Video: C Corporation Characteristics

In this lesson, Nick Palazzolo, CPA, unpacks the Ultra Vires Doctrine—often known as the Purpose Clause. He illuminates why this corporate law concept is vital for ensuring that a corporation sticks to its stated objectives or purpose as outlined in their articles of incorporation and what it means for shareholders and the corporation itself when ventures veer off-course. With practical examples and an exploratory dive into piercing the corporate veil, Nick clarifies when and why shareholders and directors might become personally liable for corporate activities. Additionally, he briefly touches on corporate bylaws and the particulars of raising capital through various securities, shedding light on equity, debt, and the unique characteristics of C Corporations when it comes to issuing stock.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's get familiar with the Ultra Viris Act. This is something you may see as a term on the exam, so we want to make sure that you are familiar with it. Now, it's also known as the Purpose Clause. We could say either or Ultra Viris Doctrine or the Purpose Clause. It's a concept in corporate law that stipulates that a corporation can only engage in activities that are within the scope of its stated objectives or purpose. That makes sense. It's totally fair. There are plenty of things in law and tax where I'll come out and just say, yeah, that doesn't really make sense. I don't agree with that. But yeah, this makes sense. You form a corporation to sell shoes unless there is some crazy other way to make money, which also should be run by shareholders, a vote. Should we change what we're doing as a business? But if you're created to sell shoes, make money that way, if the corporation kind of goes off the deep end and starts doing a bunch of other things, this is a way to kind of rein in those running the company. These objectives are typically outlined in the corporation's articles of incorporation. Now, if a corporation engages in activities outside of its stated purpose, those activities may be considered ultra viras, meaning beyond the powers in Latin. We've got a lot of Latin terminology here coming with our business law. Now, the purpose here is to ensure that corporations operate within the limits set by their founding documents and to protect shareholders and other stakeholders from unauthorized actions taken by the corporation's management. However, modern corporate laws, they've become more permissive, allowing corporations to engage in any lawful activities and the ultra viras doctrine has become less

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