[1] In order for a de facto corporation to be created, the following elements must exist: 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 the 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.
[citation needed] Corporation by estoppel, on the other hand, applies when someone operates a business as if it were a limited liability entity or corporation, irrespective of whether there was a good faith effort by the business to incorporate.
The person doing business with such an entity, as if it were a limited liability entity or corporation, may later be estopped from arguing that it is not in fact a limited liability entity, 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.