Part 10- Corporations, Chapter 41: History and Nature of Corporations, Doc 2 | Summary - Edubirdie

University:
Indiana University Bloomington
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Financial and Managerial Accounting: Information for Decisions - John J. Wild
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2024
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1
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bratrochanter

The federal government holds exclusive power to regulate interstate commerce, meaning that states cannot bar or discriminate against foreign corporations (those incorporated in another state or country) engaged solely in interstate commerce. However, if these corporations conduct intrastate business within a state, that state may regulate their activities as long as the regulations don’t place an undue burden on interstate commerce. To determine if a state law unduly burdens interstate commerce, three criteria are assessed: (1) the law must serve a legitimate state interest, (2) the state must choose the least burdensome means to promote that interest, and (3) the state’s interest must outweigh any burden on interstate commerce. States use the concept of “doing business” to decide if a corporation is subject to their jurisdiction, which can apply when determining if the corporation can be sued, taxed, or required to qualify for certain activities within the state. For a foreign corporation to be sued in a state court, it must meet the “minimum contacts” standard established in International Shoe Co. v. Washington (1945). This test requires that the corporation’s presence in the state not violate due process or fair play standards under the Fourteenth Amendment and the Commerce Clause. Courts also consider the balance between the corporation’s benefits from state activities and the burden of defending a lawsuit in that state. The concept of general versus specific jurisdiction was clarified in cases such as Goodyear Dunlop Tires Operations, S.A. v. Brown (2011). Here, the Supreme Court ruled that general jurisdiction over a foreign corporation is appropriate only if the corporation's connection to the state is "continuous and systematic." In Goodyear, North Carolina courts were found not to have general jurisdiction over Goodyear’s foreign subsidiaries because their limited product sales in the state were insufficient for general jurisdiction. These principles apply similarly to alien corporations (incorporated outside the U.S.) as well as other business entities like partnerships and LLCs, provided they engage in sufficient contact with the state in question.

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