De facto corporation and corporation by estoppel are both terms that are used by courts to describe circumstances in which is a business organization that has failed to become a de jure corporation (a corporation by law) will nonetheless be treated as a corporation, thereby shielding shareholders from liability. A court is an official, public forum which a public power establishes by lawful authority to adjudicate disputes, and to dispense civil, labour, administrative and criminal justice under the law. ... A corporation is a legal entity (distinct from a natural person) that often has similar rights in law to those of a Civil law systems may refer to corporations as moral persons; they may also go by the name AS (anonymous society) or something similar, depending on language (see below). ... A shareholder or stockholder is an individual or company (including a corporation), that legally owns one or more shares of stock in a joint stock company. ...

De facto corporation

In order for a de facto corporation to be created, the following elements must exist:

1. There must be an incorporation statute that lays out the various requirements under which legal incorporation can be accomplished;
2. There must have been a good faith attempt to comply with the statute by the intended incorporators;

   For example, if the articles of incorporation were mailed to the appropriate office, but addressed to the wrong person, lost in the mail, or not filed by the corporation by the time the corporation began acting in an official capacity.

3. There must have been act made on the corporation's behalf by its purported officers or agents.

If all of these requirements are met, then the business will be treated as a corporation for all purposes, except with respect to acts by state itself. However, most states will not apply this doctrine to protect a person who was aware that the incorporation effort was defective at the time that they purported to act on behalf of the corporation. A statute is a formal, written law of a country or state, written and enacted by its legislative authority, perhaps to then be ratified by the highest executive in the government, and finally published. ... The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the Charter) are the primary rules governing the management of a corporation, and are filed with a state or other regulatory agency. ... Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, authorizes the other, the agent, to represent her or his legal interests and to perform legal acts that bind the principal. ...

Corporation by estoppel

Corporation by estoppel, on the other hand, applies against someone who deals with a business as if it is were a corporation, irrespective of whether there was a good faith effort by the business to incorporate. The person doing business with such an entity may later be estopped from arguing that it is not in fact a corporation, in an attempt to reach the assets of the incorporators. For the same reason, defendants who had acted as a corporation will be estopped from denying liability as a corporation when sued by a plaintiff who had relied on the defendant's corporate form when dealing with the defendant. Estoppel is a legal doctrine proposing that any person who asks the courts to enforce a legal remedy should have a clear conscience. ...

Differences between de facto corporation and corporation by estoppel

Unlike a de facto corporation, the theory of corporation by estoppel only applies to contract claimants, not tort claimants, because contract claimant should have known the nature of the entity with which they were doing business. A contract is any legally-enforceable promise or set of promises made by one party to another and, as such, reflects the policies represented by freedom of contract. ... This article needs to be cleaned up to conform to a higher standard of quality. ...