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Paralegal Licenscing Exam > Business Law > Flashcards

Business Law Flashcards

1
Q

A sole proprietorship exists where

A

an individual carries on business for his or her own account without the involvement of other individuals, except as employees

  • all income and assets accrue exclusively to the sole proprietor
  • all losses, obligations, contractual and tortious liability associated w the business are the sole proprietor’s responsibility
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2
Q

What is a major disadvantage of sole proprietorship?

A

There is no limited liability for the sole proprietor, all assets may be seized in satisfaction of business obligations and liabilities

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3
Q

how can a sole proprietor limit their personal liability exposure?

A

by contract or through insurance

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4
Q

Sole proprietors must comply with s2.2 of ON’s Business Names Act, which states that

A

no individual shall carry on business or identify their business to the public under a name other than their own, unless the name is registered by them

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5
Q

Section 7(1) of the Business Names Act requires

A

leave of the court if an individual, corporation or partnership commences/defends an action under a name other than the registered name of the business

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6
Q

Business includes every

A

trade, occupation, profession, service or venture carried on with a view to profit

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7
Q

Business registration must be filed with

A

The Ministry of Public and Business Service Delivery

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8
Q

What is the penalty for non-compliance with the BNA and registration requirements?

A

summary conviction

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9
Q

Small Claims Court subrule 5.06(1) enables a sole proprietor carrying on business under a name other than his own to

A

sue or be sued in the name of the sole proprietorship

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10
Q

Partnership is defined as

A

two or more individuals or corporations carrying on business together with a view to profit

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11
Q

ON recognizes three types of partnerships:

A
  • general partnerships
  • limited liability partnerships (LLP)
  • limited partnerships
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12
Q

Section 2 of the Partnerships Act defines a partnerships as

A

relationship that subsists between people:
- there must be an ongoing business activity
- there must be a view to profit
- there is an agreement to carry on business in common and to share profit.

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13
Q

Section 3 of the Partnerships Act sets out the rules for determining

A

the existence of a partnership

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14
Q

in determining whether a partnership exists, courts will look at:

A

the intention of the parties as disclosed in the partnerships agreement

the conduct of the parties

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15
Q

Failure to file a registration of a partnership is an offence under

A

Section 10 of the BNA

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16
Q

The characteristics of a general partnership are:

A
  • no separate legal existence
  • each partner is an agent of the partnership and the other partners when acting in the normal course of partnership business, or what reasonably appears to be so
  • each partner is JOINTLY LIABLE with the other partners to the full extent of their personal assets fo9r all debts and obligations of the firm incurred while a partner
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17
Q

Upon death, a general partner’s estate remains

A

severally liable for the partnerships debts and obligations in so far as they remain unsatisfied, subject to the prior payment of their individual debts

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18
Q

A retired partner remains

A

liabile for partnership debts or obligations incurred BEFORE RETIREMENT with the remaining partners and the firms creditors (Section 18 Partnerships Act)

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19
Q

A retired partner can formally achieve their retired status by

A

publishing an advertisement in the Ontario Gazette regarding retirement

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20
Q

In the absence of a partnership agreement, the terms of a partnership will be determined by ss20-31 of the Partnerships Act, including:

A
  • all partners share equally in the capital and profits of the business and must contribute equally to the losses
  • the firm must indemnify partners for payments made or personal liabilities incurred in the ordinary course of business or for the preservation of the business or partnership property
  • partners are not entitled to interest on their capital contribution
  • each partner may take part in the management of the partnership business
  • any differences that arise may be decided by a majority of the partners, but no change in the nature of the partnership can occur without consensus among all partners
  • every partner must account to the firm for any benefit derived without the consent of the other partner for any use of the partnership name, property, or business connection
  • all profits from a competing business carried on by a partner without the consent of the others must be accounted for and paid over to the firm
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21
Q

Sections 32-44 of the Partnerships Act are concerned with

A

the dissolution of the partnership

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22
Q

In the absence of an agreement to the contrary, a partnership is dissolced

A
  • on the expiration of the term fixed for its existence
  • at the termination of a single adventure or undertaking for which it was entered into
  • if entered into for an undefined time, by a partner giving notie to others of their intention to dissolve the partnership on a date mentioned in te notice, or if no date mentioned, on the date the notice is commissioned
  • by the death or insolvency of a partner
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23
Q

A limited partnership is

A

that the liability of each limited partner is limited to the amount of money or other property that the partner contributes or agrees to contribute to the limited partnership

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24
Q

Can a limited partner contribute services to a LLP?

