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300 Brainscape Flashcards

1
Q

Test

A

Answer

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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

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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

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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

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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)

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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

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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

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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

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9
Q

Q012. - Partnership Terminates when:

A

A012. - 1 dissolution (stop carrying on business together) - 2 remaining partners elect to wind up & terminate partnership

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10
Q

Q013. - Distribution Order upon Termination:

A

A013. - 1 creditors (including partner loans to partnership) - 2 equity due to/from each partner

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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

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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)

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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

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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

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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)

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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)

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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

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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

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19
Q

Q022. - Disadvantages of sole proprietorship

A

A022. - - Cannot raise capital from partners or shareholders - Unlimited liability

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20
Q

Q023. - Examples of associations that cannot be partnerships

A

A023. - - Passive co-ownership of property - Not-for-profits: labor unions, charities, clubs

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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)

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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

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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

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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

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25
Q

Q028. - Evidence of an implied partnership

A

A028. - - Agreement to share profits (prima facie evidence)

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26
Q

Q029. - Requirements to form partnership

A

A029. - - Written agreement needed only if partnership cannot be completed within one year - Filing not needed

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27
Q

Q030. - Definition of partnership interest

A

A030. - - Right to share in profits and return of capital contribution on dissolution - Is considered personal property

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28
Q

Q031. - Assignment of partnership interest: Rights of assignee

A

A031. - - Share of profits - Return of capital contribution

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29
Q

Q032. - Definition of partnership property

A

A032. - - Property acquired in name of partnership - Property acquired with partnership funds - Property acquired by partner in his/her capacity as partner

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30
Q

Q033. - Definition of silent partner

A

A033. - - Does not participate in management - Unlimited liability

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31
Q

Q034. - Partners’ share in profits and losses

A

A034. - - Equal unless stated otherwise in partnership agreement - Losses are shared per profit-sharing proportions unless stated otherwise in partnership agreement

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32
Q

Q035. - Partners owe fiduciary duty to one another - details:

A

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

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33
Q

Q036. - Types of authority whereby partners can bind partnership

A

A036. - - Actual authority - Apparent authority - Authority by Estoppel - Implied authority

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34
Q

Q037. - Definition of apparent authority

A

A037. - - Created when parties misrepresent to others that they are partners - Liable to third parties as if they were actual partners

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35
Q

Q038. - Definition of partnership by Estoppel

A

A038. - - Parties misrepresent to others that they are partners and others are hurt as they rely on this

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36
Q

Q039. - Implied authority of partners

A

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

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37
Q

Q040. - Liability of partnership for acts by partners

A

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

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38
Q

Q041. - Unanimous consent of partners needed (so no apparent authority) for:

A

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

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39
Q

Q042. - Personal liability of partners

A

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

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40
Q

Q043. - Dissolution of partnership can occur by:

A

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

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41
Q

Q044. - Order of distribution on termination of partnership

A

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

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42
Q

Q045. - Limited partners invest, not manage; can do the following without risking loss of limited liability:

A

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

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43
Q

Q046. - Profit and loss sharing for limited partners

A

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

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44
Q

Q047. - Admission of general and limited partners

A

A047. - - Admission of limited partner requires written approval of all partners - Admission of general partner requires approval of general partners only

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45
Q

Q048. - Fiduciary duties of general and limited partners

A

A048. - - General partners owe fiduciary duty to general and limited partners - Limited partners do not owe fiduciary duty

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46
Q

Q049. - Withdrawal of general and limited partners

A

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

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47
Q

Q050. - Order of distribution on dissolution of limited partnership

A

A050. - - Same as general partnership - General and limited partners share equally

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48
Q

Q051. - Definition of joint venture

A

A051. - - Association of two or more persons (or entities) organized to carry out a single business undertaking (or series of business undertakings) for profit

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49
Q

Q052. - Differences between joint venture and partnership

A

A052. - - Each joint venturer is not necessarily an agent of other joint venturers - Death of joint venturer does not automatically dissolve joint venture

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50
Q

Q053. - Advantages of LLC

A

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

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51
Q

Q054. - Formation of LLC

A

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

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52
Q

Q055. - Profit and loss sharing in LLC

A

A055. - - According to operating agreement - In absence of other agreement, members divide profits and losses equally

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53
Q

Q056. - Member-managed and manager-managed LLCs: authority and compensation

A

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

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54
Q

Q057. - Duties of members (if member-managed) and managers of LLC

A

A057. - - Fiduciary duty - Duty of due care - Duty of loyalty

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55
Q

Q058. - Dissolution of LLC occurs when:

A

A058. - - All members agree in writing (prior or present) - Member withdraws, dies, goes bankrupt, or becomes incompetent - Court order

