Question

1. What steps are involved in bringing a corporation into existence?

2. In what circumstances might a court disregard the corporate entity and hold the shareholder’s

personally liable (“Pierce the Corporate Veil”)?

Answer 1

The formation of the company is a time-consuming and costly process than any other forms of business. The whole formation process of a company involves the following steps
1. Select where to from a company- Once when the location is decided to incorporate a business, the next step is choosing a state of incorporation. The company can incorporate in the state where a person wants to do business or company can also incorporate in another state. There are a number of factors must require to consider when selecting the company right location including the tax rates, corporate laws and cost to incorporate. Incorporate in the home state saves a person’s money and time because the company required to register as a foreign corporation includes taxes and annual report fees from both the country of incorporation.
2. Choose a name- Generally, the company name must end with incorporated, corporate or abbreviation of one of these. A company name will not accept if it misleads to the public or if it too similar to the name of another existing company in the state. If the name of the corporation decided and this is related to the user in connection with goods or services the person needs to obtain federal trademark protection for the name.
3. Choose a board of directors- A company is managed by its directors, without the board of Directors Company cannot approve business decisions. Directors in the company are selected by the shareholders and they are appointed for the limited-term. At least one directors must be required in each corporate
4. Prepare and file the articles of incorporation for register- In the Articles of incorporation required mentioned the overall formation process of the company. The incorporator must require to provide the necessary information relating to the company like the company’s registered name, street address and the amount and type of stock issued. This article should be signed by the incorporator and required to submit with the secretary of state in the state where the company operated its business.

5. Designate a registered agent- A person who selected a registered agent to receive the legal document and accepts taxes on behalf of the corporation. The registered agent can be a mature person who resides within a state where company formed. after selecting the business structure of the company it will require to add a registered agent office when the company file its articles of incorporation with the government agency

2. In the following circumstances, the court would possibly disregard the corporate entity and hold the shareholder as a person liable.
1. Reduction in membership- If the numbers of members after the formation of any company are reduced below 7 in the case of a public company and below 2 in the private company. Afterwards, the company continues to operating its business for more than 6 months in this case every person who has the knowledge of this fact will be accountable for all the debts and liability of the company
2. Fraudulent conduct of business- In the situation of winding up of a company, If it appears that any company carried its business with the reason of defrauding creditors and any other individual than persons who were knowingly parties to the carrying on such business shall be personally accountable with unlimited liability for all the debts.
3. Failure to return application money- If the application money of those applicants whom share has been allotted is not repaid within the 130 days of issue of prospectus then the directors will be responsible to repay such money with interest.

4. Misrepresentation in the prospectus- If the company mentioned any information which misleads in the prospectus, in this situation every person who involves in the issue of such prospectus shall be liable towards those persons who subscribe for company’s shares on the faith of misleading information.
5. Misdescription of the name- Directors and any officer of the company will be personally responsible for all the agreements made by them on behalf of the company in their own personal names e.g.- Intentionally omitting to use the name of the company in the prescribed manner