A

no

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25
Q

A limited partnership is formed by

A

filing a declaration with the Ministry of Government and Consumer Services, signed by all general partners and stating, among other things:
- firm name
- general nature of its business
- the names and addresses of the general partners
- the address of the principal plae of business in ON

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26
Q

When does a LP declaration expire?

A

after 5 years but may be renewed by filing a new declaration before the expiry date

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27
Q

A limited partnership must consist of

A

one or more persons who are general partners and one or more persons whp are limited partners. A person may be a gp and an lp at the same time in the same partnership

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28
Q

How is a “person” defined in the LPA?

A

An individual, sole proprietorship and/or a corporation

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29
Q

A limited partner is

A

a passive investor rather than an active participant in the operation of a limited partnership

30
Q

Section 21 of the LPA provides that a limited partnership is dissolved if

A

a gp dies, retires, becomes incapable of managing property, or is dissolved in the case of a corporate general partner

31
Q

Upon the dissolution of a limited partnership, the liabilities of

A

creditors are paid first

32
Q

After the dissolution of a limited partnersip, and after creditors are paid, the order of payments follows:

A
  • limited partners in respect of their share of profits and other compensation
  • limited partners in respect of their contributions
  • general partners other than for capital and profits
  • general partners in respect of their profits
  • general partners in respect of capital
33
Q

When a limited partnership is dissolved, what must be filed?

A

A declaration of dissolution with the Registrar of Partnerships

34
Q

No extra-provincial limited partnership shall carry on business in ONtario unless

A

it has filed a declaration with the Registrar of Partnerships together with a power of attorney appointing an attorney in Ontario, per the LPA section 25

35
Q

which provices currently do not have partnership legislation that provides that if an extra-provincial limited partnership is registered, the LPs continue to enjoy limited liability?

A

Manitoba and QC

36
Q

What is a limited liability partnership?

A

a cross between a general partnership and a limited partnership, where the assets of an LLP can be looked to in order to satisfy the debts and claims against the LLP, but a partner in an LLP is not liable for the debts, liabilities, or obligations of the partnership or any partner arising from negligence/wrongful acts that another partner/employee commits.

37
Q

An LLP may only carry on business in….(conditions)

A

ontario, for the purpose of practicing a profession governed by the Act and provided that the following conditions are met:
- the Act must expressly permit the LLP to practice the profession (lawyers, paralegals, CPAs)
- the governing body of the profession must require the LLP to maintain a minimum amt of liability insurance
- the LLP must register its firm name under the BNA
- the firm name must contain the words ‘limited liability partnership’ or the abbreviations LLP

38
Q

The minimum insurance requirement for each paralegal partner is currently

A

$1,000,000

39
Q

A corporation is

A

a legal entity separate in law from its owners and can own property, carry on business, possess rights, and incur liabilities

40
Q

Shareholders of a corporation own the corporation through

A

their ownershp of shares, but they do not own the property belonging to the corporation, and the rights and liabilities of the corporation are not the rights and liabilities of the shareholders

41
Q

Shareholders liability is

A

limited to the value of the assets they have transferred to the corporation in exchange for shares

42
Q

A corporation continues notwithstanding the

A

death or withdrawal of a shareholder by the sale of their shares

43
Q

COrporate dissolution may only occur:

A
  • when the requisite majority of shareholders resolve that the corporation should be dissolved
  • a court orders that the corporation be dissolved
  • the corporation is deemed to be inactive or has breached certain statutory provisions
44
Q

Business can be incorporated either

A

provincially, under Ontario’s Business Corporations Act

OR

federally, under the Canada Business Corporations Act

45
Q

A corporation under the Ontario BCA can

A

carry on business only in Ontario unless it obtains a license under the extra provincial licensing statute of another province

46
Q

As of June 13, 2019, non-distributing federal corporations are required to create and maintain a register of individuals with significant control, which is defined as

