20 Common Corporate Law Questions and Their Solutions

General Corporate Law

What is corporate law?

Corporate law refers to the rules that govern the creation, existence, and dissolution of corporations and the operation thereof to ensure adherence to legal standards.

What is a corporation?

A legal entity separate from its owners, providing limited liability protection and the ability to enter contracts, sue, and be sued.

What are the types of business structures?

Sole proprietorship, partnership, LLC, corporation (C-corp or S-corp), and nonprofit organization.

Also read:

What is limited liability?

A legal doctrine whereby shareholders of a corporation do not have direct liability for obligations or debts made by the corporation beyond their capital investment.

Structure and Governance

How is a corporation created?

Articles of incorporation are filed with the state. Bylaws, directors, and officers are formed.

What are corporate bylaws?

Internal corporate rules that set the management of the corporation in addition to conducting business, including any decision-making practices.

What is a shareholder agreement?

A shareholder’s rights and liabilities contract: This outlines the transferability of shares and how disputes must be resolved.

What does a director and officer do?

A director manages corporate policies and resolutions while an officer handles daily operations.

Corporate Compliance

What is corporate compliance?

To avoid lawsuits and ethical issues, it follows laws, regulations, and internal policies.

What is a registered agent?

A person or organization authorized to receive legal and tax documents on behalf of a corporation.

What are annual reports?

Required state filings that summarize a corporation’s financial condition and activities.

What happens if a corporation does not comply with regulations?

Possible penalties include fines, loss of good standing, or dissolution of the corporation.

Corporate Financing

What are the ways a corporation can raise capital?

Issuance of stocks, raising loans, or raising venture capital or private equity investment.

What is the difference between common and preferred stock?

Common stock grants voting rights and profits, whereas preferred stock provides fixed dividends and liquidation priority.

What are corporate bonds?

Bonds issued by corporations to raise funds promising to repay along with interest.

Contracts and Liability

Can a corporation enter into contracts?

Yes, a corporation can enter into contracts in its own name, and by doing so, it is bound lawfully as an independent entity.

What happens when a corporation breaches a contract?

The corporation may be subjected to litigation, monetary damages or specific performance required.

Piercing the Corporate Veil

A legal doctrine that courts can pierce, meaning hold shareholders liable for corporate debt if they misuse the corporation for private purposes.

Dissolution and Bankruptcy

Steps to dissolve a corporation?

File articles of dissolution, settle debts, distribute remaining assets, and report to its stakeholders.

What is the bankruptcy of a corporation?

The corporation either liquidates its assets or reorganizes to pay its creditors depending on the type of bankruptcy (Chapter 7 or Chapter 11).

These questions encompass most substantial aspects of corporate law, providing sensible answers to usual legal and operational problems.