C ONTENTS

Table of Forms xii Preface xv

Acknowledgments xxi

1 A

GENCY IN A

B

USINESS

O

RGANIZATION

1

Definition and Elements of Agency 1 Types of Principals 2

Types of Agents 2 Agency Authority 5

Torts Committed by Agents 7 Agents for a Business Enterprise 9

2 S

OLE

P

ROPRIETORSHIP

13

Characteristics of a Sole Proprietorship 13 Liability of the Sole Proprietor 14

Taxation of a Sole Proprietorship 14 Formation and Operation of a Sole

Proprietorship 15

Termination upon Death of the Proprietor 19

3 G

ENERAL

P

ARTNERSHIP

30

Characteristics of a Partnership 30 Partnership Property 33

Partner’s Interest in a Partnership 35 Management of a Partnership 36 Profits and Losses 42

Liability of Partners 44

Dissolution and Termination of a Partnership 46

Tax Considerations of a General Partnership 52

Formation and Operation of a General Partnership 56

Registration as a Limited Liability Partnership 74

4 L

IMITED

P

ARTNERSHIP

89

Characteristics of a Limited Partnership 89 General Partners of a Limited Partnership 90 Limited Liability and Contributions 91 Management and Control 92

Admission, Substitution, and Withdrawal of a Limited Partner 93

Dissolution of a Limited Partnership 94 Taxation of a Limited Partnership 96 Formation and Operation of a Limited

Partnership 97

5 L

IMITED

L

IABILITY

C

OMPANY

121

Characteristics of a Limited Liability

Company 122

Statutory Powers of a Limited Liability Company 123

Ownership and Management of a Limited Liability Company 124

Managers 126

Transferability of Membership Interest 128 Finance 129

Continuity of Existence and Dissolution 130 Conversion of Other Entities and Merger 131 Taxation of a Limited Liability Company 132 Formation and Documentation of a Limited

Liability Company 132

6 B

USINESS

C

ORPORATION

158

Entity Characteristics of a Corporation 158 Statutory Powers of a Corporation 160 Ownership and Management of a

Corporation 164

C O N T E N T S

Limited Liability 176

Continuity of Existence and Dissolution 177 Taxation of a Corporation 178

7 V

ARIATIONS ON THE

C

ORPORATE

F

ORM

193

Public Corporations 193 Close Corporations 209 Professional Corporations 214

8 F

ORMATION OF A

C

ORPORATION

229

Preincorporation Responsibility 229 Preincorporation Share Subscriptions 232 Selection of Jurisdiction 235

Selection and Reservation of Corporate Name 241

The Articles of Incorporation 249 Filing and Other Formalities 270 Corporate Existence 271

Formalities after Formation of a Corporation 272

Bylaws 273

9 C

ORPORATE

F

INANCIAL

S

TRUCTURE

293

Generally 293

Types of Corporate Securities 293 Equity Securities 294

Stages of Equity Securities 295 Par Value or No Par Value 296 Certificates for Shares 297 Classifications of Shares 300 Fractions of Shares and Scrip 307 Consideration for Shares 307 Common Stock Rights 308 Preferred Stock Rights 310 Transfer Agents 318

Debt Securities (Bonds) 318

Types of Corporate Debt Securities 320 Trust Indenture 323

Common Provisions in Debt Securities 325 Important Considerations Regarding Debt and

Equity 331

10 M

EETINGS

342

Types and Purposes of Meetings 342

Requirement for Organizational Meetings 343 Directors’ Organizational Meeting 343

x Contents

Incorporators’ Organizational Meeting 344 Business Conducted at Organizational

Meetings 344

Directors’ Regular and Special Meetings 358 Shareholder Meetings 361

Shareholder Business and Vote Required 368 Action without a Meeting 373

Minutes 375

Special Preparation for Public Company Shareholder Meetings 377

11 C

ORPORATE

D

IVIDENDS AND

O

THER

D

ISTRIBUTIONS

384

Types of Corporate Distributions 384 Sources of Funds for Distribution 385 Cash and Property Dividends 387 Share Dividends 390

Stock Splits 393

Corporation’s Purchase of Its Own Shares 395 Partial Liquidations 398

Dissolution and Liquidation 398

12 E

MPLOYMENT AND

C

OMPENSATION

405

Employment at Will 406

Employment Agreements 409

Employee Handbooks and Manuals 417 Restrictive and Proprietary Covenants 421 Employer’s Right to Employee Work

Product 422

Trade Secret Protection 424 Covenants Not to Compete 426 Incentive Compensation Plans 430 Deferred Compensation 431

