200 Brainscape Flashcards
1
Q
Test
A
Answer
2
Q
Q001. - Types of Business Structures
A
A001. - 1 sole proprietorships - 2 general partnerships - 3 limited partnerships - 4 limited liability partnerships (LLP) - 5 joint ventures - 6 limited liability companies (LLC) - 7 corporations
3
Q
Q002. - Advantages of a Sole Proprietorship
A
A002. - 1 easy to form & operate - 2 business can be sold without approval from others - 3 owner has right to make all business decisions - 4 profits are not shared w/others
4
Q
Q003. - Disadvantages of a Sole Proprietorship
A
A003. - 1 the owner suffers all of the loss - 2 capital is limited by what the owner has or can borrow - 3 unlimited personal liability
5
Q
Q004. - Definition of Partnership
A
A004. - An assn of two or more persons and/or entities to carry on a business as co-owners for profit (not including passive co- ownership & not-for-profit unincorporated assns)
6
Q
Q005. - Elements of Co-ownership in a Partnership
A
A005. - 1 profit sharing (is not always in equal increments) - 2 joint control (each partner has = right to participate in mgmt) - 3 RUPA states that partner is no longer co-owner of partnership property
7
Q
Q010. - Unanimous Consent of Partners is Needed for;
A
A010. - 1 admission of a new partner - 2 amendment of partnership agreement - 3 assignment of partnership property - 4 making partnership a surety or guarantor - 5 admitting to a claim a/g partnership in court - 6 any action outside the scope of the business
8
Q
Q011. - Partner Liability:
A
A011. - 1 each partner is jointly & individually liable for all debts (creditors required to attempt collection from partnership 1st) - 2 still liable to 3rd party despite agreement (meaning that if any partner pays more than required the others are to reimburse the overage) - 3 incoming partners are liable for existing debts to the extent of their capital contributions (unless agreed otherwise) - 4 outgoing partners are liable for existing & subsequent (if notice is not given to 3rd parties) liabilities
9
Q
Q012. - Partnership Terminates when:
A
A012. - 1 dissolution (stop carrying on business together) - 2 remaining partners elect to wind up & terminate partnership
10
Q
Q013. - Distribution Order upon Termination:
A
A013. - 1 creditors (including partner loans to partnership) - 2 equity due to/from each partner
11
Q
Q014. - Priority of Creditors:
A
A014. - 1 partnership creditors —> 1st to partnership assets, excess to personal creditors - 2 personal creditors —> 1st to personal assets. excess to partnership creditors
12
Q
Q015. - Creation of Limited Partnership
A
A015. - 1 file certificate w/the SOS (to include names of all general partners) - 2 requires @ least 1 general & 1 limited partner - 3 contributions may be in the form of —> cash, services performed & property (also includes promises of the previous)
13
Q
Q016. - Limited Partner CAN do this without the Risking Loss of Limited Liability:
A
A016. - 1 act as agent or employee of partnership - 2 consulting with & advising general partner - 3 voting on amendments to the partnership agreement - 4 voting on: dissolution, winding up, loans, change in the nature of the business or removal of a general partner - 5 bringing derivative lawsuit on behalf of the partnership - 6 being surety for partnership
14
Q
Q017. - Limited Partnership on Sharing of Profits (Losses)
A
A017. - 1 shared as agreed upon in agreement - 2 if no agreement, then based on % of capital contributions
15
Q
Q018. - Termination of Limited Partnership Occurs When:
A
A018. - 1 completion of time period - 2 specified event in the agreement - 3 unanimous written consent of all partners - 4 court decree - 5 event that causes business to become illegal - 6 withdrawal of GENERAL partner (unless ALL partners agree to continue)
16
Q
Q019. - Characteristics of LLC’s:
A
A019. - 1 all owners have limited liability (liability limited to capital contributions + equity in the LLC) - 2 separate legal entity (can sue & be sued in own name) - 3 must have LLC in name - 4 adopt agreement & file w/SOS - 5 has personal property interest in LLC (no specific interest) - 6 member has mgmt interest - 7 member may assign financial interest (unless otherwise specified)
17
Q
Q020. - Liability Provisions of LLP Partners:
A
A020. - 1 each partner is a limited partner - 2 specified amounts of liability malpractice insurance REQUIRED (takes place of “general” partner) - 3 retain unlimited liability for OWN negligence & wrongful acts - 4 partners avoid some personal responsibility for mistakes or malpractice of other partners
18
Q
Q021. - Advantages of sole proprietorship
A
A021. - - No need to file with government (unless operating under name other than sole proprietor) - Business can be sold without approval from others
19
Q
Q022. - Disadvantages of sole proprietorship
A
A022. - - Cannot raise capital from partners or shareholders - Unlimited liability
20
Q
Q023. - Examples of associations that cannot be partnerships
A
A023. - - Passive co-ownership of property - Not-for-profits: labor unions, charities, clubs
21
Q
Q024. - 2 elements determining whether co-ownership (and hence partnership) exists
A
A024. - - Profit sharing (need not be equal) - Joint control (but the right to manage may be contracted away to a managing partner)
22
Q
Q025. - 5 characteristics of partnerships: - Duration - Transfer of ownership - Lawsuits - Partners’ liability - Formation
A
A025. - - Duration: limited - Transfer of ownership: requires agreement - Lawsuits: partnership may sue and be sued as separate entity - Partners’ liability: unlimited for partnership debts - Formation: easy, can be informal
23
Q
Q026. - Definition of limited partnership
A
A026. - - Consists of one or more general partners and one or more limited partners - Sole general partner may be a corporation
24
Q
Q027. - 3 characteristics of a limited partner
A