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56
Q

Q059. - Formation of LLP

A

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

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57
Q

Q060. - Characteristics of LLP

A

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

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58
Q

Q061. - Liability provisions of partners in LLP

A

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

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59
Q

Q062. - Advantages of corporate structure

A

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

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60
Q

Q063. - Disadvantages of corporate structure

A

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

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61
Q

Q064. - Characteristics of foreign corporation

A

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

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62
Q

Q065. - Promoter of corporation: characteristics

A

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)

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63
Q

Q066. - Articles of Incorporation (charter) contain:

A

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

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64
Q

Q067. - Uncertificated securities

A

A067. - - Securities not represented by written documents

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65
Q

Q068. - Authorized stock

A

A068. - - Amount and types permitted to be issued in Articles of Incorporation

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66
Q

Q069. - Issued and unissued stock

A

A069. - - Issued stock: authorized and delivered to stockholders - Unissued stock: authorized but not yet issued

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67
Q

Q070. - Outstanding stock

A

A070. - - Issued and not repurchased by the corporation (i.e., owned by shareholders)

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68
Q

Q071. - Treasury stock

A

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

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69
Q

Q072. - Par-value stock

A

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

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70
Q

Q073. - No-par stock

A

A073. - - Issued without a set par value - May have a stated value

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71
Q

Q074. - Stated capital (legal capital)

A

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

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72
Q

Q075. - Retained earnings (previously “earned surplus”)

A

A075. - - Cumulative amount of income (net of dividends) retained by the corporation during its existence

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73
Q

Q076. - Surplus (of corporation)

A

A076. - - Excess of net assets over stated capital

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74
Q

Q077. - Capital surplus (of corporation)

A

A077. - - Surplus [excess of net assets over stated capital] less retained earnings

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75
Q

Q078. - Contributed capital

A

A078. - - Total consideration received by corporation upon issuance of stock

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76
Q

Q079. - Characteristics of common stock

A

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.)

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77
Q

Q080. - Characteristics of preferred stock

A

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

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78
Q

Q081. - Powers of corporation

A

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

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79
Q

Q082. - Liability of corporations for crimes or torts

A

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

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80
Q

Q083. - Ultra vires acts

A

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

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81
Q

Q084. - Powers and duties of directors

A

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

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82
Q

Q085. - Liability of directors

A

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

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83
Q

Q086. - Negligence of directors

A

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

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84
Q

Q087. - Fiduciary duty of directors

A

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

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85
Q

Q088. - Characteristics of officers (as contrasted with directors)

A

A088. - - Is agent of corporation and can bind corporation if acts are within scope of authority - Selected by directors for a fixed term

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86
Q

Q089. - Stockholder’s right to transfer stock

A

A089. - - Stock certificates are negotiable instruments - Reasonable limitations on transfer may be imposed; must be plainly printed on certificate

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87
Q

Q090. - Stockholder’s voting rights

A

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

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88
Q

Q091. - Stockholder’s right to dividends

A

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

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89
Q

Q092. - Stockholder’s preemptive right

A

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

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90
Q

Q093. - Stockholder’s right to sue

A

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

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91
Q

Q094. - Stockholder’s right on dissolution

A

A094. - - Right to a pro rata share of distribution of assets after creditors have been paid

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92
Q

Q095. - Stockholder’s liability

A

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

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93
Q

Q096. - Examples of piercing the corporate veil

A

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

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94
Q

Q097. - Merger

A

A097. - - Union of two corporations where one is absorbed by the other - Surviving corporation issues its own shares to shareholders of original corporations

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95
Q

Q098. - Consolidation

A

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

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96
Q

Q099. - Requirements to accomplish a merger or consolidation

A

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

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97
Q

Q100. - Dissolution of corporation

A

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)

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98
Q

Q101. - Subchapter S corporation

A

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

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99
Q

Q102. - What is a general partnership?

A

A102. - An association of two or more persons to carry on as co- owners a business for profit.

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100
Q

Q103. - What is a joint venture?

A

A103. - An association of two or more persons in a single business venture.

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101
Q

Q104. - What is the difference between a general partnership and a joint venture?

A

A104. - A general partnership can mean an ongoing relationship whereas a joint venture is usually for a one-shot deal.

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102
Q

Q105. - What is a Limited Partnership (LP) ?

A

A105. - A partnership with at least one general partner and one limited partner.

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103
Q

Q106. - What distinguishes a Limited Partnership from a General Partnership?

A

A106. - In a limited partnership, limited partners will enjoy Limited Liability!

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104
Q

Q107. - What is a Limited Liability Partnership (LLP) ?