Pension and Profit Sharing Plans 433 Incentive Stock Options 438

Life Insurance Programs 445

Employee Expense Reimbursement Plans 446

13 A

GREEMENTS

R

EGARDING

O

WNERSHIP

458

Purposes and Legal Support 458

Concentration of Voting Power 459 Share Transfer Restrictions and Buyout

Agreements 464

14 C

ORPORATIONS IN

F

OREIGN

J

URISDICTIONS

495

Selection of Jurisdiction 495

Constitutional Basis for Qualification 495

Contents xi

Authorization to Qualify as a Foreign Corporation 496

Statutory Prohibition from Doing Business without Qualification 496

Transacting Business 497

Sanctions for Not Qualifying 498

Application for Certificate of Authority 499 Certificate of Authority 504

Effect of Qualification 505 Structural Changes of a Foreign

Corporation 508

Withdrawal of Authority 511

Revocation of Certificate of Authority 513

15 C

HANGES IN

C

ORPORATE

S

TRUCTURE AND

D

ISSOLUTION

521

Amendment of the Articles of Incorporation 521

Merger and Exchange 525

Sale, Mortgage, or Other Disposition of Assets 537

Domestication and Conversion 540 Rights of Dissenting Shareholders 546 Voluntary Dissolution 549

Involuntary Dissolution 558 Liquidation 562

A

PPENDIX

A U

NIFORM

P

ARTNERSHIP

A

CT

(O

RIGINAL

) 569

A

PPENDIX

B U

NIFORM

P

ARTNERSHIP

A

CT

(1997) 577

A

PPENDIX

C U

NIFORM

L

IMITED

P

ARTNERSHIP

A

CT

591

A

PPENDIX

D R

EVISED

U

NIFORM

L

IMITED

P

ARTNERSHIP

A

CT

, 1976,

WITH

1985 A

MENDMENTS

596

A

PPENDIX

E U

NIFORM

L

IMITED

P

ARTNERSHIP

A

CT

(2001) 605

A

PPENDIX

F U

NIFORM

L

IMITED

L

IABILITY

C

OMPANY

A

CT

(1996) 628

A

PPENDIX

G M

ODEL

B

USINESS

C

ORPORATION

A

CT

646

A

PPENDIX

H M

ODEL

S

TATUTORY

C

LOSE

C

ORPORATION

S

UPPLEMENT

701

A

PPENDIX

I M

ODEL

P

ROFESSIONAL

C

ORPORATION

S

UPPLEMENT

(1984) 707

A

PPENDIX

J F

ORMS

713

Form J–1 Complex Partnership Agreement 713

Form J–2 Limited Partnership Agreement 730 Form J–3 Information Sheet for Limited

Liability Company 733

Form J–4 Complex Operating Agreement for Limited Liability Company 735

Form J–5 Contract Between Stockholders Organizing a Close Corporation 752 Form J–6 Articles of Incorporation of a

Medical Corporation 754

Form J–7 Application for Registration of Professional Corporation (California) 758 Form J–8 Preincorporation Agenda and

Information Sheet 761 Form J–9 Delaware Articles of

Incorporation 765

Form J–10 Delaware Bylaws 769 Form J–11 Skeleton Trust Indenture 777 Form J–12 Voting Trust Agreement 781

G

LOSSARY

785

I

NDEX

794

T A B L E O F F O R M S

Exhibit 2–1 Schedule C to Form 1040 15

Exhibit 2–2 Application for Employer Identification Number 16

Exhibit 2–3 Assumed Business Name Registration 17 Exhibit 2–4 Certificate of Assumed Name

(New York) 19

Exhibit 2–5 Application for Registration of Fictitious Name (Florida) 26

Exhibit 2–6 Application for Renewal of Fictitious Name (Florida) 28

Exhibit 3–1 Assignment of Partner’s Interest in Firm 36

Exhibit 3–2 Statement of Partnership Authority 38 Exhibit 3–3 Statement of Denial of Partnership

Authority 39

Exhibit 3–4 Personal Notice of Dissolution of Partnership 45

Exhibit 3–5 Notice of Dissolution of Partnership by Publication 45

Exhibit 3–6 Statement of Dissociation from a Partnership 46

Exhibit 3–7 Preliminary Notice of Expulsion to Partner 48

Exhibit 3–8 Notice of Expulsion to Partner 48 Exhibit 3–9 Form 1065 53

Exhibit 3–10 Form K-1 54

Exhibit 3–11 Form 8832 Entity Classification Election 55

Exhibit 3–12 Certificate of Limited Liability Partnership (Maine) 75

Exhibit 3–13 Foreign Limited Liability Partnership Application (Utah) 77

Exhibit 4–1 Assignment of a Limited Partner’s Transferrable Interest 94 Exhibit 4–2 Consent to Substitution of a Limited

Partner 94

Exhibit 4–3 Reservation of a Limited Partnership Name 98

Exhibit 4–4 Limited Partnership Certificate (Virginia) 105

Exhibit 4–5 Limited Partnership Certificate

(Revised Uniform Limited Partnership Act) 107

Exhibit 4–6 Amendment of Limited Partnership Certificate (Delaware) 109

Exhibit 4–7 Statement of Cancellation (Idaho) 110 Exhibit 4–8 Application for Registration of a Foreign

Limited Partnership (Nevada) 111

Exhibit 5–1 Reservation of Limited Liability Company Name (Louisiana) 133

Exhibit 5–2 Articles of Organization (Oklahoma) 134 Exhibit 5–3 Unanimous Consent of Managers