A027. - - Contributes capital only - Liable only to extent of capital contribution - Does not participate in management
25
Q028. - Evidence of an implied partnership
A028. - - Agreement to share profits (prima facie evidence)
26
Q029. - Requirements to form partnership
A029. - - Written agreement needed only if partnership cannot be completed within one year - Filing not needed
27
Q030. - Definition of partnership interest
A030. - - Right to share in profits and return of capital contribution on dissolution - Is considered personal property
28
Q031. - Assignment of partnership interest: Rights of assignee
A031. - - Share of profits - Return of capital contribution
29
Q032. - Definition of partnership property
A032. - - Property acquired in name of partnership - Property acquired with partnership funds - Property acquired by partner in his/her capacity as partner
30
Q033. - Definition of silent partner
A033. - - Does not participate in management - Unlimited liability
31
Q034. - Partners' share in profits and losses
A034. - - Equal unless stated otherwise in partnership agreement - Losses are shared per profit-sharing proportions unless stated otherwise in partnership agreement
32
Q035. - Partners owe fiduciary duty to one another - details:
A035. - - May pursue self-interest if it's not competition - Any wrongly derived profits must be held by partner for others - Must abide by partnership agreement - Liable to other partners for liability caused by going beyond actual authority
33
Q036. - Types of authority whereby partners can bind partnership
A036. - - Actual authority - Apparent authority - Authority by Estoppel - Implied authority
34
Q037. - Definition of apparent authority
A037. - - Created when parties misrepresent to others that they are partners - Liable to third parties as if they were actual partners
35
Q038. - Definition of partnership by Estoppel
A038. - - Parties misrepresent to others that they are partners and others are hurt as they rely on this
36
Q039. - Implied authority of partners
A039. - - Examples: buy and sell goods, receive money, pay debts for partnership - Third parties can rely on implied authority even if secret limitations (among partners) exist
37
Q040. - Liability of partnership for acts by partners
A040. - - Not liable for acts outside of express, implied, or apparent authority - Liable for partner's torts committed in course and scope of business and for partner's breach of trust - Creditors must try to collect from partnership before individual partners
38
Q041. - Unanimous consent of partners needed (so no apparent authority) for:
A041. - - Admission of new partner - Amending partnership agreement - Assignment of partnership property - Making partnership a surety or guarantor - Admitting to a claim against partnership in court - Submitting partnership claim to arbitrator - Any action outside scope of partnership business
39
Q042. - Personal liability of partners
A042. - - Joint and several liability - Partners may agree to spilt liability according to any proportion, but third parties can collect full amount from an individual partner
40
Q043. - Dissolution of partnership can occur by:
A043. - - Prior or present agreement among partners - Partner's withdrawal, death, or bankruptcy if remaining partners do not choose to continue partnership within 90 days
41
Q044. - Order of distribution on termination of partnership
A044. - - 1. To creditors (including partners as creditors) - 2. Allocation of profit or loss per profit-sharing agreement - 3. Allocation of remaining capital according to partners' capital balances - Partners are personally liable to partnership for capital deficiency and to creditors for insufficiency of partnership assets
42
Q045. - Limited partners invest, not manage; can do the following without risking loss of limited liability:
A045. - - Act as agent or employee of partnership - Advise general partner on partnership business - Vote on or approve of changes in partnership business - Bring lawsuit on behalf of partnership - Being surety for partnership
43
Q046. - Profit and loss sharing for limited partners
A046. - - Losses and any liability are limited to capital contributions - If no profit-sharing agreement, then profits and losses are shared based on percentages of capital contributions
44
Q047. - Admission of general and limited partners
A047. - - Admission of limited partner requires written approval of all partners - Admission of general partner requires approval of general partners only
45
Q048. - Fiduciary duties of general and limited partners
A048. - - General partners owe fiduciary duty to general and limited partners - Limited partners do not owe fiduciary duty
46
Q049. - Withdrawal of general and limited partners
A049. - - Withdrawal of general partner causes dissolution of partnership unless prior or present agreement among partners to continue business - Withdrawal or death of limited partner does not cause dissolution
47
Q050. - Order of distribution on dissolution of limited partnership
A050. - - Same as general partnership - General and limited partners share equally
48
Q051. - Definition of joint venture
A051. - - Association of two or more persons (or entities) organized to carry out a single business undertaking (or series of business undertakings) for profit
49
Q052. - Differences between joint venture and partnership
A052. - - Each joint venturer is not necessarily an agent of other joint venturers - Death of joint venturer does not automatically dissolve joint venture
50
Q053. - Advantages of LLC
A053. - - Limited liability for all members: limited to capital contribution and any equity in LLC - Limited liability is retained even if members fail to follow usual formalities in conducting business
51
Q054. - Formation of LLC
A054. - - Members adopt operating agreement and file it with Secretary of State; required to be in writing - Members form articles of organization - Initials LLC or LC required in company name
