Business Organizations

Question 1

Factors to consider when choosing business structure

Answer 1

Ownership
Formation Process
Liability
Taxation
Operation/MGMT
Property Ownership
Profits/Losses (who bears them)
Dissolution

Question 2

Sole Proprietorships Advantages

Answer 2

Simple, inexpensive, complete control, keep all profits, taxation is simple

Question 3

Sole Proprietorships Disadvantages

Answer 3

Business and owner are joined (liability), take on all liability and losses, limited access to capital

Question 4

How to terminate a sole proprietorship

Answer 4

stop running business

Question 5

Partnerships

Answer 5

2 or more people conduct and own a business for profit, contribute labor, skills, and funds, partners are both principals and agents

Question 6

Elements of General Partnership

Answer 6

Assumed under law, share profits and losses, joint ownership, shared MGMT

Question 7

Elements of Limited Partnerships

Answer 7

Written agreement and filing with secretary of state
General Partners: manage, liable for debts
Limited Partners: no MGMT rights, liability limited to amount of investment (investor)

Question 8

Limited Liability Partnerships (LLP)

Answer 8

Limites partner’s liability for the wrongful act of the other partners (not responsible for their wrongdoing), liable for the LLP’s debts and obligations, all partners manage
Common for doctors and lawers (protects against their malpractice)

Question 9

Limited Liability Company (LLC)

Answer 9

Hybrid, separate legal entity, form by filing articles of organization, could be just one person, may be limited to a certain duration, members can manage, liable only for their capital contribution, requires operating agreement, no double taxation, allows investors, members have voting rights

Question 10

Corporations

Answer 10

Independent legal entity, owners only liable for capital investment, form by filing articles of incorporation, bylaws, and corporate name, ownership is shareholders, MGMT is board of directors (elected by shareholders), double taxation

Question 11

Types of Corporations

Answer 11

Public, private, closely held

Question 12

Nonprofit

Answer 12

Mission driven, tax exempt, reporting requirements

Question 13

Officers

Answer 13

Appointed by board of directors, oversee day to day operations, C-Suite

Question 14

What is double taxation?

Answer 14

Company is taxed on profits and then shareholders are taxed on dividends

Question 15

Corporation Formation

Answer 15

Articles of incorporation filed with the secretary of state (shares, registered agent, board of directors, corporate purpose) along with corporate name and bylaws
Must choose where business is incorporated (which state, Deleware is popular)

Question 16

Shareholder Power

Answer 16

Elect directors, approve fundamental changes, amend articles and bylaws with quorum vote

Question 17

Director Powers

Answer 17

Supervisors, formulate policy, appoint/remove officers, hold meetings with quorum and committees

Question 18

Officer Powers

Answer 18

Adminiter daily operations, supervised by the board, agents of the corporation

Question 19

Closely Held Corporations

Answer 19

5 or less people own 50% or more of the business, incorporated in principal state

Question 20

Co-signing

Answer 20

Personally liable for what is being signed for, makes shareholder personally liable

Question 21

When are shareholders personally liable?

Answer 21

Co-signing, comingling of personal and corporate interests (intermixing cards), signing contract without listing your title, tort/fraud, shell corporation

Question 22

Pierces the Corporate Veil

Answer 22

Shows you are actually a sole proprietorship

Question 23

Corporate Dissolution Options

Answer 23

1) File article of dissolution
2) Agreement of shareholders and board
3) Expiration of time period stated in incorporation (LLC)
4) Court order or other state action

Question 24

Voluntary Dissolution

Answer 24

It is your choice to end business

Question 25

Involuntary Dissolution

Answer 25

Court ordered, fraudulent, failure of admin. requirements, failure to commence operations, criminal acts

Question 26

Liquidation

Answer 26

Sale of business assets and the distribution of proceeds to creditors and shareholders based on seniority