UNIT 5 LAW307 HOMEWORK
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Forming a corporation
Forming a corporation
Beverly Baxter
Post University
LAW307 Business Organizations & Practice
Professor: Misenti
Assignment Due Date: October 2, 2022
Forming a corporation
A corporation is, “an organization that is formed under state or federal law and exists, four
legal purposes, as a separate being or an “artificial person.” Complying with foreign registration
is imperative to your corporation as you can suffer severe consequences by not registering to do
business in another state. “Foreign qualification is the procedure by which a corporation, LLC, or
other statutory business entity receives the authority to do business in a state other than its
formation state. (It is also sometimes referred to as “registration”)”
Why I would comply with the requirements under foreign registration because. Forming a
corporation takes a lot of time, money, and formalities. No corporation wants to be subject to
fines or third parties through your corporation. States can also prevent your corporation from
filing a suit within the courts until you qualify and or register. Keeping your corporation within
good standing is also good to look over. Making a subchapter (S) election is one I feel all
corporations should elect to do.
First, under the Internal Revenue Code is where subchapter (S) is formed. Secondly, all
shareholders must agree to the election which is a con. However, (S) corporation’s income passes
through to their shareholders in the corporation and is not taxed. Furthermore, since the
recognition of S Corporations from the Internal Revenue Code, tax returns have passed regular
income taxes that are filed for other corporations which is another reason why I would make a
subchapter (S) election. Lastly, there are requirements S corporations must be eligible for and to be treated as one.
They also must file a 2553 form. The requirements S corporations must be eligible for are. 1.
“The corporation must be a domestic corporation, or a domestic entity. Eligible to elect to
be treated as a corporation that has filed a form 2553.
2.
The corporation must have no more than 100 shareholders.
3.
The corporation’s shareholders must all be individuals, estates, or exempt organizations
or trusts that meet certain prerequisites.
4.
Nonresident aliens may not be shareholders.
5.
The corporation cannot issue more than one class of stock.”
Forming a corporation
There are a lot of requirements. However, as someone forming a corporation. I want to ensure I
have my company within standards, have trustworthy shareholders, and follow all requirements
to prevent anything potentially happening. Avoiding the piercing veil of limited liability has its pros and cons. However, how I
would avoid it is by. Making sure my corporation is following statutes, rules, and not violating
anything such as fraud, gaining higher equity illegally, or injustice. Also, “when a corporation is
formed or operates to commit fraud or other illegal activity, or to defend a crime, the corporation
veil may be pierced and any shareholder, directors, or officer who is responsible for the
wrongdoing may be held personally accountable.” For these reasons, is why avoiding the
piercing veil of limited liability is important.
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Forming a corporation
References
Schneeman, A. (2013). Law of Corporations and other business organizations (6
th
ed). Boston, MA: Cengage Learning, P.260
https://ambassadored.vitalsource.com/reader/books/9781285401768/pageid/299
Feldman, S. (2020, July 7).
Understanding why companies have to register to do business in another state
. Ttps://www.wolterskluwer.com. https://www.wolterskluwer.com/en/expert-
insights/why-do-states-make-companies-register-to-do-business-there
Schneeman, A. (2013). Law of Corporations and other business organizations (6
th
ed). Boston, MA: Cengage Learning, P.279
https://ambassadored.vitalsource.com/reader/books/9781285401768/pageid/318
Schneeman, A. (2013). Law of Corporations and other business organizations (6
th
ed). Boston, MA: Cengage Learning, P.271
https://ambassadored.vitalsource.com/reader/books/9781285401768/pageid/310
Forming a corporation