Express Powers

ü 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.

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

Implied Corporate Powers

ü Corporation has implied powers to: to perform all acts reasonably necessary to accomplish its corporate purposes, e.g.,:

• Borrow and lend money.

• Extend credit.

• Make charitable contributions.

ü A corporate officer can bind corporation in contract in matters connected with the ordinary business affairs of the enterprise.

Ultra Vires Doctrine

ü Corporate acts are beyond the express or implied powers of the corporation as stated in state statute or the corporation’s own articles of incorporations and are considered to be “ultra vires” (beyond the powers).

ü Corporate articles of incorporations now adopt very broad purposes to prevent lawsuits against the corporation.

ü The Following remedies are available for ultra vires acts:

ü Shareholders can bring action for corporation.

ü Corporation can recover damages from its officers and directors.

ü Attorney general of state may bring action to dissolve corporation for ultra vires acts.

Classification of Corporations

ü Domestic corporation does business in its state of incorporation.

ü Foreign corporation from X state doing business in Z state.

ü Alien Corporation: formed in another country doing business in United States.

ü Public and Private.

ü Nonprofit.

ü Close Corporations.

ü Shares held by few shareholders.

ü More informal management,similar to a partnership.

ü Restriction on transfer of shares.

ü “S Corporations”: Avoids the federal “double taxation” of regular corporations at the corporate level. Only dividends are taxed to the shareholders as personal income. IRS requirements:

ü Corporation is domestic, fewer than 75 shareholders, only one class of stock, no shareholder can be a non-resident alien.

ü Professional Corporations.

Corporate Formation

ü The process of incorporation generally involves two steps:

Preliminary and Promotional Activities; and

The Legal Process of Incorporation.

Promotional Activities

ü Before corporation is formed, promoters are the persons who take the preliminary steps of organizing the venture and attracting investors via subscription agreements.