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Assignment Case

Essay by   •  April 8, 2012  •  Essay  •  3,036 Words (13 Pages)  •  1,313 Views

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existence, the promoters have joint personal liability on all contracts that were signed. If the corporation is formed, a resolution must be passed by the board of directors in order for it to be bound by the contracts. Even then, the promoters are still liable unless the parties enter into a novation.

Articles of Incorporation - The corporate charter is the basic governing document for the corporation. It includes the name, number of authorized shares, address of the initial office and registered agent, and the name and address of each incorporator. This paper is a matter of public record.

Amending the Articles of Incorporation - In order for the articles to be amended, the board must pass a resolution recommending the amendment and the shareholders must vote to support the change. The corporation will file an article of amendment with the secretary of state.

Corporate Status - Corporate existence begins when the articles are filed. After that, only the state can bring a proceeding to cancel or revoke the incorporation or involuntarily dissolve it. Failure to file articles is taken as conclusive proof of the nonexistence of the corporation.

Purpose of a Corporation - Most articles include a general-purpose clause allowing them to engage in any legal activities, but some state a limited-purpose clause, restricting their activities to specific purposes.

Registered Agents - The articles will indicate a registered office and registered agent for purpose of service.

Corporate Bylaws- The governing documents of an organization, bylaws are not filed with any government official. Bylaws establish the internal management structure and are adopted by the incorporators or the board.

They establish the time and method for the annual meeting, board meetings, special meetings, duties of board members, determine what a quorum is and the required vote, and establish committees.

The board may amend them at any time, unless this right is specifically reserved to the shareholders.

Corporate Seal - This design contains the name and date of incorporation and is often required on certain legal documents.

Organizational Meeting - Following the filing of the Articles of Incorporation, the directors meet to adopt bylaws, elect officers, and transact business.

Contemporary Environment: Close Corporation Election under State Corporation Law

Any corporation that does not qualify for or elect to become an S corporation, or any corporation with more than 75 shareholders. C corporations pay federal tax at the corporate level, and distribute profits to shareholders as dividends, which are taxed with personal income tax.

Contemporary Environment: S Corporation Election for Federal Tax Purposes

S corporations pay no federal tax at the corporate levels, but the income or loss

is passed through to the individual shareholders and taxed with their personal income tax.

Election to be an S Corporation - To be an S corporation, the organization must be a domestic corporation with 75 or fewer shareholders who are residents of the U.S., and must have only a single class of stock.

The Corporation as a Legal "Person" - Corporations are created by statute as separate legal entities. Corporations are incorporated in one single state, and they are governed by the law and by the articles of incorporation. The articles of incorporation, or corporate charter, include, among other provisions, the name, the number of authorized shares, address of the initial office and registered agent, and the name and address of each incorporator. In fact, the articles of incorporation have such a relevance that corporate existence begins when the articles are filed and, at the same time, failure to file articles is taken as conclusive proof of the nonexistence of the corporation.

In this case, from an ethical point of view, Goodman should take responsibility for the agreement he personally entered into, no matter what is the business form under those services were going to be performed.

From a legal standpoint, DDS entered into an agreement with Goodman before his company was "formally" incorporated. In that case, the corporation becomes liable for the contract entered into by the promoter before the corporation was formed if it agrees to be bound by ratification, adoption, or novation. But the promoter still remains personally liable on the contract.

36.11. Yes, Goodman can be held personally liable for the renovation contract with DDS. A corporation becomes liable for a contract entered into by a promoter before the corporation was formed if it agrees to be bound by ratification, adoption, or novation. Liability for the contract does not automatically transfer because the promoter was acting as the agent of a nonexistent principal when the contract was entered into. In this case, ratification of the promoter's contracts was not allowed in the state of Washington, and no novation had occurred place. Therefore, if the newly formed corporation chose to be bound by the renovation contract, it would have to be by adoption. Upon adoption, the corporation becomes liable for the contract. However, the promoter remains personally liable on the contract, unless the third party agrees to release him. Since DDS did not agree to release Goodman from liability on the renovation contract, he remained personally liable with the newly formed corporation. Goodman v. Darden, Doman & Stafford Associates, 100 Wn.2d 476, 670 P.2d 648, Web 1983 Wash. Lexis 1776 (Supreme Court of Washington).

Corporations are artificial persons created as separate legal entities; therefore they can sue or be sued in their own names. In this case, when the company was involved in the dispute, Sammak decided to sue Deister Corporation, and the fact that the company is considered as a legal person for most purposes, allows Sammak to do so.

36.1. Legal Entity. Yes, Deister Corporation can be sued. Corporations are the most dominant form of business organization today. When a corporation is properly incorporated pursuant to the laws of the state of incorporation, the corporation becomes a separate legal entity for most purposes. Corporations are treated, in effect, as artificial persons created by the state that can sue or be sued in their own names. Deister was a business properly incorporated under the laws of the state of Pennsylvania. When the corporation became involved in a dispute with Sammak,

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