Business Entity: Termination

Question 1

Business Entity
Termination
Sole Proprietorship

Answer 1

Sole Proprietorship

- naturally terminates when the sole owner dies or departs

Question 2

Business Entity
Termination
General Partnership

Answer 2

General Partnership
- adding or removing partners does not automatically lead to dissolution
Disassociation
- cause of “disassociation”: notice of partner’s express will to dissolve, death, bankruptcy, expulsion
- must lead to buyout or dissolution
- partnership will purchase the share of the disassociating partner as if partnership was sold at greater of liquidation or going-concern value
- 90 day cooling off period between dissolution and liquidation
- in winding up, creditors must be paid first. If insufficient funds, then partners must contribute assets, then pay partners

Question 3

Business Entity
Termination
Limited Partnerships

Answer 3

Limited Partnerships

• process is similar to general partnership
• departure of limited partner will not result in dissolution

Question 4

Business Entity
Termination
Corporation

Answer 4

Corporation

• voluntarily dissolved upon approval of directors and shareholders
  
  • majority of directors vote and majority of shareholders vote
• “administratively” dissolved by failure to pay franchise taxes, file annual reports, establish and maintain a registered agent and office
• “judicially” dissolved by court: fraudulent approval of articles of incorporation, abused legal authority
• “judicially” dissolved by shareholders: if management is deadlocked, those in control are acting illegally, if shareholders are deadlocked and cannot elect directors, by an action of creditors, unsatisfied judgement creditor’s claim and corporation is insolvent
• other major activities
  
  • Procedures: directors owing fiduciary duty must propose and shareholders approve and vote
  • Appraisal Rights: dissenting shareholders must request share be purchased at court-valued rate

Question 5

Business Entity
Termination
LLC’s

Answer 5

LLC’s

• Disassociated from LLC: express will to withdraw, event listed in agreement occurs, expulsion, death, entity that has been dissolved.
• possible event: event occurs, consent of members, 90 days, court order