Business Law Today Standard Edition: Summarized Cases 12e

Business Law Todaystandard Edition Text Summarized Cases 12eroger

Summarized Cases and core concepts from Business Law Today Standard Edition, 12th Edition by Miller, focusing on corporations, formation, classification, powers, veil piercing, and financing.

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Business law provides the legal framework within which business entities operate, with corporations being a central focus due to their unique legal nature and extensive regulation. A corporation is a legal entity created and recognized by state law, with various classifications, formation procedures, and operational powers that influence business activities and liabilities. This paper explores the essential aspects of corporations, including their classification, formation, powers, and financing, along with the legal implications of piercing the corporate veil and the burgeoning field of corporate financing options.

Nature and Classification of Corporations

Corporations are distinguished by their unique status as legal entities separate from their shareholders. They are managed by a board of directors, responsible for overarching policies and decision-making, while corporate officers and employees handle daily operations. Shareholders enjoy limited liability, meaning their exposure is restricted to their investment in the corporation. Corporations can generate income through dividends or retain earnings for future growth, and they may be liable for torts and criminal acts committed by their agents or employees.

Classifications of corporations include domestic, foreign, and alien types, depending on where they are incorporated and operate. Public corporations serve governmental purposes, while publicly traded corporations are listed on securities exchanges. Nonprofit corporations, such as hospitals and charities, operate without profit motives. Close corporations, owned by few persons, often family members, mimic partnerships but are governed by specific legal requirements. S corporations have particular restrictions, including limits on shareholders and types of stock, and are taxed like partnerships. Professional corporations cater to licensed professionals, and benefit corporations aim for social and environmental impact alongside profit.

Formation and Powers

The process of forming a corporation involves selecting a state of incorporation, choosing an appropriate name, drafting and filing articles of incorporation that include key details like the corporation’s name, stock details, and registered agent. The first organizational meeting adopts bylaws—internal rules governing management. Proper incorporation must follow statutory requirements; failure to do so may result in a de jure or de facto corporation, or the application of the doctrine of corporation by estoppel.

Corporations possess express powers explicitly granted by their articles, laws, or bylaws, and implied powers necessary to fulfill their lawful purpose. The ultra vires doctrine restricts corporations from acting beyond their authorized powers; however, shareholders may seek injunctions against ultra vires acts that threaten the corporation's legality or purpose.

Piercing the Corporate Veil

Although corporations provide limited liability, courts may disregard this shield in certain circumstances, piercing the corporate veil to hold shareholders personally liable. Factors include fraud, misrepresentation, failure to follow corporate formalities, commingling of personal and corporate assets, and the corporation being undercapitalized or set up to perpetrate a fraud. This is particularly a concern in close corporations where personal and corporate interests may blur, increasing risk for creditors and other stakeholders. Cases such as Brennan’s, Inc. v. Colbert exemplify situations warranting veil piercing.

Corporate Financing

Corporations utilize various financing methods, including bonds and stocks, to raise capital. Bonds are securities representing debt owed by the corporation, providing creditors with fixed interest payments and principal repayment upon maturity. Stocks represent ownership interests; common stock confers voting rights and dividends proportionate to ownership, whereas preferred stock has priority over common stock in dividends and liquidation proceeds.

Innovative funding sources such as venture capital involve outside investors providing capital to start-ups in exchange for equity and potential future profits. Private equity capital involves funds invested by private firms to acquire and reorganize existing companies. Crowdfunding has emerged as a popular method, enabling numerous small investors to pool resources via online platforms for various ventures, democratizing access to investment opportunities.

Legal considerations in corporate financing include securities regulations, disclosure requirements, and protections for investors. Understanding these mechanisms is vital for entrepreneurs, investors, and legal practitioners involved in corporate growth and sustainability.

References

  • Gomez, A. (2019). Corporate Law: Text, Cases, and Materials. Oxford University Press.
  • Miller, R. L. (2020). Business Law Today: Comprehensive Edition. Cengage Learning.
  • Reed, L. (2021). Corporate Finance: Principles and Practice. Pearson.
  • Sealy, L. & Worthington, S. (2018). Cases and Materials in Company Law. Oxford University Press.
  • Clark, T. (2019). Corporate Governance and Accountability. Routledge.
  • Johnson, A. (2020). Securities Regulation and the Modern Corporation. Wolters Kluwer.
  • Roe, M. (2020). The Politics of Corporate Law. Harvard University Press.
  • Schaffer, R., et al. (2017). Securities Regulation and Enforcement. Foundation Press.
  • Wilkins, M. (2018). Corporate Finance: A Practical Approach. McGraw-Hill Education.
  • Bradley, M., & Roberts, D. (2019). Venture Capital Deal Structures. Stanford Law Review.

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