52
Q055. - Profit and loss sharing in LLC
A055. - - According to operating agreement - In absence of other agreement, members divide profits and losses equally
53
Q056. - Member-managed and manager-managed LLCs: authority and compensation
A056. - - All members have authority to bind LLC unless LLC is manager-managed (then only managers have authority) - Member who is not manager has no right to compensation - Managers receive compensation according to agreed contract
54
Q057. - Duties of members (if member-managed) and managers of LLC
A057. - - Fiduciary duty - Duty of due care - Duty of loyalty
55
Q058. - Dissolution of LLC occurs when:
A058. - - All members agree in writing (prior or present) - Member withdraws, dies, goes bankrupt, or becomes incompetent - Court order
56
Q059. - Formation of LLP
A059. - - File articles of LLP with Secretary of State - Firm's name must include initials LLP or RLLP - Most states require only majority approval of partners to become LLP
57
Q060. - Characteristics of LLP
A060. - - Works well for professionals who want to do business as professionals in a partnership but still pass through tax benefits while limiting personal liability of the partners - Most partnership law applies to LLP
58
Q061. - Liability provisions of partners in LLP
A061. - - Unlike traditional partnerships, LLP has no general partner with unlimited liability - Regulations require liability malpractice insurance - Partners retain unlimited liability for their own negligence - Partners avoid some personal liability for mistakes or malpractice of other partners
59
Q062. - Advantages of corporate structure
A062. - - Limited liability for shareholders: risk only their investment - Transferability of interest through sale of shares - Continuous life unless dissolved, merged, or otherwise terminated - Separate legal entity: can hold and convey property, can contract with shareholders or third parties, can sue and be sued - Easy to raise large amounts of capital by issuance of stocks and bonds
60
Q063. - Disadvantages of corporate structure
A063. - - Tax burden: may be double taxation when income is taxed at corporate level and then dividends are taxed at shareholder level - Costs of incorporating - Formal operating requirements
61
Q064. - Characteristics of foreign corporation
A064. - - Definition: corporation doing business in a state other than the one in which it is incorporated - "Doing business" includes maintaining an office or selling personal property in state - "Doing business" does not include defending against a lawsuit, holding bank account, using mail to solicit orders, collecting debts, using independent contractors to make sales
62
Q065. - Promoter of corporation: characteristics
A065. - - Forms corporations and arranges capitalization - Has fiduciary relationship with corporation - Is not an agent of the corporation (because it is not yet in existence)
63
Q066. - Articles of Incorporation (charter) contain:
A066. - - Proposed name of corporation - Purpose of corporation - Powers of corporation - Name of registered agent of corporation - Name and address of each incorporator - Majority vote (or sometimes two-thirds vote) required to amend Articles of Incorporation
64
Q067. - Uncertificated securities
A067. - - Securities not represented by written documents
65
Q068. - Authorized stock
A068. - - Amount and types permitted to be issued in Articles of Incorporation
66
Q069. - Issued and unissued stock
A069. - - Issued stock: authorized and delivered to stockholders - Unissued stock: authorized but not yet issued
67
Q070. - Outstanding stock
A070. - - Issued and not repurchased by the corporation (i.e., owned by shareholders)
68
Q071. - Treasury stock
A071. - - Issued but not outstanding; corporation repurchased it - Are not votable and do not receive dividends - Corporation does not recognize gain or loss on transactions with its own stock - Must be purchased out of unrestricted retained earnings - May be distributed as part of stock dividend - Can be resold without regard to par value or preemptive rights - No purchase of treasury stock may be made if it renders corporation insolvent
69
Q072. - Par-value stock
A072. - - Amount is set in Articles of Incorporation - Stock should be issued for this amount or more - May subsequently be traded for any amount - Creditors of corporation may hold purchaser liable (for difference between amount paid and par value) if stock originally purchased at below par ("watered stock"), unless purchased in good faith without notice that sale was below par
70
Q073. - No-par stock
A073. - - Issued without a set par value - May have a stated value
71
Q074. - Stated capital (legal capital)
A074. - - Number of shares issued times par value (or stated value) - Dividends may not be declared or paid out of stated capital - Increase stated capital: Exercise of stock option; Small common stock dividend - Do not change stated capital: Acquisition or reissuance of treasury stock under cost method; Stock splits; Payment of organization costs
72
Q075. - Retained earnings (previously "earned surplus")
A075. - - Cumulative amount of income (net of dividends) retained by the corporation during its existence
73
Q076. - Surplus (of corporation)
A076. - - Excess of net assets over stated capital
74
Q077. - Capital surplus (of corporation)
A077. - - Surplus [excess of net assets over stated capital] less retained earnings
75
Q078. - Contributed capital
A078. - - Total consideration received by corporation upon issuance of stock
76
Q079. - Characteristics of common stock
A079. - - Entitled to dividends if declared by the directors - Shareholders entitled to share in final distribution of assets - Votes may be apportioned to shares by one vote per share or other ways (one vote per ten shares, etc.) - Corporation may issue more than one class of common stock with varying terms (no voting rights, different par value, etc.)
