Sarah Nilsson, JD, PhD, MAS
Sarah Nilsson, JD, PhD, MAS

Business Organizations

Forms of Business

(controls potential consequences of legal risks inherent in doing business)

- Sole Proprietorship: business owned by single individual who is personally responsible for debts of business and torts committed by employees

- General Partnership: same personal liability as above applies to each general partner

- Limited Partnership: also has at least one general partner

- Limited Liability Company (LLC): owners have same protection as shareholders of corporation

- Limited Liability Partnership (LLP): owners have same protection as shareholders of corporation

- Corporation: no owner (shareholder) of business took on the added risk of vicarious personal liability for torts committed by employees or debts of business


Forming and Operating a Corporation

Agent for service of process

Articles of Incorporation: express what has been created

Certificate of Incorporation

Alter Ego Doctrine: if, notwithstanding the fact of incorporation, you continue to operate the business as though it were a sole proprietorship or partnership, a plaintiff's attorney may later be able to "pierce the corporate veil" to reach our personal assets to satisfy liabilities or debts of the business


Looking like a Corporation

- Showing the corporate name: Inc., Corp., Ltd.

- Adequate capitalization: no-hard-and-fast-rule on how much money and assets needed - empty shell having no assets more likely to pierce the corporate veil

- Multiple shareholders: more than one shareholder makes it legitimate

- Duck rule: quacks, waddles, leaves a slippery trail of spoor like a duck - then a DUCK!

- How to sign for a Corporation - so it is apparent to the world you are signing on behalf of the corp. not personally - 3 elements:

1. Corp.'s full legal name

2. your signature

3. your corporate title

- Keeping personal and corporate assets separate - corp. can acquire funds by:

1. sale of shares of stock (capital investment) - issue a stock certificate - record in stock certificate register 

2. income from operations

3. debt (loans) - make a promissory note

4. sale or leasing out of assets - issue bill of sale or lease

- Making and documenting corporate decisions: keep the paper trail

Board of Directors: elect officers - make decisions affecting corporate policy and major business decisions

Officers: (eg CEO) execute that policy and make day-to-day business decisions

Minutes: written record in corporate minute book

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Sarah Nilsson, JD, PhD, MAS


602 561 8665


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Legal disclaimer 

The information on this website is for educational purposes only and DOES NOT constitute legal advice. While the author of this website is an attorney, she is not your attorney, nor are you her client, until you enter into a written agreement with Nilsson Law, PLLC to provide legal services.



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