A

someone who:
- owns a significant number of shared (25% of the corporations voting rights or worth 25% of the corporations fair market value)
- controls or directs a significant number of shares
- has significant influence over the corporation or
- has a combination of the above factors

47
Q

Failure to comply with the new obligations on reporting individuals with significant control may result in

A

Fines/imprisonment
- the corporation may be liable to afine up to $5,000
- directors, officers and shareholders may be liable to a fine of up to $200,000, 6mos imprisonment or both

48
Q

Incorporation is accomplished by

A

filing articles of incorporation in the form prescribed by the regulations with the appropriate gov department, together with the required supporting material and fees

49
Q

the three main parties of a corporation are

A
  • directors
  • officers
  • shareholders
50
Q

Directors are required to

A
  • manage or supervise the management of the business and affairs of the corporation.
  • obligation of a fiduciary duty to act honestly, in good faith, with a view to the best interests of the corporation
  • obligation of a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances
51
Q

Officers of a corporation

A
  • have the same fiduciary duty, duty of care, and duty to disclose interests in material contracts or transactions
  • unlike directors, officers do not have the benefit of statutory provisions permitting reliance on financial statements and reports of independent experts
52
Q

A person becomes a shareholder when

A

shares are issued to them in exchange for money paid, property transferred, or past services rendered to the corporation

53
Q

under section 141(1) of the OBCA and s 50 of the CBCA, a corporation is required to keep

A

a securities register that includes a listing of the shares issued, together with the name, address and number of shares held by each shareholder, and the date and particulars of the issue of each share

54
Q

Section 28 of the OBCA and section 30 of the CBCA prohibit the corporation from owning

A

shares in itself or in its holding body corporate, except in certain limited instances

55
Q

one of the most important rights of shareholders who own voting shares is the right to

A

elect and remove directors from office

56
Q

according to section 149 of the OBCA and 162 of the CBCA, voting shareholders have a right to appoint

A

an auditor at each annual meeting of shareholders

57
Q

What is the function of an auditor?

A

To act as the shareholders’ representative or watchdog, making such examinations as they consider necessary to be able to report to the shareholders about the financial statements

58
Q

The auditor has the rifht to attend

A

any shareholders meeting and to be heard

59
Q

List the ways that shareholders can ensure the protection of their rights and interests

A
  • personal actions for the infringement of a personal right, such as the right to receive notive of, or to vote at a shareholders meeting
  • applications for winding up
  • right of dissent and appraisal
  • investigations
  • compliance orders
60
Q

The two most common methods of shareholders protecting their interests are

A

derivative actions and actions for oppression

61
Q

What is a derivative actions?

A

a shareholder may be injured indirectly if a wrong is done to the copt and the OBCA and CBCA provide shareholders with a statutory right to bring a derivative action

62
Q

a corporation is preferable where

A

there is a substantial uninsurable risk possible, therefore a corporation can limit a proprietor’s or partner’s liability

63
Q

A corporation allows for

A

perpetual existance, and will continue to exist beyond the death or departure of partners

64
Q

If a venture is for a single project or a limited number of commercial transactions, you should enter into a

A

partnership or limited partnership form , sinve they can be dissolved more easily and expiditiously than a corporation

65
Q

Share structures can be very helpful when

A

estate planning, so as to leave shares to family members

66
Q

where there are a large number of owners, _____ is preferrable

A

incorporation, since the responsibility of one shareholder for the acts of the other shareholds is absent, and incorporation provides rules for control and greater flexibility in financing

67
Q

one disadvantage of a corporation to note is that

A

minority shareholders are subject to the will of the majority, and their shares are not very marketable in the abselce of a compulsory buy-sell agreement on the withdrawal of a shareholder.

by contract, if a partnership wishes to withdraw and the majority will not buy them out, the partnership can normally be dissolved and assets liquidated

68
Q

incorporation or a limited partnership is desirable when employers want to allow

A

employees to participate in the growth and profits of the business without giving them the management rights of a partner

69
Q

As of July 5, 2021, the OBCA was amended to remove

A

the Canadian residency requirements, but OBCA corporations must still include the residency status of directors in certain filings such as their Articles of Incorporation and their initial and annual returns

70
Q

the CBCA requires that 25% of directors of a CBCA corporation be

A

residents of Canada

Paralegal Licenscing Exam (51 decks)

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