77
Q080. - Characteristics of preferred stock
A080. - - Usually nonvoting - Dividend usually a fixed rate - May be cumulative (dividends in arrears must be paid) or noncumulative (dividend will not be paid once it has passed); held to be implicitly cumulative unless different intent shown - Participating: may participate further in corporate earnings remaining after a fixed amount is paid to preferred shares - Callable: may be redeemed at a fixed price by the corporation - Convertible: gives shareholder option to convert to common stock at a fixed exchange rate
78
Q081. - Powers of corporation
A081. - - To acquire or retire their own shares (typically limited to amount of surplus) - To make charitable donations - To guarantee obligations of others only if in reasonable furtherance of corporation's business - Loans to directors: only with shareholder approval - Loans to employees: do not need shareholder approval
79
Q082. - Liability of corporations for crimes or torts
A082. - - Corporations are liable for crimes they are capable of committing - Punishment for crimes usually consists of crimes or forfeiture; rarely, prison sentences for directors - Corporations are liable for damages resulting from torts committed by officers, directors, agents, or employees within the course and scope of their corporate duties
80
Q083. - Ultra vires acts
A083. - - Definition: acts beyond the scope of the corporate powers (as defined in Articles of Incorporation) - State may dissolve corporation for ultra vires act - Stockholders have right to object to ultra vires acts - Directors or officers may be sued by shareholders or by corporation itself for ultra vires acts
81
Q084. - Powers and duties of directors
A084. - - Cannot bind corporation except as board member at a board meeting - Declaration of dividends - Selection of officers - Must comply with Articles of Incorporation; cannot amend Articles - Delegate authority to officers and agents - Not entitled to compensation unless so provided in articles, bylaws, or a resolution of the board passed in advance
82
Q085. - Liability of directors
A085. - - Directors must exercise ordinary care and due diligence in performing their duties - Directors are personally liable for torts committed while acting for corporation - Business judgment rule: if acting in good faith, not liable for errors of judgment unless negligent - May be held liable for wrongs of other directors if director intentionally or negligently does not prevent them - Personally liable for ultra vires acts of the corporation unless they dissented on the record
83
Q086. - Negligence of directors
A086. - - Directors are liable for negligence if their action was the cause of the corporation's loss - Corporation may indemnify directors against suits if acted in good faith and in best interest of corporation - Corporation may purchase liability insurance for directors
84
Q087. - Fiduciary duty of directors
A087. - - Owe fiduciary duties of loyalty and due care to the corporation - Corporation may deal with other corporation in which director has interest if one of the following: - 1) Conflict of interest is disclosed or known to board and majority of disinterested members approve - 2) Conflict of interest is disclosed or known to shareholders and majority of voting shareholders approve - 3) Transaction is fair and reasonable to corporation
85
Q088. - Characteristics of officers (as contrasted with directors)
A088. - - Is agent of corporation and can bind corporation if acts are within scope of authority - Selected by directors for a fixed term
86
Q089. - Stockholder's right to transfer stock
A089. - - Stock certificates are negotiable instruments - Reasonable limitations on transfer may be imposed; must be plainly printed on certificate
87
Q090. - Stockholder's voting rights
A090. - - Right to vote for election of directors, decision to dissolve the corporation, and any other fundamental corporate changes - Governed by the charter and the class of stock owned - Can assign voting rights (vote by proxy) - Requiring majority approval of shareholders: amendment of Articles of Incorporation; fundamental changes such as a merger, consolidation, or sale of all assets
88
Q091. - Stockholder's right to dividends
A091. - - No right to dividends unless declared by board of directors - Dividends become a liability of corporation only when declared, even for cumulative preferred stock - Cash dividends may be paid out of unrestricted retained earnings unless corporation will be insolvent because of dividend
89
Q092. - Stockholder's preemptive right
A092. - - Right to subscribe to new issues of stock at fair market value so that ownership will not be diluted without the opportunity to maintain it - Usually applies to common stock only - No preemptive right unless provided in Articles of Incorporation
90
Q093. - Stockholder's right to sue
A093. - - Stockholder may sue corporation on own behalf if interests have been directly injured - Stockholder may sue others on behalf of corporation (derivative suit) if a duty to the corporation is violated - In derivative suit, stockholder must first demand that directors sue in name of corporation (suit may be barred if directors make good faith business judgment that suit is not in corporation's best interest) - In derivative suit, damages go to corporation
91
Q094. - Stockholder's right on dissolution
A094. - - Right to a pro rata share of distribution of assets after creditors have been paid
92
Q095. - Stockholder's liability
A095. - - Generally limited to price paid for stock - If corporate veil is pierced, court disregards corporate entity and holds stockholders personally liable - Majority shareholders owe fiduciary duty to minority shareholders and to corporation
93
Q096. - Examples of piercing the corporate veil
A096. - - Corporation used to perpetrate fraud (e.g. forming an under-capitalized corporation) - Owners/officers do not treat corporation as separate entity - Shareholders commingle assets, bank accounts, financial records with those of corporation - Corporate formalities not adhered to
94
Q097. - Merger
A097. - - Union of two corporations where one is absorbed by the other - Surviving corporation issues its own shares to shareholders of original corporations
95
Q098. - Consolidation
A098. - - Joining of two or more corporations into a single new corporation - All assets and liabilities are acquired by the new company - New corporation is liable for debts of old corporations
96
Q099. - Requirements to accomplish a merger or consolidation
A099. - - Boards of both corporations must prepare and submit plan to shareholders of both corporations - Approval of board of directors of both companies - Shareholders of both corporations must be given copy or summary of merger plan - Majority vote of shareholders of each corporation - Surviving corporation gets all assets and liabilities of merging corporations - Dissatisfied shareholders of subsidiary may dissent and assert appraisal rights, thereby receiving the fair market value of their stock
97
Q100. - Dissolution of corporation
A100. - - Liquidation (winding up of affairs and distribution of assets) occurs in the following order: - 1) Expenses of liquidation and creditors - 2) Preferred shareholders - 3) Common shareholders - Dissolution may be voluntary (board of directors passes resolution) or involuntary (by state for cause)
98
Q101. - Subchapter S corporation
A101. - - Avoid double taxation by not paying tax at the corporate level; instead, corporation income flows through to the income tax returns of individual shareholders - Shareholders report the income or loss even if income is not distributed to them - Rules involving criteria to be met to be taxed as Subchapter S corporation often change, e.g.: - 1) Number of shareholders S corporation can have - 2) Which types of entities cannot be shareholders - 3) Citizenship of shareholders - 4) How much of corporation's income can come from passive income
99
Q102. - What is a general partnership?
