Essay Example on Delaware Corporation and Business Entity Laws

Summary of Applicable Facts

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Due to rising need to make the organization have a sustainable course of actions, there is urgent need to address certain legal issues that are appropriate forms of business organization for CIA.

Additionally, I would like to address the major limitations of a nonprofit firm in the Delaware which is the state in which CIA was established and is operating in. I will also offer insight on the limited liability laws as well as nonprofit corporation laws, and this would offer a recommendation for the best business for the client (Mundi, 2016).

Issues

From the legal procedures, I can affirm that most nonprofit corporations are formed under the laws of their home states ("U.S. Code: Title 41 - PUBLIC CONTRACTS", 2011). It implies that they are governed by the laws of the state in which they are established and operate in. The main advantage of incorporation of such nonprofit corporation is that they offer protection of members from personal liabilities. This protection covers unlawful actions by the officers as well as the members of the governing body.

Law: Delaware Corporation And Business Entity Laws. Article 9

Analysis

In Delaware State, the legal requirements for nonprofit corporations are that they are not necessarily limited to from pursuing the commercial activities ("Delaware Corporation And Business Entity Laws", n.d.). However, the directors, in this case, CIA directors have to be duty-bound in an effort to devote attention to the promotion of social mission of the firm rather than the income production. Since the nonprofit intend to engage in activities that are for profit and access to capital market may be needed to enhance sustainability; there is a need for a limited liability company since the nonprofit firms cannot offer capital stock. In this case, the client needs to get down and register the corporation following a structural procedure to attain the capacity for operation (Holland, 2014).

For CIA, the directors will have to portray strict duties to the stakeholders to facilitate the maximization of the profit as well as value. Therefore, for the client to be safe, the corporations management have to tie the social mission of their for-profit corporation in a direct manner that would ensure it is linked to the business purpose. If this is not adhered to, the corporation may risk being sued for violation of its duties towards stakeholders as well as mishandling of corporate assets.

I strongly, recommend that all stakeholders should be factored in, and a common agreement is key for the sake of pursuing a social mission as well as devoting towards charitable activities. Amendments are an element that can be pursued in an event that there is a drop in profits or just a change in control. The employment contract for CIA that was not developed by a professional must be drafted afresh to conform to the legal requirements so that the stakeholders can have a validated independent contractor agreement.

The above provisions, if pursued comprehensively, are geared towards meeting clients needs as well as the agent. For an agent to be deemed as an independent contractor and not just a mere employee, members should not be held liable for corporation's debts, however in cases where a certificate of incorporation providing for imposition of liability, then the default law should apply. The members are not supposed to be personally liable unless because of their conduct.

References

Delaware Corporation And Business Entity Laws. State of Delaware. Retrieved 16 May 2016, from https://corp.delaware.gov/DElaw.shtml

Mundi, L. (2016). Delaware Nonprofit Corporations. Lawforchange.org. Retrieved 16 May 2016, from http://www.lawforchange.org/NewsBot.asp?MODE=VIEW&ID=2141

U.S. Code: Title 41 - PUBLIC CONTRACTS. (2011). LII / Legal Information Institute. Retrieved 16 May 2016, from https://www.law.cornell.edu/uscode/text/41

Holland, C. (2014). Is Delaware the Best Place to Incorporate a Nonprofit?. Community Enterprise Law. Retrieved 17 May 2016, from http://communityenterpriselaw.org/2014/01/is-delaware-the-best-place-to-incorporate-a-nonprofit/