A

A107. - A partnership that CARRIES MUCH GREATER PROTECTON from liability than exists in a general or limited partnership.

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105
Q

Q108. - What does Limited Liability mean?

A

A108. - Only liable up to personal investment.

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106
Q

Q109. - What does Liability mean?

A

A109. - Legal responsibility

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107
Q

Q110. - What is General Partnership Law governed by?

A

A110. - Model acts that the states adopt

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108
Q

Q111. - What is the Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA)?

A

A111. - Model acts that govern partnership law.

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109
Q

Q112. - Joint ventures are essentially identical to partnerships and are governed by what?

A

A112. - UPA or RUPA, depending on the jurisdiction

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110
Q

Q113. - What law governs Limited Partnership Law in most jurisdictions?

A

A113. - The Revised Uniform “Limited” Partnership Act (RULPA)?

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111
Q

Q114. - What act was amended to provide limited liability for partners?

A

A114. - RUPA

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112
Q

Q115. - RUPA Is functionally a form contract and provides what?

A

A115. - Default rules

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113
Q

Q116. - By agreement, partners may vary most RUPA provisions but not prejudice rights of thrid parties. T or F

A

A116. -1

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114
Q

Q117. - Is a written agreement required in a written partnership?

A

A117. - No, unless the partnership will last more than a year

115
Q

Q118. - Is an official filing required to form a General Partnership?

A

A118. - No

116
Q

Q119. - What are the characteristics of a General Partnership?

A

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
Q

Q120. - Under RUPA, what is the name of the voluntary statement that can be filed in the Secretary of State’s office?

A

A120. - Statement of Partnership Authority

118
Q

Q121. - How does pass-thru taxation work?

A

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
Q

Q122. - When defining the term ASSOCIATION in the definition of a general partnership, what does Delectus Personae mean?

A

A122. - Voluntariness. - 1) Partners choose with whom they’ll become partners. - 2) Existing partners must consent to the addition of new partners.

120
Q

Q123. - When defining the term ASSOCIATION in the definition of a general partnership, what does Intent mean?

A

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
Q

Q124. - When defining the term ASSOCIATION in the definition of a general partnership, what does “two or more persons having legal capacity mean?

A

A124. - Minors can become partners

122
Q

Q125. - What does the term Business for Profit exclude?

A

A125. - Charitable, religious, & fraternal groups

123
Q

Q126. - What does Co-ownership mean?

A

A126. - 1. Community of Interest: Sharing capital, control, profits/losses

124
Q

Q127. - The sharing of profits and losses is prima facie evidence of a partnership, unless the profits were received in payment of what?

A

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
Q

Q128. - What are Purported Partners?

A

A128. - Purported Partners. - Where persons who are not partners are treated as such on the Estoppel theory.

126
Q

Q129. - What is partnership by Estoppel?

A

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
Q

Q130. - What actions deem a partnership by Estoppel?

A

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
Q

Q131. - What is the Aggregate Theory versus Entity Theory?

A

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
Q

Q132. - What does having a separate entity mean in regards to a General Partnership?

A

A132. - That the partnership itself continues to exist, even though the partners may come and go.

130
Q

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?

A

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
Q

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?

A

A134. - When the other partners authorize the act

132
Q

Q135. - A partner binds the partnership and the other parnters if the partner acts with what types of Authority?

A

A135. - Actual Authority - Apparent Authority

133
Q

Q136. - What is Actual Authority?

A

A136. - Expressed or Implied

134
Q

Q137. - What is Implied Authority?

A

A137. - Customary - Incidental - Emergency

135
Q

Q138. - What is Apparent Authority?

A

A138. - Authority that is Clearly seen or understood

136
Q

Q139. - In what instances can Apparent Authority NOT exist?

A

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
Q

Q140. - What does the “Scope” of Authority mean?

A

A140. - The “range” of authority covered

138
Q

Q141. - The scope of Authority in a Partnership is determined by what?

A

A141. - 1) Past practices of the partnership - 2) Practices of similar businesses in the area

139
Q

Q142. - Give examples of Implied and Apparent Authority.

A

A142. - Hire/fire employees, open bank accts, buy supplies, sell inventory, rent office space

140
Q

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?

A

A143. - The sale of the couch is probably within the scope of apparent authority, but the sale of the trucks probably is not.

141
Q

Q144. - If a partner does not have actual or apparent authority, can the partnership still be liable for the act of the partner?

A

A144. - Yes, if the partnership ratifies or formally approves the action.

142
Q

Q145. - What is a tort?

A

A145. - A wrongful act

143
Q

Q146. - Generally, are Partnerships liable for the Torts of their partners?

A

A146. - Yes

144
Q

Q147. - What is the key question when determining if a Tort has been committed?

