Paralegal Advanced Competency Exam (PACE) Practice Exam

How is a domestic corporation characterized?

1. By its legal status in multiple states

2. By the location where it was formed and where Articles of Incorporation are filed

3. Based on its revenue generation

4. By its membership in a corporate federation

The correct answer is: By the location where it was formed and where Articles of Incorporation are filed

A domestic corporation is characterized by the location where it was formed and where its Articles of Incorporation are filed. This is a foundational aspect of corporate law. A corporation is considered "domestic" in a specific state if it has been incorporated there, and it must adhere to the laws and regulations of that state. This means that the jurisdiction in which the corporation is created directly influences its legal status, governance, and operational framework. In contrast, the other options pertain to different aspects of corporate classification or structure. For instance, legal status in multiple states relates more to foreign corporations, which are those incorporated in one state but operate in others. Revenue generation is typically analyzed for financial reporting and taxation purposes but does not define a corporation's domestic or foreign status. Membership in a corporate federation could describe associations of businesses but does not define a corporation's domestic status. Thus, understanding that domestic corporations are dictated primarily by their state of incorporation is crucial for grasping the structure and operational legitimacy of such entities.