A102. - An association of two or more persons to carry on as co- owners a business for profit.
100
Q103. - What is a joint venture?
A103. - An association of two or more persons in a single business venture.
101
Q104. - What is the difference between a general partnership and a joint venture?
A104. - A general partnership can mean an ongoing relationship whereas a joint venture is usually for a one-shot deal.
102
Q105. - What is a Limited Partnership (LP) ?
A105. - A partnership with at least one general partner and one limited partner.
103
Q106. - What distinguishes a Limited Partnership from a General Partnership?
A106. - In a limited partnership, limited partners will enjoy Limited Liability!
104
Q107. - What is a Limited Liability Partnership (LLP) ?
A107. - A partnership that CARRIES MUCH GREATER PROTECTON from liability than exists in a general or limited partnership.
105
Q108. - What does Limited Liability mean?
A108. - Only liable up to personal investment.
106
Q109. - What does Liability mean?
A109. - Legal responsibility
107
Q110. - What is General Partnership Law governed by?
A110. - Model acts that the states adopt
108
Q111. - What is the Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA)?
A111. - Model acts that govern partnership law.
109
Q112. - Joint ventures are essentially identical to partnerships and are governed by what?
A112. - UPA or RUPA, depending on the jurisdiction
110
Q113. - What law governs Limited Partnership Law in most jurisdictions?
A113. - The Revised Uniform "Limited" Partnership Act (RULPA)?
111
Q114. - What act was amended to provide limited liability for partners?
A114. - RUPA
112
Q115. - RUPA Is functionally a form contract and provides what?
A115. - Default rules
113
Q116. - By agreement, partners may vary most RUPA provisions but not prejudice rights of thrid parties. T or F
A116. -1
114
Q117. - Is a written agreement required in a written partnership?
A117. - No, unless the partnership will last more than a year
115
Q118. - Is an official filing required to form a General Partnership?
A118. - No
116
Q119. - What are the characteristics of a General Partnership?
A119. - 1. Unlimited Liability for Partners - 2. Pass-thru Taxation - 3. An association of two or more persons to carry on as co- owners a business for profit.
117
Q120. - Under RUPA, what is the name of the voluntary statement that can be filed in the Secretary of State's office?
A120. - Statement of Partnership Authority
118
Q121. - How does pass-thru taxation work?
A121. - 1. The partnership files an informational return but pays no taxes. - 2. Individual partners pay tax on allocated income, whether or not it is distributed.
119
Q122. - When defining the term ASSOCIATION in the definition of a general partnership, what does Delectus Personae mean?
A122. - Voluntariness. - 1) Partners choose with whom they'll become partners. - 2) Existing partners must consent to the addition of new partners.
120
Q123. - When defining the term ASSOCIATION in the definition of a general partnership, what does Intent mean?
A123. - Not an intent to be "partners", but an intent to enter into the type of business relationship that the law deems a partnership. - CONTENT CTLS FORM.
121
Q124. - When defining the term ASSOCIATION in the definition of a general partnership, what does "two or more persons having legal capacity mean?
A124. - Minors can become partners
122
Q125. - What does the term Business for Profit exclude?
A125. - Charitable, religious, & fraternal groups
123
Q126. - What does Co-ownership mean?
A126. - 1. Community of Interest: Sharing capital, control, profits/losses
124
Q127. - The sharing of profits and losses is prima facie evidence of a partnership, unless the profits were received in payment of what?
A127. - 1. Debt - 2. Wages of an employee - 3. Rent to a landlord - 4. Annuity to a widow or rep of a deceased person - 5. Interest on a loan - 6. Consideration for the sale of goodwill
125
Q128. - What are Purported Partners?
A128. - Purported Partners. - Where persons who are not partners are treated as such on the Estoppel theory.
126
Q129. - What is partnership by Estoppel?
A129. - Not a true partnership, but is a method of fixing liability on one who has held themselves out as a partner or has allowed others to them as partners.
127
Q130. - What actions deem a partnership by Estoppel?
A130. - 1. Words or conduct that represent a partnership - 2. Detrimental actions taken by the plaintiff in reliance on the representation - 3. Representation was reasonably believed by plaintiff
128
Q131. - What is the Aggregate Theory versus Entity Theory?
A131. - The Aggregate Theory is held by UPA where the partnership is not a separate entity from the partners. - The Entity Theory held by RUPA recognizes the partnership as a separate entity for most purposes. - Pass-thru taxation still exists in both cases.
129
Q132. - What does having a separate entity mean in regards to a General Partnership?
A132. - That the partnership itself continues to exist, even though the partners may come and go.
130
Q133. - Regarding Contractual Liability to third parties, the ACT of a partner in the ordinary course of partnership business BINDS the partnership with what exceptions?
