The basics of corporate structure

Please note that this is a general overview of corporations, what they are, and how they function.  As with most legal questions, there are exceptions and nuances that we will not discuss here.  If you are thinking about forming a corporation it is always advisable to seek the advice of a licensed attorney.

Advantages of Incorporating

Corporations are legal entities designed to pool the efforts, resources, and expertise of many individuals into a collective operation.  And, perhaps more importantly, provide a layer of protection for the shareholders, directors, and officers from the liabilities of the corporation.  This protection is not, however, absolute.  The most notable exception is the legal principle often referred to as “piercing the corporate veil.”  This is a complicated area that is beyond the scope of this article but underscores the notion that the protections offered by the “corporate veil” have their limitations.

Where to Incorporate

Where you chose to incorporate is critically important and must be carefully analyzed.  Corporations are created under and governed by state statutes.  Those rules are further refined by the courts.  Statues and caselaw dictate a variety of critical issues such as whether and to what extent shareholders owe fiduciary duties to one another, what duties directors and officers owe to the corporation and its shareholders, and whether those duties can be eliminated.

The Shareholders

The shareholders are the “owners” of the corporation.  Large, publicly-traded companies might have millions of shareholders and tens of millions of shares outstanding. By contrast, the stock of a closely-held corporations is owned by a few people shareholders.  Most corporations in the United States are closely held corporations with a limited number of shareholders.

A quick word on Shareholders’ Agreements or Buy-Sell Agreements.  It is highly advisable for the corporation’s shareholders to negotiate amongst themselves and execute a Shareholders’ Agreement.  A corporation or other type of entity (like an LLC) can own stock in another corporation.  Shareholders’ Agreements provide the framework for the relationship by and among the shareholders and cover critically important issues like voting, management, money, and exit.  Many statutes will defer to the Shareholders’ Agreement on these critical issues.  The provisions in the statutes are looked to only if there is no Shareholders’ Agreement in place.  Often the statutory provisions will result in unfavorable results, thus emphasizing the need for a Shareholders’ Agreement.

The Board of Directors

Directors are “elected” by the shareholders.  Directors dictate and oversee the corporation’s general objectives; they focus on the “big picture” and provide direction to the officers of the corporation. It is generally advisable to have an odd number of directors to avoid a deadlock situation, which results in no clear majority.

The Officers

Officers are “appointed” by the directors.  Officers are responsible for implementing the corporation’s general objectives and are generally responsible for the day-to-day operations of the corporation. Officers report to the directors, who, in turn, report to the shareholders.  There are certain required positions that must be filled and other optional positions, but these will vary by state and statute.  Most corporations are required to have a President, Treasurer and Secretary.  Other optional positions include Chief Executive Officer (position often held by the President of the corporation), Chief Operating Officer, Chief Financial Officer, Chief Technology Officer, and the ubiquitous position of Vice President.  The number of officers a corporation has can vary widely depending on the size of the Corporation and the specific industry of the corporation.

An individual can hold one or more positions as a shareholder, director and/or officer.

Is your business prepared to face a lawsuit?

When a prepared business in New Jersey first gets news of a lawsuit, they should always have a plan in place to handle the fallout. This usually includes managing the company’s reputation, minimizing the legal costs and taking steps to possibly avoid business litigation altogether. When an unprepared company in New Jersey faces legal trouble, they are often left scrambling for the next steps.

For example, there are situations where a business owner can talk to the person threatening legal action against the company. Appropriate mediation in these instances can lead to a swift resolution. In other circumstances, it may be essential that the business owner not communicate with anyone involved. A business owner will need to speak to their attorney to decide on the right course for the best outcome.

Every case of business litigation in New Jersey will be different. Some small business lawsuits are civil while others may be criminal cases. Still, it’s possible to prepare your company to handle a variety of threats ahead of time with an established process in place.

What steps can a business owner take to prepare for business litigation in New Jersey?

Meet with a lawyer to discuss the details of your business. A waste disposal company will need to take different steps to legally prepare than a doctor’s office. For this reason, it’s good to get individual legal advice for your business in your physical location.

Always keep accurate records for your company. While many do this for financial reasons, it’s also a good practice in case of business litigation.

Secure business insurance that covers the potential liabilities in your business. This may include property damage, bodily injury for employees or customers and any specialized insurance required by your industry.

Ideally, business litigation would never be necessary. The reality is that businesses face lawsuits regularly. It’s better to be calm and prepared for the possibility so that your company can continue to work while the legal process plays out.

Reckless driving puts people in danger

Civil court juries may have little sympathy for a reckless driver, especially if the driver’s behavior cost someone their life. Yet, many motorists take dangerous risks on New Jersey roads. No matter how much a reckless driver attempts to justify their behavior, causing an accident when committing this type of a moving violation may prove challenging to defend.

Reckless driving and inflicting injuries

When the actions of motorists present a blatant or deliberate disregard for others’ safety, they may be guilty of reckless driving. In many instances, a combination of impatience and poor judgment leads to reckless driving. For example, a driver who crosses a double line and travels in the wrong direction on a single-lane highway risks a head-on collision. Similar dangers may exist when driving on the shoulder or sharing lanes.

Speeding might be the most common form of reckless driving, and many people lose their lives in collisions caused by speeding drivers. Drunk driving inflicts terrible costs on bicyclists, motorcyclists, pedestrians and other drivers. Yet, thousands of drunk driving arrests continue to occur.

Reckless driving could result in life-altering harm, including spinal damage, brain injuries, organ damage and severe disfigurement. Tragically, many people die in fatal accidents spawned by reckless driving.

Losses and reckless driving

Catastrophic injuries may leave the victims suffering from financial devastation. Even those dealing with soft tissue damage and other minor injuries could deliver losses from missed work and medical care. A fatality might devastate families emotionally and financially, and they could seek compensation for any losses by filing a wrongful death lawsuit.

Police and medical reports could provide compelling evidence in court. So might eyewitness testimony. Such evidence may help sway a jury or convince a defendant to settle out of court.