A

A147. - Was the partner acting within the scope of partnership business?

145
Q

Q148. - What are the three types of torts?

A

A148. - Intentional - Unintentional (Negligence) - Strict Liability

146
Q

Q149. - For Intentional Torts, when is the Partnership liable for the Torts of their partners?

A

A149. - When the partner is attempting to advance partnership interests

147
Q

Q150. - Here is an example of an Intentional Tort a Partnership is probably liable for.

A

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.

148
Q

Q151. - For Negligence/unintentional cases, when is a partnership liable for the Torts of their partners?

A

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.

149
Q

Q152. - What does RUPA impose Strict Liability on a partnership for?

A

A152. - Misapplication of Funds received in the course of its business

150
Q

Q153. - Under RUPA, contract and tort liability are typically joint and several. What does this mean?

A

A153. - That a creditor may sue any one partner and hold that partner completely liable without suing the others.

151
Q

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?

A

A154. - Individual assets of Partners

152
Q

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?

A

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.

153
Q

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

A

A156. -1

154
Q

Q157. - Consistent with earlier UPA rules, RUPA provides that property is Partnership Property if acquired in the name of whom?

A

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

155
Q

Q158. - Property is presumed to be partnership property when what occurs?

A

A158. - If purchased with Partnership Assets

156
Q

Q159. - When is property Separate from the partnership?

A

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.

157
Q

Q160. - Partnerships have Entity Ownership of partnership property. What is Entity Ownership?

A

A160. - Partnership Property is owned by the Partnership Entity, not by the partners in common.

158
Q

Q161. - A partner’s Partnership Interest is considered what?

A

A161. - Personal Property

159
Q

Q162. - What does Partnership Interest give the partner the Right to?

A

A162. - 1. Share in the partnership’s Profits - 2. Share in the partnership’s Net Assets upon dissolution.

160
Q

Q163. - The Creditor Restriction relating to Partnership Property is what?

A

A163. - No Creditor of an Individual Partner may attach partnership property to satisfy an Individual Debt.

161
Q

Q164. - What is the proper approach for creditors of Individual Partners?

A

A164. - The Charging Order

162
Q

Q165. - What is a Charging Order?

A

A165. - The judge orders the other partners to pay any Distribution Due to the debtor partner to that Partner’s Creditor instead.

163
Q

Q166. - What does Assignment mean relating to Individual Partner debt?

A

A166. - Debtor partners may Assign (or creditors may seize) ONLY the Individual Partner’s Interest in the Partnership (i.e. profits and net assets)

164
Q

Q167. - What is the rule regarding using PARTNERSHIP PROPERTY to satisfy the debts of Individual Partners?

A

A167. - Individual Partners MAY NOT ASSIGN and creditors of Individual Partners MAY NOT SEIZE Partnership Property to satisfy the debts of individual partners.

165
Q

Q168. - Can an Individual Partner assign his Partnership Interest to an Individual Creditor?

A

A168. - Yes

166
Q

Q169. - If an individual partner does assign to an individual creditor his or her partnership interest, does the creditor become a Partner?

A

A169. - NO

167
Q

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?

A

A170. - False! Generally promoters are personally liable on contracts that they enter into on behalf of the corporation to be formed!

168
Q

Q171. - What must be included in the A.O.I?

A

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

169
Q

Q172. - What are valid reasons for the courts to pierce the corporate veil?

A

A172. - 1. Commingle funds - 2. Inadequate cap when formed - 3. Illegal or defrauding

170
Q

Q173. - What’s the minimum # of director’s for a corporation?

A

A173. - One! however, the AOI or bylaws may require as many as desired without limitation!

171
Q

Q174. - What’s the minimum # of officers for a corporation?

A

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!

172
Q

Q175. - What’s the procedure for a fundamental change?

A

A175. - 1. Board Resolution (majority) - 2. Notice to shareholder - 3. Shareholder approval (majority) - 4. Filing of articles

173
Q

Q176. - What are the fundamental corporate changes that req shareholder approval?

A

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

174
Q

Q177. - When does a shareholder of common and/or preferred have a right to a dividend?

A

A177. - Generally, shareholder do not have a right to dividends unless & until a dividend is DECLARED by the BOD!

175
Q

Q178. - Once a div is declared, shareholders have the status of secured creditor’s. T or F?

A

A178. - False! Unsecured!

176
Q

Q179. - Adv of cum preferred stock is?

A

A179. - even if div is not declared in a particular year, it accumulates & must be paid b4 common shareholders get anything.

177
Q

Q180. - What’s the main point regarding the inspection rights of shareholders?

A

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).

178
Q

Q181. - Which of the following bus’s can be formed without filing a formation doc w / the state: partnership, LP, LLC or Corp?