A133. - A partner's act in the ordinary course of business does not bind the partnership when: - 1)The partner had no authority to act for the pship in the particular matter - AND - 2) The person with whom the partner was dealing knew or had received notification that the partner lacked authority
131
Q134. - If a partner does not act in the ordinary course of partnership business, then that act can only bind the partnership when what occurs?
A134. - When the other partners authorize the act
132
Q135. - A partner binds the partnership and the other parnters if the partner acts with what types of Authority?
A135. - Actual Authority - Apparent Authority
133
Q136. - What is Actual Authority?
A136. - Expressed or Implied
134
Q137. - What is Implied Authority?
A137. - Customary - Incidental - Emergency
135
Q138. - What is Apparent Authority?
A138. - Authority that is Clearly seen or understood
136
Q139. - In what instances can Apparent Authority NOT exist?
A139. - 1) When the third party knows of a partner's lack of authority, or - 2) The partner's action requires unanimity (ie extraordinary contract)
137
Q140. - What does the "Scope" of Authority mean?
A140. - The "range" of authority covered
138
Q141. - The scope of Authority in a Partnership is determined by what?
A141. - 1) Past practices of the partnership - 2) Practices of similar businesses in the area
139
Q142. - Give examples of Implied and Apparent Authority.
A142. - Hire/fire employees, open bank accts, buy supplies, sell inventory, rent office space
140
Q143. - After a falling out with Partners B and C, Partner A of the ABC Furniture Co. is forbidden - by majority vote - to sell any - partnership property - without the consent of the other partners. If A sells to a customer a couch and the company's fleet of seven delivery trucks, which of the two sales if any are within the scope of apparent authority?
A143. - The sale of the couch is probably within the scope of apparent authority, but the sale of the trucks probably is not.
141
Q144. - If a partner does not have actual or apparent authority, can the partnership still be liable for the act of the partner?
A144. - Yes, if the partnership ratifies or formally approves the action.
142
Q145. - What is a tort?
A145. - A wrongful act
143
Q146. - Generally, are Partnerships liable for the Torts of their partners?
A146. - Yes
144
Q147. - What is the key question when determining if a Tort has been committed?
A147. - Was the partner acting within the scope of partnership business?
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Q148. - What are the three types of torts?
A148. - Intentional - Unintentional (Negligence) - Strict Liability
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Q149. - For Intentional Torts, when is the Partnership liable for the Torts of their partners?
A149. - When the partner is attempting to advance partnership interests
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Q150. - Here is an example of an Intentional Tort a Partnership is probably liable for.
A150. - In attempting to acquire more prominent shelf space for the partnership's products in a grocery store carrying those products, partner A gets into a fist fight with an employee of a competitor also seeking the shelf space. - The partnership is probably liable.
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Q151. - For Negligence/unintentional cases, when is a partnership liable for the Torts of their partners?
A151. - When the partner is performing partnership business if using partnership owned means to do it. - If using personal means to do partnership business, then, the partnership is liable if the business is a regular part of partnership business.
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Q152. - What does RUPA impose Strict Liability on a partnership for?
A152. - Misapplication of Funds received in the course of its business
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Q153. - Under RUPA, contract and tort liability are typically joint and several. What does this mean?
A153. - That a creditor may sue any one partner and hold that partner completely liable without suing the others.
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Q154. - RUPA and most UPA states require in cases of contract and tort liabilities that Assets of the Partnership be exhausted before the partnership creditor can proceed against what?
A154. - Individual assets of Partners
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Q155. - If a partner joins an Existing Partnership, the new partner is generally liable for all subsequent debt, but is liable for preexisting debt how?
A155. - Only out of her Firm Contribution. - In other words, liable for preexisting debt only to the extent of the amt contributed when joined the partnership.
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Q156. - RUPA provides that "Property transferred to or otherwise acquired by a partnership is property of the partnership and not of the partners individually." True or False
A156. -1
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Q157. - Consistent with earlier UPA rules, RUPA provides that property is Partnership Property if acquired in the name of whom?
A157. - 1. the Partnership - 2. In the name of the Partner or Partners with at least one of the following indications: - In the instrument that transferred title: - a. The person's Capacity as partner - b. The Existence of the Partnership
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Q158. - Property is presumed to be partnership property when what occurs?
A158. - If purchased with Partnership Assets
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Q159. - When is property Separate from the partnership?
A159. - When property is acquired in the name of one or more partners without indication of: Partnership Capacity, or Existence of the Partnership, or without the use of Partnership Assets.
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Q160. - Partnerships have Entity Ownership of partnership property. What is Entity Ownership?
A160. - Partnership Property is owned by the Partnership Entity, not by the partners in common.
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Q161. - A partner's Partnership Interest is considered what?
A161. - Personal Property
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Q162. - What does Partnership Interest give the partner the Right to?
A162. - 1. Share in the partnership's Profits - 2. Share in the partnership's Net Assets upon dissolution.
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Q163. - The Creditor Restriction relating to Partnership Property is what?
A163. - No Creditor of an Individual Partner may attach partnership property to satisfy an Individual Debt.
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Q164. - What is the proper approach for creditors of Individual Partners?
A164. - The Charging Order
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Q165. - What is a Charging Order?
A165. - The judge orders the other partners to pay any Distribution Due to the debtor partner to that Partner's Creditor instead.
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Q166. - What does Assignment mean relating to Individual Partner debt?
