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LSDefine
Simple English definitions for legal terms
principal place of business
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A quick definition of principal place of business:
A principal place of business is where the people in charge of a company make decisions and control what the company does. It's like the company's brain. This is important because it helps determine which state a company belongs to for legal reasons. The main way to figure out a company's principal place of business is to look at where the people in charge work. If they work in New York, then the company's principal place of business is in New York. A company can only have one principal place of business, but it can be a citizen of more than one state. This is important for legal cases, but you don't need to know the exact location of a company's principal place of business to go to court with them.
A more thorough explanation:
A principal place of business is where a corporation's officers direct, control, and coordinate the corporation's activities. It is also known as the corporation's "nerve center." This is important for determining diversity jurisdiction, which is when a case involves parties from different states or countries.
For example, if a company's officers direct the company's business activities in New York, then its principal place of business is New York regardless of the company's degree of activity in any other state.
The Supreme Court has established the "nerve center" test as the dominant approach for determining a corporation's principal place of business. This means that the location where a corporation's officers direct, control, and coordinate its activities is considered its principal place of business.
A corporation can only have one principal place of business, but it can be a citizen of multiple states. For example, if a corporation is incorporated in a different state than where its headquarters are located, it is a citizen and under the jurisdiction of both states.
It is not necessary to pinpoint a corporation's principal place of business to establish diversity jurisdiction. It is enough to show that the parties involved in the case are from different states or countries.