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REG > Business Law X: Business Structure > Flashcards

Business Law X: Business Structure Flashcards

1
Q

Sole Proprietorship

A

Advantages:

  1. Total Control
  2. Simplicity
  3. Taxation

Disadvantage:
1. General Liability

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2
Q

General Partnership

A

Advantages:

  1. Pass-through taxation
  2. Simplicity

Disadvantage:
1. General Liability

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3
Q

Limited Partnerships

A

Advantages:

  1. Pass-through taxation
  2. Limited liability as long as partners do not take part in management

Disadvantages:

  1. Formality
  2. Authority
  3. General Liability - at least one managing partner
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4
Q

Limited Liability Partnerships

A

Advantages:

  1. Pass-through taxation
  2. Limited liability - other than torts they commit
  3. Authority - may be active without forfeiting limited liability

Disadvantages:

  1. Formality
  2. Insurance requirement
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5
Q

Limited Liability Limited Partnership

A

Advantages:

  1. Pass-through taxation
  2. Limited liability

Disadvantages:

  1. Not offered in all states
  2. Formality
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6
Q

Corporations

A

Advantages:

  1. Limited liability - other than piercing of corporate veil
  2. Legal personality
  3. Perpetual duration

Disadvantages:

  1. Double taxation
  2. Formality
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7
Q

S Corp

A

Advantages:

  1. Limited liability
  2. Single taxation

Disadvantages:

  1. Formality
  2. Individual taxation
  3. Special requirements
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8
Q

LLC

A

Advantages:

  1. Pass-through taxation
  2. Limited liability

Disadvantages:
1. Formality

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9
Q

Sole Proprietorship Operation

A

Sole owner makes all important decisions/delegates

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10
Q

General Partnership Operation

A
  1. Absent agreement, all partners have equal rights in mgmt/conduct of business affairs
  2. Absent agreement, majority vote governs all ordinary matters
  3. Unanimity needed to take actions contrary to partnership agreement
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11
Q

Limited Partnership, LLP, LLLP Operation

A
  1. One or more general partners make mgmt decision, limited partners are passive investors
  2. If limited partners become active, may forfeit limited liability
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12
Q

Corporation Operations

A
  1. Shareholders elect directors, who elect officers, and officers make day-to-day decisions
  2. Small corps, same people may hold all roles
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13
Q

LLC Operations

A
  1. May either be owner-managed or manager-managed
  2. Terms set forth in operating agreement filed with Secretary of State
  3. Legal uniformity lacking across nation
  4. Most states allow single-member LLC
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14
Q

Partnership Termination

A

Dissociation of a partner leads to either buyout or dissolution.

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15
Q

Corporation Termination

A

Voluntary - approval of directors/shareholders

Involuntary - administratively dissolved by secretary of state

  • failure to pay franchise taxes
  • failure to file annual reports
  • failure to establish/maintain registered agent/office

Judicially

  1. Attorney General for fraudulent approval of articles of incorporation or abusing legal authority
  2. Shareholders for mgmt deadlock, illegal/oppressive controllers, inability to elect directors
  3. Creditors
  4. Insolvency
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16
Q

Partnership: Capital Accounts

A
  1. Credited amount = money + value of property - liabilities contributed by partner + partner share of profits
  2. Charged amount = money + value of property - liabilities distributed to partner + partner share of losses
17
Q

Types of corporate securities

A
  1. Equity Securities = Common Stock, preferred stock, treasury stock
  2. Debt Securities = Notes, Debentures, Bonds
18
Q

Redeemable Shares

A

must be repurchase by corporation under specified conditions at specified prices if shareholder so desires

19
Q

Callable Shares

A

redeemable at corporation’s option

20
Q

Convertible Shares

A

debt securities convertible to equity securities at specified ratios at request of holder

21
Q

Warrants, rights, options

A

legal entitlements to purchase equity securities at specified price/time at request of holder

22
Q

Consideration for Shares

A

Shares must be issued only in exchange for consideration that meets both:

  1. Quality Tests
  2. Quantity tests
23
Q

Partnership Information Rights

A
  1. Partners/Agents entitled to access to books

2. Each partner must provide any info about business affairs or other info reasonably demanded

24
Q

Partnership Standards of conduct

A
  1. Duty of Loyalty

2. Duty of care

25
Q

Corporate Shareholder Rights

A
  1. Vote for directors
  2. Inspect corp records
  3. Have financial priorities respected
  4. Exercise appraisal rights when they dissent from major changes
  5. File derivative lawsuits against officers/directors who have injured corp
  6. Exercise preemptive rights to buy their proportional share of new securities
26
Q

Corporate Director Duties

A
  1. Duty of Attention (must direct)
  2. Duty of Care
  3. Duty of Loyalty
27
Q

Corporate Director Rights

A
  1. Right to rely (upon reports of officers)
  2. Business Judgement rule
  3. Liability protection
28
Q

Agency Law in Partnerships

A

Governs regarding authority of partners to bind the partnership

  1. act of partner for apparently carrying on in ordinary course binds the partnership
  2. act of partner not apparently carrying on in ordinary course binds partnership ONLY if act was authorized by other partners
29
Q

Partnership Tort Liability

A

Partners generally liable for torts committed by partners:

  1. Intentional Tort - partnership liable
  2. Misapplication of funds - innocent customer gets most protection
  3. Joint/Several liability - creditor may sue general partner without suing others
  4. Late arrivers - liable for subsequently-incurred debts
30
Q

Corporate Director authority

A
  1. Borrow money
  2. Sell corporate property
  3. Hire/fire officers/employees
  4. Declare/refuse to declare dividends
  5. Make/refuse to make other distributions
  6. Set salaries
  7. Propose for shareholder approval sale of major assets, mergers/consolidations, dissolutions, amendments to articles of inc
31
Q

Corporate Officer authority

A

Express: Articles of Inc, By-laws, Directors’ resolutions, statutes

Implied: Derived by virtue of their offices (CEO, CFO)

Ratification: Even if officer acts w/o either express or implied authority, BOD could bind corp by ratifying contracts

REG (26 decks)

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