A166. - Debtor partners may Assign (or creditors may seize) ONLY the Individual Partner's Interest in the Partnership (i.e. profits and net assets)
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Q167. - What is the rule regarding using PARTNERSHIP PROPERTY to satisfy the debts of Individual Partners?
A167. - Individual Partners MAY NOT ASSIGN and creditors of Individual Partners MAY NOT SEIZE Partnership Property to satisfy the debts of individual partners.
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Q168. - Can an Individual Partner assign his Partnership Interest to an Individual Creditor?
A168. - Yes
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Q169. - If an individual partner does assign to an individual creditor his or her partnership interest, does the creditor become a Partner?
A169. - NO
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Q170. - A promoter, like a shareholder, officer, or director is not liable on contracts the promoter makes on behalf of the corporation? t or f?
A170. - False! Generally promoters are personally liable on contracts that they enter into on behalf of the corporation to be formed!
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Q171. - What must be included in the A.O.I?
A171. - 1. Name - 2. Name & address of registered agent - 3. Name & add of each incorporator - 4. # of shares authorized - 5. One or more classes of stock must have voting rights
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Q172. - What are valid reasons for the courts to pierce the corporate veil?
A172. - 1. Commingle funds - 2. Inadequate cap when formed - 3. Illegal or defrauding
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Q173. - What's the minimum # of director's for a corporation?
A173. - One! however, the AOI or bylaws may require as many as desired without limitation!
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Q174. - What's the minimum # of officers for a corporation?
A174. - One! The duty of the officer is to record the min of director's and shareholder meetings and to authenticate corporation records. - However, corporations are free to provide for more officers in the bylaws!
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Q175. - What's the procedure for a fundamental change?
A175. - 1. Board Resolution (majority) - 2. Notice to shareholder - 3. Shareholder approval (majority) - 4. Filing of articles
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Q176. - What are the fundamental corporate changes that req shareholder approval?
A176. - 1. Dissolution - 2. Amendments to the AOI - 3. Mergers, cons, share exchanges - 4. Sale of substantially all of the corporations assets outside the regular course of bus
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Q177. - When does a shareholder of common and/or preferred have a right to a dividend?
A177. - Generally, shareholder do not have a right to dividends unless & until a dividend is DECLARED by the BOD!
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Q178. - Once a div is declared, shareholders have the status of secured creditor's. T or F?
A178. - False! Unsecured!
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Q179. - Adv of cum preferred stock is?
A179. - even if div is not declared in a particular year, it accumulates & must be paid b4 common shareholders get anything.
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Q180. - What's the main point regarding the inspection rights of shareholders?
A180. - Shareholders may inspect for any proper purpose (to start a derivative suit or to solicit shareholders to vote for certain directors), but shareholders may also be denied inspection for improper purposes (to get names for a mailing list).
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Q181. - Which of the following bus's can be formed without filing a formation doc w / the state: partnership, LP, LLC or Corp?
A181. - just a regular partnership (general partnership)
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Q182. - How is a limited partnership similar to a corporation?
A182. - They both can be formed only by compliance with statute & filing with SOS, & both provide LIMITED LIABILITY for investors (except the general partners of course).
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Q183. - Which of the following bus's offer flow-thru taxation to it's owners: partnership, LP, LLC or corporation?
A183. - PARTNERSHIP, LP, LLC ( although the owners of a LLC may opt to be taxed as a corporation) & corporations that elect "S-Corporation" status offer flow-thru taxation for their owners!
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Q184. - A cop. is a legally separate entity distinct form its shareholders. To transfer interest in corporation, one must simply . - A partnerships( LP and GP) requires to transfer interest in the partnership. - A limited liability company can follow rules, depending on how it is taxed.
A184. - 1.SELL HIS/HER STOCK - 2. the consent of the other partners - 3. THE PARTNERSHIP OR CORPORATION
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Q185. - A Corporation, initial BYLAWS shall be adopted by or or the board of directors may ratify the incorporator's initial bylaws. Generally, the bylaws are the rules of conduct for the corporation and are contained in the articles of incorporation as they are usually bulky. - The typically note such items as the company name, the comp. address, the names and the addresses of persons composing the initial board of directors, the number of authorized shares, the incorporator's name and address, and the registered agent's name and address, among other items.
A185. - 1. THE INCORPORATORS OR THE BOARD OF DIRECTORS - 2. NOT - 3. THE ARTICLES OF INCORPORATION
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Q186. - What corporation can : - have more than 100 shareholders - have a nonresident alien as a shareholder - has a disadvantage of double taxation when - it pays dividends to its shareholders
A186. - C corporation
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Q187. - Answer YES or NO for PROPRIETORSHIP, S CORPORATION C CORPORATION AND LLPARTNERSHIP - 1. Tax- free distributions and contributions - 2. Earnings accumulate tax-free - 3. Not subject to personal holding tax - 4. No double taxation of income - 5. Single individual as management - 6. Corporation as member/multiple members allowed
A187. - PROPRIETORSHIP: 1. Yes, 2. Yes, pass through individuals but no entity tax, 3. Yes, 4. Yes, 5. Yes, 6. No - S CORPORATION 1. Yes, under certain circumstances, 2. Yes, pass through individuals but no entity tax, 3. Yes, 4. Yes, 5. Yes, 6. No - C CORPORATION 1. No, 2. No, 3.No, 4. No, 5. No, 6.Yes - LLPARTNERSHIP: 1. Yes, 2. Yes, pass through individuals but no entity tax, 3. Yes, 4. Yes, 5. Yes, 6. Yes
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Q188. - What Require shareholder's approval and what not? - Dissolution - Purchase of 55% of another corporation stock - Merger
A188. - Dissolution and Merger Require shareholder's approval
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Q189. - A is an association of persons or entities with the intent of engaging in a Single Business Venture for PROFIT
A189. - JOINT VENTURE
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Q190. - is the simplest form of business ownership. It is NOT considered an entity separate from the business; nothing needs to be file unless req. by the state.
