crimes committed by corporate employees (white collar crime).

  • 32 levels of offenses:

    • Culpability score.

    • Credits can be applied.

§ 2: Corporate Powers

• A corporation may act and enter into contracts as any natural person, except as limited by:

  • U.S. Constitution.

  • State constitutions.

  • State statutes.

  • Its own articles of incorporation.

  • Its own corporate bylaws.

  • Resolutions by its own board.

Express Powers

• The express powers of a corporation are found in the corporation’s articles of incorporation, the laws of the state of incorporation, and in the state and federal corporations.

• Corporate by-laws may also grant or limit a corporation’s express powers.