Which doctrine governs internal governance for a corporation?

• A. The law of the state where the company conducts most business.
• B. The law of the state of organization governs internal governance.
• C. Federal corporate law governs internal governance.
• D. The shareholders' personal preferences govern.

Answer: (B)

Internal governance is determined by the internal affairs doctrine: a corporation’s internal rules—fiduciary duties of directors and officers, voting, and corporate formalities—are governed by the law of the state of incorporation (the state where it was formed). This choice provides consistency for governance across a multi-jurisdictional operation, preventing a patchwork of conflicting rules if the company does business in many states. The state of incorporation has the strongest interest in regulating how the corporation is run, so its statutes and case law set the framework for internal matters. External issues (like contracts or property) may be governed by other conflict-of-laws rules, but internal governance remains anchored in the laws of the state of incorporation. Federal corporate law does not generally govern these internal aspects, and shareholders’ personal preferences do not determine the governing rules.