A

A181. - just a regular partnership (general partnership)

179
Q

Q182. - How is a limited partnership similar to a corporation?

A

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).

180
Q

Q183. - Which of the following bus’s offer flow-thru taxation to it’s owners: partnership, LP, LLC or corporation?

A

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!

181
Q

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.

A

A184. - 1.SELL HIS/HER STOCK - 2. the consent of the other partners - 3. THE PARTNERSHIP OR CORPORATION

182
Q

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.

A

A185. - 1. THE INCORPORATORS OR THE BOARD OF DIRECTORS - 2. NOT - 3. THE ARTICLES OF INCORPORATION

183
Q

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

A

A186. - C corporation

184
Q

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

A

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

185
Q

Q188. - What Require shareholder’s approval and what not? - Dissolution - Purchase of 55% of another corporation stock - Merger

A

A188. - Dissolution and Merger Require shareholder’s approval

186
Q

Q189. - A is an association of persons or entities with the intent of engaging in a Single Business Venture for PROFIT

A

A189. - JOINT VENTURE

187
Q

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.

A

A190. - A SOLE PROPRIETORSHIP

188
Q

Q191. - List major disadvantages and advantages of sole proprietorship.

A

A191. - disadvantages: - 1. is personally liable fro ALL obligations of the business. - 2. limited life - advantages: - 1. not double taxation - 2. sole decision maker

189
Q

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

A

A192. - SINGLE TRANSACTION OR PROJECT OR RELATED SERIES OF TRANSACTIONS

190
Q

Q193. - A GP is similar to a sole proprietorship EXCEPT

A

A193. - that there are at least TWO partners

191
Q

Q194. - List disadvantages and advantages of GP.

A

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

192
Q

Q195. - All partnerships are assumed to be unless otherwise stated.

A

A195. - GP

193
Q

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.

A

A196. - DISSOCIATION

194
Q

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.

A

A197. - DISSOCIATION - DISSOLUTION

195
Q

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.

A

A198. - APPARENT

196
Q

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.

A

A199. - PERSONALLY LIABLE - JOINT AND SEVERAL - ENTIRE AMOUNT - 100%

197
Q

Q527. - What are the different levels of a partnership interest?

A

A527. - 1. General partner - 2. Limited partner - 3. Minimal - 4. Secret - 5. Silent

198
Q

Q528. - What events may result in a dissolution of a partnership?

A

A528. - A dissolution of a partnership occurs upon admission of a new partner or departure of an existing partner. - Such event may be the result of death, incapacity, illegality, agreement, withdrawal, war, court decree and bankruptcy.

199
Q

Q529. - To what extent may a partner be held liable for debts and liability of a partnership?

A

A529. - 1. New Partner - liable for pre-existing debt only to extent of cap cont. May become personally liable by assumption or novation. - 2. Leaving partner - liable for pre-exist debts to date of leaving. Not liable after as long creditors had notice. - 3. Criminal liability - limited to personal participation. Not liable for crimes of other partners. - 4. Torts - general partners are liable. Limited are NOT! - 5. Deceased partners estate - liable for partnership debts while he was a partner.

200
Q

Q530. - How does the dissolution of a partnership affect the partner’s authorities & liability? What types of notice should be given to third parties?

A

A530. - Dissolution will terminate partner’s authority to enter into new obligations so long as 3rd party has notice. - 3rd parties should be given actual notice (given to those with prior partnership dealings) & constructive notice (given to other 3rd parties).

201
Q

Q531. - What are the liabilities of a retired partner?

A

A531. - Existing liability - fully liable - Future liability - may be liable unless appropriate notice is given!

202
Q

Q532. - What are the characteristics of a limited partnership?

A

A532. - 1. Names are usually not identified with the bus. - 2. Liability of limited partners is restricted to cap cont. No personal liability. - 3. Limited partner may NOT engage in management! - 4. Must have at least ONE general! - 5. Limited one’s possess same non-management rights as general one! - 6. Limited partner may participate in profits and losses as specified by partnership agreement. - 7. Limited partner can’t bind partnership.

203
Q

Q533. - Discuss the formation & dissolution of a limited partnership.

A

A533. - Formation - certificate must be filed with state where located. Certificate should include name, purpose, location, term, cap and contr for each partner. - Dissolution - assets will be distributed in the following order: to creditors, distributions in arrears, cap cont’s and undistributed profits.

204
Q

Q534. - Actual Authority

A

A534. - All authority that a principal expressly gives to an agent plus any authority that can reasonably be implied from the express grant

205
Q

Q535. - Agent

A

A535. - One (agent) who acts on behalf of another (principal)

206
Q

Q536. - Apparent Authority

A

A536. - Authority that a third party reasonably believes an agent has based on the principal’s holding the hange out as being the principal’s agent.

