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Business Associations/Corporations
Southern Illinois University School of Law
Koehler, Michael

Corporations
Professor Koehler
Spring 2016
 
 
Course Overview
Brief Overview of Other Business Organizations
Corporate Personhood
Corporate Formation and Internal Affairs Doctrine
 
The Nature of the Corporation
Role and Purpose
Limited Liability
The Legal Role, Rights and Responsibilities of Corporate Actors
 
 
 
A Corporation
Board of Directors
Executive Officers
 
Public Company Issues
Role of the SEC
Securities Law Issues
Initial Public Offerings
Disclosure Requirements
Insider Trading
M&A Transactions
Limited Liability Companies
The Cases
There is a dispute about something between corporate actors
Most often between shareholders and the board of directors or executive officers
The substantive and procedural framework in which the dispute will be resolved
Business Organizations
Sole Proprietorship
 
 
Limited Liability Company
Sole Proprietorships
Not a separate legal entity
Owner operated
Numerous in number
 
Ease of creation, flexible, lack of formality
Complete ownership and control
All profits are the owner’s
Not a separate entity for tax purposes
All the risk is the owners
Unlimited personal liability
No distinction between personal assets and business assets
Limited in ability to raise capital
Limited existence/lack of continuity
Partnerships
Agreement (express or implied) by two or more persons to carry on a business for profit
Partners are co-owners, joint control over its operation, right to share in profits, equal responsibility for losses
The above the default rules, but the default rules may not serve your client well, thus a written partnership agreement is always recommended.
Ease of creation
Flexible/lack of formality
Not a separate entity for tax purposes
Unlimited personal liability
No distinction between personal assets and business assets
Everything a partner does in connection with partnership business binds the partnership as well as other partners
Legal entity formed under state law that is separate from the natural persons who own, manage, and operate the entity
Shareholders “own” the entity and elect a board of directors who are responsible for overall management of the entity
Board of directors appoint corporate officers who are responsible for the day operation of the entity and serve at the discretion of the board
Perpetual existence
Limited liability of owners (shareholders) subjected to certain exceptions
Ability to raise capital through issuance of shares (i.e. ownership)
Many formalities in forming and operating the entity thus more “expensive,” particularly publically traded corporations
Double taxation
Limited Liability Companies
Not always an option
In certain cases, unsettled legal principles
Compared to sole proprietorships and partnerships
More formalities
Compared to corporations
Limited ability to raise capital
Limited existence/lack continuity
Corporate Personhood
Santa Clara County v. Southern

l or statutory, are extended to corporations, the purpose is to protect the rights of these people
Protecting the free-exercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies.”
“Legal” Home in Delaware
Approximately 1 million legal entities
Delaware has a “natural person” population of 917,000
50% of all publically traded corporations
65% of the Fortune 500
83% of new initial public offerings were incorporated in Delaware
 
Delaware General Corporation Law
Flexible law, does not attempt to regulate every aspect of corporate behavior, gives the board lots of discretion to manage the corporation subject to fiduciary duties
Has been replicated in whole or in part by many states and provides, in many respects, a de facto national corporations law
Court of Chancery (since 1792)
A trial court, but no juries
Experienced judges
Given its unique focus, it has less clogged dockets and is thus more efficient
Developed, predictable body of case law
Priority of state government
Approximately 25% of state budget is corporate taxes/fees
Lawyers are comfortable with Delaware law
John Deere Co.