Civil Procedure Multistate Bar Practice Exam

Where is the citizenship of a corporation determined?

1. The state of its principal shareholder

2. The country where its CEO resides

3. Any state where it operates

4. The state where it is incorporated and its principal place of business

The correct answer is: The state where it is incorporated and its principal place of business

The citizenship of a corporation is determined by two primary factors: the state in which it is incorporated and the state of its principal place of business. This means that a corporation may be considered a citizen of both the state of incorporation and the state where it conducts its primary business activities. In legal contexts, particularly in federal court cases, the determination of a corporation's citizenship is crucial for establishing diversity jurisdiction, which requires parties to be citizens of different states. By adhering to this rule, courts can properly ascertain the jurisdictional limits of federal court authority. The other options do not accurately reflect the legal standards for corporate citizenship. For example, the state of the principal shareholder or CEO does not factor into the legal definition of where a corporation is considered a citizen. Similarly, simply operating in a state does not confer citizenship; a corporation must be formally incorporated in that state or have its principal place of business there for jurisdictional purposes. Therefore, considering both the incorporation and the principal place of business is essential to correctly determine a corporation's citizenship.