A190. - A SOLE PROPRIETORSHIP
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Q191. - List major disadvantages and advantages of sole proprietorship.
A191. - disadvantages: - 1. is personally liable fro ALL obligations of the business. - 2. limited life - advantages: - 1. not double taxation - 2. sole decision maker
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Q192. - The key difference between a Joint Venture and a GP is the fact that JV is formed for . - JVs are treated as a Partnerships in most legal aspects
A192. - SINGLE TRANSACTION OR PROJECT OR RELATED SERIES OF TRANSACTIONS
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Q193. - A GP is similar to a sole proprietorship EXCEPT
A193. - that there are at least TWO partners
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Q194. - List disadvantages and advantages of GP.
A194. - disadvantages : - 1. partners are personally liable for obligations of the partnership - 2. Transfer of partners interest must be approved by ALL GPs., - 3. limited life of the GP - Advantages: - 1. no double taxation
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Q195. - All partnerships are assumed to be unless otherwise stated.
A195. - GP
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Q196. - is a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business.
A196. - DISSOCIATION
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Q197. - In case of - partners change but the partnership may or may not continue. - In case of business is wound up, then the entity is terminated.
A197. - DISSOCIATION - DISSOLUTION
195
Q198. - When a partner Dissociates, the partner's right to participate in management ceases. - Actual authority ends but authority continues until the third party given notice.
A198. - APPARENT
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Q199. - Partners are for all contracts entered into and All torts committed by other partners within the scope of the partnership business or which are authorized. - Under liability , each partner is personally and individually liable for the amount of all partnership obligations.
A199. - PERSONALLY LIABLE - JOINT AND SEVERAL - ENTIRE AMOUNT - 100%
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Q200. - Each partner owes a DUTY to GP and is bound to use P-p property and his best efforts for the benefit of the Partnership.
A200. - FUDUCIARY
198
Q201. - LLP have a perpetual life, unless provided otherwise.
A201. - DOSE NOT
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Q202. - Limited partners in LLP are like , they contribute capital , but participate in the management of the partnership.
A202. - SHAREHOLDERS - DO NOT
200
Q203. - Unlike a GP, if there is No agreement, Profit and Loss allocations in LP are based on
A203. - CAPITAL CONTRIBUTIONS
201
Q204. - is a form of business entity that offers its owners ( called members) one of the main advantages of the corporate form of business - they are not personally liable for the obligations of the company and all of the tax advantages of a partnership - flow though taxation.
A204. - LIMITED LIABILITY COMPANY
202
Q205. - A LLC is a business that combines characteristics of corporations, partnership and LP.
A205. - HYBRID
203
Q206. - Generally, may participate in management of LLC
A206. - ALL MEMBERS - each member will be an agent of the LLC.
204
Q207. - An LLC is formed by filing with the secretary of state.
A207. - ARTICLES OF ORGANIZATION
205
Q208. - Voting strength of LLC members are and is based on
A208. - NOT EQUAL - CAPITAL
206
Q209. - Profit and loss allocation for the LLC members is based on and is similar to LP.
A209. - CAPITAL - GP and LLP - is EQUAL , unless otherwise agreed
207
Q210. - List + and - of the LLC
A210. - + Limited liability of members, liable only for his own torts - may NOT transfer all of his interest without the consent
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Q211. - is a legal entity distinct from its owners - called Shareholders, and manages.
A211. - A CORPORATION
209
Q212. - Creation of the Corporation requires filing a document called with the state.
A212. - THE ARTICLES OF INCORPORATION
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Q213. - do not have the power to manage the day-to-day operations of a Corporation - Management power is vested in . - They usually delegate their power to run the day-to-day operations to , whom they select.
A213. - STOCKHOLDERS - DIRECTORS - OFFICERS
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Q214. - List + (3) and - or Corporation
A214. - 1. Not personally liable - 2. perpetual life - 3. easy to transfer interest in the Corporation - sell - Double Taxation is main disadvantage
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Q215. - The tax laws permit certain Corporation to elect to be Taxed like partnerships and yet retain the other advantages of the Corporation form
A215. - S corporation
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Q216. - There are number of restrictions on S Corporation (5)
A216. - 1. No more than 100 members - 2. Shareholders must be individuals, estates, or certain trusts - 3. must be domestic corporation - 4. one class of stock - 5. foreign shareholders are not allowed.
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Q217. - An agreement among the third party, the corporation and the promoter that the third party will release the promoter and substitute the Corporation
A217. - NOVATION
215
Q218. - are the rules for running the corporation
A218. - BYLAWS
216
Q219. - If the incorporators made a good Faith attempt to incorporate - the doctrine is called
A219. - De Facto
217
Q220. - Foreign corporation is a corporation that is - It must obtain a to transact business.
A220. - not incorporated within the state - Certificate of Authority
