9.1 SELECTION AND FORMATION OF BUSINESS ENTITY AND RELATED OPERATION AND TERMINATION

Question 1

WHAT IS A SOLE PROPRIETORSHIP?

Answer 1

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• A SINGLE BUSINESS OWNER
• TERMINATION BY DEATH OF OWNER OR ANYTIME BY DISPOSING AND OR SELLING INVENTORY

Question 2

WHAT IS A GENERAL PARTNERSHIP?

Answer 2

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• TWO OR MORE PERSONS TO CARRY ON AS CO-OWNERS OF A BUSINESS FOR PROFIT

Question 3

WHAT IS THE FINANCIAL STRUCTURE OF A GENERAL PARTNERSHIP?

Answer 3

CAPITAL ACCOUNTS - CREDITED WITH AN AMOUNT EQUAL TO THE MONEY PLUS PROPERTY MINUS ITS LIABILITIES

RIGHTS TO PROFITS - AGREEMENT (E.G., 75/25) IF NO AGREEMENT THEN PROFIT AND LOSS ARE SPLIT EQUALLY

Question 4

WHAT IS A LIMITED PARTNERSHIP?

Answer 4

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• CONSIST OF AT LEAST ONE GENERAL PARTNER AND AT LEAST ONE LIMITED PARTNER
• LIMITED PARTNERS GIVE UP THEIR GENERAL MANAGEMENT RIGHTS IN EXCHANGE FOR LIMITED LIABILITY
• ONLY GENERAL PARTNERS HAVE PERSONAL LIABILITY

DEATH OR BANKRUPTCY OF A GP IN A LIMITED PARTNERSHIP WILL CASUSE DISSOLUTION OF THE LP

*THEIR ARE NO LEGAL RESTIRCTION ON OWNING BOTH A GENERAL PARTNER INTEREST AND LIMITED PARTENER INTEREST IN THE SAME LP

Question 5

WHAT IS THE FINANCIAL STRUCTURE OF AN LP, LLP’S, AND LLLP’S?

Answer 5

ABSENT ANY AGREEMENT EACH PARTNERS PROFIT AND LOSSES ARE DETERMINED BY THE VALUE OR PERCENTAGE OF THE CAPITAL CONTRIBUTIONS THAT THE PARTNER HAS MADE.

Question 6

WHAT IS THE PROCESS OF TERMINATING A GENERAL PARTNERSHIP LP’S, LLP’S, LLLP’S?

Answer 6

3 EVENTS LEAD TO THE TERMINATION
A) DISSOCIATION
-PARTNERS DESIRE TO DISSASOCIATE
-DEATH OF PARTNER
-BANKRUPTCY OF PARTNER
-EXPULSION
B) DISSOLUTION
-PARTNERSHIP MAY CONTINUE AFTER DISSOCIATION HOWEVER IT MUST BUY OUT PARTNERS INTEREST
C) WINDING UP/LIQUIDATING/TERMINATION
- TERMINATION IN ITS ENTIRETY REQUIRE PAYING CREDITORS FIRST, IF INSUFFICIENT FUNDS THAN PARTNERS PAY OUT OF POCKET
- AND FUNDS LEFT OVER ARE DISTRIBUTED TO PARTNERS FOR ANY EXCESS CREDITS OVER CHARGES.

Question 7

WHAT ARE THE DOCUMENTS REQUIRED TO BE FILED IN CREATING AN LP?

Answer 7

1) LP NAME
2) PLACE OF FORMATION
3) PRINCIPAL OFFICE AND MAILING ADDRESS
4) NAME AND ADDRESS OF GP
5) NAME AND ADDRESS OF TH LP’S REGISTERED AGENT

Question 8

WHAT IS A LIMITED LIABILITY COMPANY?

Answer 8

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• ALLOW OWNERS TO ENJOY LIMITED LIABILITY BUT COULD STILL HAVE THE PASS THROUGH TAX BENEFITS OF A PARTNERSHIP.

Question 9

HOW IS AN LLC TERMINATED?

Answer 9

DISSOCIATION
- DESIRE TO WITHDRAW
- EXPULSION
- DEATH

Question 10

WHAT ARE THE DOCUMENTS REQUIRED TO BE FILED IN CREATING AN LLC?