207
Q

Q537. - Appraisal Rights

A

A537. - Shareholders who are dissatisfied with most fundamental corporate changes have an opportunity to dissent and demand that they corporation pay them the fair value of their shares rather than remain shareholders of a fundamentally changed corporation.

208
Q

Q538. - Articles of incorporation

A

A538. - Formation filing documents of a corporation and are filed with the state in which the business is located.

209
Q

Q539. - Articles of Organization

A

A539. - Formation filing documents of a Limited Liability Corporation.

210
Q

Q540. - Authorized Shares

A

A540. - Shares described in the articles

211
Q

Q541. - Business Judgment Rule

A

A541. - A director will not be liable to the corporation for acts performed or decisions made in good faith, in a manner the director believes to be in the best interest of the corporation, and with the care an ordinarily prudent person in a like position would exercise.

212
Q

Q542. - Bylaws

A

A542. - Contains the rules for running the corporation. - They are not part of the articles of incorporation and are not required to be filed by the state.

213
Q

Q543. - C Corporation

A

A543. - A corporation that is taxed as an entity distinct from its owners.

214
Q

Q544. - Certificate of Authority

A

A544. - Authority granted by a state authorizing a foreign corporation to transact business within the state

215
Q

Q545. - Charging Order

A

A545. - Court order used by a creditor of an individual partner may obtain an interest against an individual partner’s share of profits.

216
Q

Q546. - Closely held Corporation

A

A546. - The articles of incorporation can eliminate the board of directors and provide that they shareholders shall have the power of the board, but this is not typical expect in small corporations.

217
Q

Q547. - Common Stock

A

A547. - Class of stock that will carry with it all rights of stock ownership

218
Q

Q548. - Confessing a Judgment

A

A548. - Admitting liability in a lawsuit.

219
Q

Q549. - Corporate Opportunity Doctrine

A

A549. - If a director is presented with a business opportunity that would be of interest to his corporation, generally the duty of loyalty prohibits the director from taking the opportunity himself.

220
Q

Q550. - Corporation

A

A550. - Legal entity distinct from its owners and managers. - They are created by complying with a state incorporation statute.

221
Q

Q551. - Corporation by Estoppel

A

A551. - Under the Estoppel doctrine, a party who treats a business as if it were a validly formed corporation will be estopped (legally barred) from claiming in a legal proceeding that the corporation was not validly formed. - This applies to third parties who treat the business as a corporation as well as to the business itself

222
Q

Q552. - Cumulative Preferred Shares

A

A552. - Shares with a preference usually are entitled to a fixed amount of money before distributions can be made with respect to nonpreferred shares. - With cumulative preferred shares, if a dividend

223
Q

Q553. - De Facto Corporation

A

A553. - If all the requirements for incorporation are not met, the business might still be treated as a corporation (and protect its owners, officers, and directors from personal liability). - If the incorporators made a good faith attempt to incorporate, and operated as if they had incorporated, the business will be treated as a corporation in all respects, except the state may bring an action challenging the corporation’s status.

224
Q

Q554. - De Jure Corporation

A

A554. - If all the requirements for incorporation are met, the corporation is said to be “de jure” and its existence will be recognized for all purposes

225
Q

Q555. - Debt Securities

A

A555. - Debt Securities are bonds. - It represents a creditor-debtor relationship with the corporation whereby the corporation has borrowed funds from “outside investors” and promises to pay.

226
Q

Q556. - Derivative Action

A

A556. - When a corporation has a legal cause of action against someone but refuses to bring the action, the shareholders may have a right to bring a shareholder derivative action to enforce the corporation’s rights. - Such an action may be brought against the director of the corporation or outsiders.

227
Q

Q557. - Directors

A

A557. - Individuals with the general authority and responsibility for management of the corporation. - In most corporations, the board of directors delegates the power to run the corporation on a day-to-day basis to the officers.

228
Q

Q558. - Dissociation

A

A558. - Change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business. - The remaining partners have the right to continue the business.

229
Q

Q559. - Dissolution

A

A559. - Upon dissolution, the partnership is terminated and the business must be wound up

230
Q

Q560. - Dividends

A

A560. - Distribution of corporate profits as ordered by the directors and paid to the shareholders

231
Q

Q561. - Domestic Corporation

A

A561. - Corporation incorporated within the state

232
Q

Q562. - Equity Securities

A

A562. - Stocks - An instrument representing an investment in the corporation whereby its holder becomes a part owner of the business.