(Colorado) 150

Exhibit 6–1 U.S. Corporation Income Tax Return 179 Exhibit 6–2 Shareholder’s Statement of Consent as

to Taxable Status under Subchapter S 181

Exhibit 6–3 Election of Subchapter S Taxation 182 Exhibit 6–4 Resolution Authorizing Issuance of

Section 1244 Stock 185 Exhibit 6–5 Plan for Issuance of Section 1244

Stock 186

Exhibit 7–1 Form S-1 Registration Statement under the Securities Act of 1933 198

Exhibit 7–2 Preliminary Prospectus 199 Exhibit 7–3 Tombstone Ad 200

Exhibit 7–4 Form 10-K 202 Exhibit 7–5 Form 10-Q 203 Exhibit 7–6 Form 8-K 204 Exhibit 7–7 Proxy Form 206

Exhibit 7–8 Articles of Incorporation for a Close Corporation 211

Exhibit 7–9 Guide for Articles of Incorporation for a Professional Corporation 215 Exhibit 8–1 Agreement Between Promoters 230 Exhibit 8–2 Certificate of Paid-in Capital

(New Jersey) 233 Exhibit 8–3 Nevada’s Advertisement for

Corporations 236

Exhibit 8–4 Checklist for Selection of Jurisdiction 237 Exhibit 8–5 Application for Reservation of Corporate

Name (Mississippi) 242

Exhibit 8–6 Certificate of Reservation of Corporate Name (South Dakota) 243 Exhibit 8–7 Notice of Transfer of Reserved Name

(Mississippi) 244

Exhibit 8–8 Certificate of Transfer of Reserved Corporate Name (Model Act) 244 Exhibit 8–9 Application for Registration of Corporate

Name (Alabama) 245

Exhibit 8–10 Certificate of Registration of Corporate Name (South Dakota) 246

Exhibit 8–11 Application for Renewal of Registered Name (Idaho) 247

Exhibit 8–12 Certificate of Renewal of Registered Name (South Dakota) 248

Exhibit 8–13 Certificate of Assumed Name by Corporation (Michigan) 249 Exhibit 8–14 Checklist for Articles of

Incorporation 251 Exhibit 8–15 Articles of Incorporation

(New York) 253

Exhibit 8–16 Consent to Appointment by Registered Agent (Wyoming) 258

Exhibit 8–17 Certificate of Incorporation (North Dakota) 272

Exhibit 9–1 Share Certificate 298

Exhibit 9–2 Preferred Stock Certificate 301 Exhibit 9–3 Statement with Respect to Shares

(Pennsylvania) 305

Exhibit 9–4 Cancellation of Redeemable Shares 316 Exhibit 9–5 Appointment of Transfer Agent and

Registrar 319

Exhibit 9–6 Debenture Certificate 322

Exhibit 9–7 Debenture Certificate with Coupons 324 Exhibit 9–8 Security Agreement under the Uniform

Commercial Code 326

Exhibit 9–9 Uniform Commercial Code—Financing Statement 328

Exhibit 10–1 Special Meeting of the Board of Directors 375

Exhibit 10–2 Special Meeting of the Shareholders 376 Exhibit 11–1 Statement of Cancellation of Non-

Reissuable Shares (Illinois) 396 Exhibit 12–1 Nondisclosure Agreement 425 Exhibit 12–2 Form 5304-SIMPLE 451

Exhibit 14–1 Application for Certificate of Authority (North Carolina) 501

Exhibit 14–2 Statement of Change of Registered Office or Agent (South Dakota) 504

Exhibit 14–3 Certificate of Authority (Model Act) 505 Exhibit 14–4 Annual Report (Tennessee) 507

Exhibit 14–5 Application for Amended Certificate of Authority (North Carolina) 509 Exhibit 14–6 Amended Certificate of Authority (Model

Act) 511

Exhibit 14–7 Application for Certificate of Withdrawal (Massachusetts) 512

Exhibit 14–8 Certificate of Withdrawal 515

Exhibit 14–9 Certificate of Revocation of Certificate of Authority 515

Exhibit 15–1 Articles of Amendment (Delaware) 524 Exhibit 15–2 Restated Articles of Incorporation

(Maine) 526

Exhibit 15–3 Articles of Merger (Massachusetts) 532 Exhibit 15–4 Articles of Domestication (Maine) 541 Exhibit 15–5 Articles of Charter Surrender for

Domestication (Maine) 542 Exhibit 15–6 Articles of Entity Conversion

(Maine) 544

Exhibit 15–7 Articles of Charter Surrender for Entity Conversion (Maine) 545

Exhibit 15–8 Articles to Pay Dissenting Shareholders (Maine) 550

Exhibit 15–9 Statement of Intent to Dissolve (Shareholders) 552

Exhibit 15–10 Affidavit to Dissolve Corporation (Louisiana) 554

Exhibit 15–11 Articles of Dissolution (Massachusetts) 555 Exhibit 15–12 Articles of Dissolution by

Incorporators 558

Exhibit 15–13 Articles Revocation of Voluntary Dissolution (Texas) 559

Table of Forms xiii

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