Business Law 2 Flashcards
Main Bankruptcy chapters and what are they?
Which require a trustee
- Chapter 7: Liquidation
- Chapter 9: Municipal debt adjustment
- Chapter 11: Reorganization
- Chapter 12: Family farmers with regular income
- chapter 13: Adj. of debts of ind. wiht regular income
- Chapter 15: Ancillary and cross border cases
Trustee required for Ch 7 & 13
What is test is used to qualify for chapter 7?
What is the formula and limit
Threshold?
What is the primary method used to qualify?
The means Test
(Avg monthly inc - exp) * 60,
if this is less than $9,075 then it qualifies
Threshold up to $15,150, greater go to Ch 13
Check if the TP is under the state median income
Who cannot file CH 7?
Ch. 11?
no RIBS
- Railroads
- insurance company
- banks
- Savings institutions
no BIBS (same except replace railroads with brokers)
Rule to file involuntary petition for ch 7 or ch 11
UNSECECURED Creditor must be owes $18,600 (INDIVDUALLY OR TOGETHER)
Only one must petition if they are 1 of 12 or less
or
atleast three must peititon if they are 3 of 12 or more
Define:
- Default
- Insolvent
- Illiquidity
- Debtors have been passed behind the payment deadline on a debt whose payment was due
- A legal term meaning debtors are unable to pay their debts.
- Debtors have insufficient cash (or other “liquefiable” assets) to pay debts
What is Ch 7 called when imposed on individuals vs business?
Reasons for indivduals not allowed it?
Discharge and Disolved
- Not keeping books and record, having already discharged within 8 years
Which debts cannot be discharged? (under 7 or 11)
WAFTED
- Willful and malicious injury
- Alimony
- Fraud or fine and penalties to gov.
- Taxes within last three years
- educational loans
- debts undisclosed
Three categories of claimants and the subcategory
- Secured Claimant
- Priority claimant
- general claimant that filed on time
- Priority claimant sub categories
S - Support to spouse/child
A - Admin bankruptcy expenses
G - debts arising during involuntary petition Gap period
W - wages within 180 days > $15,150
E - employee benefit > remaining of wage
G - grain (farming) > 7,475
C - Consumer deposits > $3,350
T - Tax Claims
I - Injuries from DUI
FICA Tax amount
Threshold
What income qualifies for this?
Social security = 6.2%
Medicare = 1.45 %
Both = 7.65% / 15.3%
Social security tax up to $160,200*
Gross wages, commisions, bonuses but not interest, dividends, gift, etc
SELF EMPLOYMENT tax rules
- pay both employee and employer taxes so 15.3% on profit more than $400, but one half is deductible
What is futa, who particiupates, amount to qualify?
tax for unemployment, all businesses except self employed, and less of companies that pay $1,500 in wages per quarter or have one employee for 20 weeks of the year
FUTA Tax amount
Employer pays 6% of first $7,000 per employee and can get a credit of 5.4% of first $7,000
What is workers compensation?
Exception for employers who don’t need to participate in this?
How do employers fund this?
Paying for on the job injuries
Agricultural, Domestic workers, casual white collar workers, public employees,
independent contractors
Insurance
How to decision/voting rights work in a general partnership/llp?
Does not matter how much of the business each partner owns, each partner has an equal say in decisions outside the scope of business activity! ex, 5 partners each get 20% power regardless of commitment.
Difference between general partnership and joint venture
general partership: in the business for ongoing profits and operation
joint venture: intended for a specific goal
general rule on p&l allocation for LP, LLC, C corp, GP?
Gp: everyone is equal, unless parternship agreement says other wise
LP, LLC, C corp: by contribution
What is required on c corp article of incorporation?
Name of corp, name and address incorporator and registered agent, and number of issues shares
What is an ultra virus act?
Repercussion?
When a c corp is acting outside side of its narrow objective.
May be held liable for any damages outside of the narrow scope of the business (ex, bakery starts selling car tires)
What does it mean to pierce the corporate veil?
Example (3)
- Abuse of corporate privileges, personally liable
- commingling funds, inadequate start up capitalization, or fraud on existing creditors (remember: I C Fruad)
What are preemptive rights?
Shareholders first dibs on new issued stock, to mitigate diluted shares. Must be allowed in the article of incorporation
What is a director not, and what is their main role?
Summarize directors liability to the corp: what puts them in danger how can they get out?
They are not an agent but hold fiduciary duty
Acting negligent like illegal dividends and benefiting (will have to pay back) but they can get out of most by acting in good faith and practicing due diligence
Define Indemnification
Judicial protection by corporation for directors acting in good faith
Difference between offices and directors
Directors: appointed by shareholders to oversee the management of the corporation. Officers: appointed by directors to manage the day-to-day activities of the company.
Role of an officer simple
Best defense for officers
They are an agent of the corporation
Acting in good faith and made decision using business judgement (since officers oversee day by day, unlike directors, they have to make speculative decisions with due diligence in mind so it’s not guaranteed the results but make sure they use business judgment for defense)
Who picks corporate officers and board of directors?
Shareholders select board
Board selects officers
When fundemnetal changes occur in a corporation:
- Who must agree to the changes?
- what type of changes must be agreed on?
- what process is followed?
- Board and shareholders
- DAMS: Dissolution, amendments (article of incorporation), and mergers, and sale of assets outside of scope of business
- process:
1. Board resolution
2. Notice to SH
3. SH vote
4. Article stating next steps
