Corporate Powers

The Nature of the Corporation

ü 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.

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

ü 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.

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

Corporate Personnel

ü Individual shareholders own corporation.

ü Shareholders elect board of directors to manage corporation.

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

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

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

Corporate Taxation

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

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

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

Constitutional Rights of Corporations

ü 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.

ü 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

ü 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.

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

Corporate Sentencing Guidelines

ü 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.

Corporate Powers

ü 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.