233
Q

Q563. - Fictitious Name Statutes

A

A563. - State laws that require persons conduction a business under an assumed name to file with the state the name under which the business is conducted and the real names and addresses of all person conducting the business

234
Q

Q564. - Fiduciary Duty

A

A564. - Duty of utmost loyalty and good faith owed by an agent to her principal

235
Q

Q565. - Foreign Corporation

A

A565. - Corporation doing business in a state other than its state of incorporation

236
Q

Q566. - Fundamental Changes

A

A566. - Issues that might fundamentally change the nature of the entity

237
Q

Q567. - General Partner

A

A567. - Person in either a general or limited partnership with unlimited personal liability and the right to take part in the management of the business.

238
Q

Q568. - Greenmail

A

A568. - When a corporation is faced with the prospect of being taken over and the BOD wants to resist the takeover attempt, it will pay the person or company attempting the takeover to abandon its takeover attempt

239
Q

Q569. - Incorporator

A

A569. - The party responsible for forming the corporation by filing articles of incorporation with the state.

240
Q

Q570. - Indemnification

A

A570. - Duty of a business entity to reimburse those properly acting on behalf of the entity for losses incurred.

241
Q

Q571. - Issued Shares

A

A571. - The corporation issues some or all of the authorized shares.

242
Q

Q572. - Joint and Several Liability

A

A572. - Liability whereby creditors may sure partners jointly or sue partners individually

243
Q

Q573. - Joint Venture

A

A573. - An associate of persons with the intent of engaging in a single business venture for profit.

244
Q

Q574. - Limited Liability (of shareholders, limited partners, and LLC members)

A

A574. - The creditors are prevented from accessing the personal assets of the individual. - Their liability is limited to their investment in the entity.

245
Q

Q575. - Limited Liability Company (LLC)

A

A575. - Form of business entity that offers its owners (called members) one of the main advantages of the corporate form of business (ie they are not personally liable for the obligations of the company) and all of the tax advantages of a partnership. - It is a hybrid business organization that combines characteristics of corporations, partnerships, and limited partnerships.

246
Q

Q576. - Limited Liability Partnership (LLP)

A

A576. - An association of 2 or more persons who agree to carry on as co-owners a business for profit. - An LLP differs from a general partnership in that a partner in an LLP is not personally liable for the obligations or liabilities of the partnership arising from errors, omissions, negligence, malpractice, or the wrongful acts committed by another partner or by an employee, agent, or representative of the LLP. - Neither are the partners liable for partnership contracts.

247
Q

Q577. - Limited Partner

A

A577. - Partner with limited liability as to his personal assets, risking only his investment in the limited partnership. - A limited partner is not an agent of the partnership.

248
Q

Q578. - Limited Partnership

A

A578. - A partnership made up of one or more general partners and one or more limited partners.

249
Q

Q579. - Locking up the Crown Jewels

A

A579. - When a corporation is face with the prospect of being taken over and the board of directors wants to resist the takeover attempt, it will give a third party an option to purchase the company’s most valuable assets.

250
Q

Q580. - Members

A

A580. - Owners of a limited liability company.

251
Q

Q581. - Noncumulative Preferred Shares

A

A581. - Shares with a preference are usually entitled to a fixed amount of money before distributions can be made with respect to nonpreferred shares. - Unless the dividend is cumulative the right to a dividend preference is extinguished if it is not declared for that year.

252
Q

Q582. - Officers

A

A582. - Parties elected by the board of directors to managed the corporation on a day-to-day basis. - They are agents of the corporation.

253
Q

Q583. - Outstanding Shares

A

A583. - Shares in the shareholders hands

254
Q

Q584. - Par Value

A

A584. - Specific face value placed on stock

255
Q

Q585. - Piercing the Corporate Viel

A

A585. - In some circumstances, the courts will hold the shareholders, officers, or directors of a corporation liable because the legislative privilege of conducting business in corporate form is being abused.

256
Q

Q586. - Preemptive Rights

A

A586. - When a corporation proposes to issue additional shares of stock, current shareholders often want to purchase some shares in order to maintain their proportional voting strength through special rights referred to as “preemptive rights” that must be granted in the articles of incorporation

257
Q

Q587. - Preferred Stock

A

A587. - Ownership interest in a company that is preferred in some manner (dividends or assets) over the common stockholders in the case of liquidation.

258
Q

Q588. - Promoter

A

A588. - Individuals who form a corporation. - Responsible for the procurement of commitments for capital that will be used by the corporation after formation. - Promoters enter into contracts with third partiers who are interested in becoming shareholders and might also enter into contracts for goods or services to be provided to the corporation once its formed.

259
Q

Q589. - Proxy

A

A589. - Written authorization given to third parties for the purposes of voting shares on behalf of the shareholder.

