ch 39

Business Law: Chapter 39 Study Guide

Wulf v. Bravo Brio Restaurant Group, Inc., p. 715

Roland Wulf went to dinner at the Bravo Cucina Italiana restaurant in West Chester, Ohio. He

was walking down an aisle between dining booths and the kitchen food counter to the restroom

when someone backed into him. Wulf lost his balance, fell to the floor, and fractured a hip.

He filed a complaint in an Ohio state court against the owner of the restaurant, Bravo Brio

Restaurant Group, Inc. Wulf alleged that his injuries resulted from the negligence of a Bravo

waitress and that Bravo Brio, her corporate employer, was liable under the doctrine of

respondeat superior. Wulf described the waitress—in her twenties, 5 feet 6 inches tall, slender,

with brown hair, in a Bravo uniform, and not wearing glasses—and testified that she had

admitted working for the restaurant and had apologized. But he could not specifically identify

her.

The trial court concluded that Wulf's failure to identify the waitress was fatal to his claim and

granted Bravo Brio's motion for summary judgment. Wulf appealed.

A state intermediate appellate court reversed the judgment of the trial court and remanded the

case for further proceedings. Wulf did not need to establish the waitress's identity to proceed

with his claim against Bravo Brio.

Corporate Formation and Financing1. Nature and Classification of Corporations

1.1 Definition and Key Characteristics

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A corporation is a legal entity separate from its owners (shareholders).

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Recognized as a legal person, capable of owning property, suing, and being sued.

1.2 Corporate Personnel

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Board of Directors: Elected by shareholders to oversee management.

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Corporate Officers: Hired by the board to run daily operations.

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Shareholders: Owners who invest in the corporation but are not liable beyond their

investment.

1.3 Corporate Earnings and Taxation

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Dividends: Profits distributed to shareholders.

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Retained Earnings: Profits kept for reinvestment.

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Double Taxation: Profits taxed at the corporate level and again when distributed as

dividends.

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Holding Companies: Used to minimize taxes by placing assets in low-tax jurisdictions.

1.4 Liability Considerations

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Limited Liability: Shareholders are generally not personally liable for corporate debts.

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Criminal Liability: Corporations can be fined for crimes; officers can be held criminally

responsible.

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Tort Liability: Under respondeat superior, corporations are liable for employees'

wrongful acts.

1.5 Types of Corporations

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Domestic: Incorporated and operating in the same state.

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Foreign: Incorporated in one state but doing business in another.

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Alien: Incorporated in another country but doing business in the U.S.

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Public: Government-owned (not the same as a publicly traded corporation).

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Private: Owned by private individuals.

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Nonprofit: Formed for charitable or other non-profit purposes.

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Close Corporations: Few shareholders, often family-owned, flexible management.

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S Corporations: Special tax status allowing pass-through taxation (limited to 100

shareholders, all U.S. residents).

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Professional Corporations (PCs): Owned by licensed professionals.

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Benefit Corporations (B Corps): For-profit but with a commitment to social good.

2. Corporate Formation and Powers2.1 Incorporation Process

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Preincorporation Contracts: Founders may be personally liable until a corporation

assumes liability.

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Steps to Incorporate:

1. Select state of incorporation.

2. Choose a corporate name.

3. Prepare and file Articles of Incorporation.

4. Hold First Organizational Meeting to adopt bylaws and elect directors.

2.2 Corporate Powers

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Express Powers: Defined in federal/state laws, Articles of Incorporation, and bylaws.

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Implied Powers: Allow corporations to perform necessary business actions.

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Ultra Vires Doctrine: Limits actions beyond corporate authority.

3. Piercing the Corporate Veil

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Courts may hold shareholders personally liable if:

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The corporation is used to commit fraud.

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Personal and corporate affairs are intertwined.

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The business is undercapitalized or improperly managed.

4. Corporate Financing

4.1 Securities

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Stocks (Equity Financing):

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Common Stock: Voting rights, profit potential, last to receive assets if dissolved.

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Preferred Stock: Fixed dividends, priority over common stock, limited control.

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Bonds (Debt Financing):

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Loans to the corporation, repaid with interest over time.

4.2 Alternative Financing

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Venture Capital: Funding from private investors for startups.

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Private Equity: Investment firms buy and restructure corporations.

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Crowdfunding: Raising small amounts from many investors via online platforms

(subject to SEC regulations).