Originally from:
Advising Minnesota Corporations and Other Business Organizations - 2nd Edition - Hardcover
Advising Minnesota Corporations and Other Business Organizations - 2nd Edition - Electronic
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CHAPTER 11
PREINCORPORATION PROMOTION
ACTIVITIES
Section
§ 11.01 Introduction
§ 11.02 Definitions of Promoters and the Phenomenon of Promotion
§ 11.03 Liabilities of Promoters for Preincorporation Activities
§ 11.04 Fiduciary Duties of Promoters
§ 11.05 Liabilities of the Corporation for Promoter Activity
§ 11.06 Agreements among Promoters; Preincorporation Agreements
§ 11.07 The Promoter Agreement Itself
§ 11.08 Other Procedures Incident to Prebusiness Promoter Activity Stages
Including Screening for Noncompetition, Nondisclosure, Preliminary
Intellectual Property Pitfalls, and Securities Law Risks
§ 11.01 Introduction
Once the decision has been made to use the corporate form for the
enterprise, a corporation must be created. The promoters begin to
organize and assemble the persons, financing, and documents necessary.
This Chapter begins with a section defining the role of the promoter. The
promoter’s exposure to liability for preincorporation activities is
discussed next, followed by a section on the corporation’s liability for a
promoter’s activities. The use of promoter agreements and suggested
terms are examined in Sections 11.06 and 11.07. Finally, this Chapter
concludes with a general overview of other preincorporation matters
typically considered by promoters.
§ 11.02 Definitions of Promoters and the Phenomenon of Promotion
Promoters are the persons who initiate the organization of a
corporation and orchestrate its creation.1 They investigate business
opportunities for the product or service the business will provide.
Promoters arrange capital and financing for the business. They may seek
investors interested in the proposed corporation, from whom they obtain
offers, often termed subscriptions, to purchase corporate stock in the
corporation when it is created. Promoters may purchase or lease the
office or warehouse space in which the corporation will do business.
They may obtain necessary equipment and supplies. Promoters may hire
employees and legal, accounting, or tax advisers to work with the
proposed corporation. Obtaining licenses and tax identification numbers,
reserving trademarks or trade names, securing patents, planning
preliminary advertising, and a number of other start-up tasks can be
performed by promoters on behalf of the corporation to be formed.
Roger J. Magnuson is a Partner at Dorsey and Whitney, LLP, where he serves as Head of the National Strategic Litigation Group and has practiced since 1973. He has been recognized as one of the top trial lawyers in the United States by major national and international publications, including Chambers International Guide to American Lawyers, which profiles the top 500 trial lawyers in the United States, Best Lawyers in America, Who's Who in American Law, and Who's Who in America. Mr. Magnuson was also recognized by a Journal of Law and Politics' survey for Judge's Choice "Wins Most Cases."
Some high profile cases that he has litigated include representation of the Florida Senate in the Bush v. Gore election controversy in 2000; and representation of the Plaintiffs in the widely publicized and studied Mall of America case. For several years he has represented, among other persons and entities, the Minnesota Twins and Major League Baseball principals and players in litigation; and has litigated national and local cases in federal and state court venues. He has appealed before the Supreme Court in a number of cases; as well as the Minnesota Supreme Court. He has authored several articles and 7 books.
Richard A. Saliterman is a Principal in Saliternan & Siefferman P.C., a full-service firm in Minneapolis established in 1976. Mr. Saliterman is a leading expert on corporate business matters, and is the author of several publications on business start-ups, franchises, and trademarks. Mr. Saliterman is the former National Judge Advocate for the U.S. Navy League, based in Washington D.C.
Contributing Editor:
Amanda Chang
Contributing Authors:
Alecia Anderson
Seth Back
John Baker
Shannon Berg
Constatin Burachek
Benjamin Carpenter
Ryan Check
Carl Christensen
Peter Fear
Michael Frasier
Aaron Hall
Catherine Hanson
Paul Harman
Amy Ithlan
Michael Kern
Chris Kuhlman
Brett Larson
Joshua Lederman
Karen Lundquist
James Magnuson
Jennifer Mead
Rao Menier
Heidi Miller
Rachael Moxon
Oliver Nelson
Scott Peitzer
Mitchell Skinner
Jonathan Stechmann
Lael Weinberger
Jonathan Wilson
Alex Zumbulyadis