Answer 10

SOME STATES REQUIRE ARTICLES OF INCORPORATION AND OTHERS AN OPERATING AGREEMENT

Question 11

WHAT IS THE FINANCIAL STRUCTURE OF AN LLC?

Answer 11

MEMBER CONTRIBUTION - CREDITED WITH AN AMOUNT EQUAL TO THE MONEY PLUS PROPERTY MINUS ITS LIABILITIES

MEMBER DISTRIBUTION -
IN DIRECT PROPORTION TO THEIR OWNERSHIP STAKE.

Question 12

WHAT IS A CORPORATION?

Answer 12

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• A LEGAL SEPARATE ENTITY OWNED BY SHAREHOLDERS WHO WILL HAVE LIMITED LIABILITY.
• C-CORPORATION - DOUBLE TAXATION
• S-CORPORATION - NOT ALLOWED TO HAVE MORE THAN 100 SHAREHOLDERS - AVOIDS DOUBLE TAXATION

Question 13

HOW IS A CORPORATION TERMINATED?

Answer 13

CORPORATIONS MAY BE VOLUNTARILY OR INVOLUNTARILY
INVOLUNTARILY BY,
- SECRETARY OF STATE (E.G., FAILURE TO PAY FRANCHISE TAX, FILE ANNUAL REPORT.
- JUDICIALLY “ILLEGAL ACT BY THE BOARD, WASTE OF CORPORATE ASSETS”
- STATE ATTORNEY GENERAL
- SHAREHODERS
- CREDITORS

AFTER DISSOLUTION ASSETS MUST BE LIQUIDATED, DIRECTORS WILL NOT BE PERSONALLY LIABLE IF THEY FOLLOW AND COMPLY WITH RMBCA’S
-GIVE NOTICE TO CLAIMANTS
-PUBLISH DISSOLUTION
-REQUESTING OTHER CLAIMANTS PRESENT THEIR CLAIMS

*AFTERWARDS ANY REMAINING MONEY IS DISTRIBUTED TO SHAREHOLDERS

Question 14

WHAT IS THE FINANCIAL STRUCTURE OF A CORPORATION?

Answer 14

A) EQUITY SECURITY
- COMMON STOCK “RIGHT TO VOTE, DIVIDENDS”
- PREFERRED STOCK
- TREASURY STOCK - STOCK THAT WAS ONCE ISSUED TO SHAREHOLDERS BUT HAS NOW BEEN REPURCHASED BY THE CORPORATION

B) DEBT SECURITES
- NOTES - SHORT TERM UNSECURED DEBT INSTRUMENTS
- DEBENTURES - LONG TERM UNSECURED DEDT INSTRUMENTS
- BONDS - DEBT INSTRUMENTS SECURED BY CORPORATE PROPERTY

Question 15

WHAT ARE THE REQUIREMENTS TO FORM A CORPORATION?

Answer 15

SEE SCREENSHOT

Question 16

WHAT IS A LIMITED LIABILITY PARTNERSHIP?

Answer 16

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

• LLP’S WERE CREATED TO PROVIDE PROFESSIONALS WHO FORM PARTNERSHIPS LIMITED LIABILITY FOR MALPRACTICE
• PARTNERS ARE GENERALLY LIABLE FOR THIER OWN MALPRACTICE, IN ADDITION, SUPERVISIG PARTNERS ARE LIABLE FOR THE TORTS OF THOSE THEY SUPERVISE

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Question 17

WHAT IS A LIMITED LIABILITY LIMITED PARTNERSHIPS

Answer 17

EASE OF FORMATION, PERSONAL LIABILITY, TAXATION, LEVEL OF CONTROL, EASE OF TRANSFER

LLLP’S ALLOW GENERAL PARTNERS OF AN LP TO HAVE LIMITED LIABILITY

Question 18

WHAT IS A JOINT VENTURE?

Answer 18

A GENERAL PARTNERSHIP FOR A SPECIFIC ACTIVITY OR A ONE-TIME TRANSACTION

Question 19

WHAT ARE THE ITEMS INCLUDED IN A CORPORATIONS ATICLES OF INCORPORATION?

Answer 19

SEE SCREENSHOT