260
Q

Q590. - Quorum

A

A590. - Minimum number of parties that must be present for a valid vote or transaction

261
Q

Q591. - Registered Agent

A

A591. - The person on whom process may be served if the limited partnership, LLC, or corporation is sued.

262
Q

Q592. - Revised Model Business Corporation Act (RMBCA)

A

A592. - Uniform law governing corporations that has been adopted by a slight majority of the states

263
Q

Q593. - Revised Uniform Limited Partnership Act (RULPA)

A

A593. - Uniform law governing limited partnerships that has been adopted by a majority of the states

264
Q

Q594. - Revised Uniform Partnership Act (RUPA)

A

A594. - Uniform law governing partnerships that has been adopted by a majority of the states

265
Q

Q595. - S Corporation

A

A595. - Corporation electing to be taxed like a partnership and yet retaining other advantages of the corporation form

266
Q

Q596. - Scorched Earth Policy

A

A596. - When a corporation is faced with the prospect of being taken over and the board of directors wants to resist the takeover attempt, it will sell off assets or take out loans that would make the company less financially attractive.

267
Q

Q597. - Self-Tender

A

A597. - When a corporation is faced with the prospect of being taken over and the board of directors wants to resist the takeover attempt, it will make an offer to acquire stock from its own stockholders and thus retain control in order to prevent a takeover.

268
Q

Q598. - Share Exchange

A

A598. - Transaction in which one corporation acquires of all outstanding shares of one or more classes of stock of another corporation. - Both corporations continue to exist as separate entities.

269
Q

Q599. - Shareholder/Stockholder

A

A599. - Party owning an interest in a corporation. - Has a limited right to manage.

270
Q

Q600. - Shark Repellant

A

A600. - When a corporation is faced with the prospect of being taken over and the board of directors wants to resist the takeover attempt, it will amend the articles of incorporation or bylaws to make a takeover more difficult.

271
Q

Q601. - Short-Form Merger

A

A601. - A merger whereby a parent corporation owning 90% or more of a subsidiary corporation may merge the subsidiary into the parent without the approval of the shareholders of either corporation or the approval of the subsidiary’s board.

272
Q

Q602. - Sole Proprietorship

A

A602. - One person owns the business and manages all of its affairs. - The sole proprietor is not considered an entity separate from the business.

273
Q

Q603. - Statement of Authority

A

A603. - Document filed with the secretary of state, stating that the partnership has expanded or curtailed a partner’s authority to enter into transactions on behalf of the partnership. - However, the filing of a limitation does not give third parties constructive knowledge of the limitation.

274
Q

Q604. - Statement of Denial

A

A604. - A partner listed in a filed statement of partnership authority may effectively deny her authority by filing a statement of denial with the secretary of state.

275
Q

Q605. - Stock Dividends

A

A605. - Dividends in the corporation’s “own authorized but unissued shares”

276
Q

Q606. - Stock Subscriptions

A

A606. - Contracts committing parties to the purchase of stock.

277
Q

Q607. - Treasury Shares

A

A607. - Issued shares that are sometimes repurchased by the corporation (called “issued but not outstanding”).

278
Q

Q608. - Ultra Vires Act

A

A608. - An unauthorized act. - Under the RMBCA, a corporation may include a clause in its articles state the business purpose for which the corporation was formed. - A number of states require a purpose clause. - If a corporation undertakes business activities outside the clause (or outside the business permitted by statute) it is said to be acting “ultra vires” and may be challenged by adversely affected parties

279
Q

Q609. - Unlawful Distribution

A

A609. - A distribution that causes a corporation not to be able to pay its debts as they become due in the regular course of business or causes the corporation’s total assets would be less than its total liabilities

280
Q

Q610. - Voting Agreements

A

A610. - Shareholders agree among themselves to vote their shares as the majority of signers directs

281
Q

Q611. - Voting Trusts

A

A611. - An agreement of shareholders under which all the shares owned by the parties to the agreement are transferred to a trustee, who votes the shares and distributes the dividends in accordance with the provisions of the voting trust agreement.

282
Q

Q612. - Watered Stock

A

A612. - Stock that is issued in exchange for property worth less than the par value of the stock (the difference between the par value and the value of the property is deemed to be “water”)

283
Q

Q613. - White Knight

A

A613. - When a corporation is faced with the prospect of being taken over and the board of directors wants to resist the takeover attempt, it will find a company that the directors want to merge with.

284
Q

Q614. - Winding Up

A

A614. - Liquidation that involves the process of collecting the corporate or partnership assets, paying the expenses involved satisfying creditors’ claims, and distributing the net assets of the business to the appropriate party.

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