Business Orgs Flashcards
What is a Sole Proprietorship?
The most common form; An unincorporated business consisting of 1 person who owns an completely controls the business. Is not a taxable entity and therefore the sole proprietor is taxed, they have unlimited liability for debts.
What is a General Partnership?
- An unincorporated business association consisting of 2 or more person who co-owns the business FOR PROFIT.
- Governed by the uniform partnership act
- Each partner has an equal right to control of the partnership
The intent to associate as partners may be based upon ________?
1) Formal written agreement
2) Oral agreement
3) conduct of the partners
What does the definition of a General Partnership exclude?
Charitable, fraternal, religious, trade association or labor union purposes.
What does it mean when we say that a partnership is a “pass-through” entity for taxation purposes?
Each partner is taxed on his, her or its proportionate share of deductions, credits, profits, and losses at the personal income tax rate applicable to that partner. The partnership is not taxed separately
What happens if there is no partnership agreement or if there exists an agreement that fails to address a specific issue?
Terms are supplied by the UPA
How long may a General Partnership exist?
any length of time to which the partners agree
To comply with the statute of frauds, if the partnership is intended to exist for 1 year or more, the agreement must be ______
In writing
What is meant that a partnership is “at will”?
The partnership may be terminated by any partner upon notice to the other partners. Done if no term is stated.
When is registration of the partnership’s business name required?
If less than all of the partners names are used or if an entirely different name is used.
What is the difference between a Legal Entity and a Legal Aggregate?
A legal entity is a unit subject capable of possessing legal rights and of being subject to legal duties. A legal aggregate is a group of individuals having no legal existence apart from that of its members.
The UPA incorporates both theories in provisions for partnerships. The entity theory is used particularly to matters concerning title to property, legal actions by and against the partnership and continuity of existence. Aggregate theory is utilized for partnership obligations (Debts)
What are the 2 most important factors for identifying a business co-ownership?
1) The sharing of profits
2) The right to manage and control the business
What is Partnership capital?
The total money and property that the partners contribute and dedicate to use in the enterprise
How may property of the partnership be held?
in the partnership’s name or the name of any partner as an agent of the partnership
May a partner sell partnership property?
Not without the consent of all other partners
Can creditors reach partnership property to satisfy an individual partner’s individual debt?
No
If a a partner in a General Partnership dies, what becomes of their partnership property?
It belongs to the surviving partners
Where do initial capitalization of the General Partnership come from?
Contributions made by its partners
A partner may NOT sell or assign ______ but can sell or assign ________
Partnership property, Partnership interest
What is a silent partner?
One who assumes all benefits and burdens of the partner status, except in the area of management decisions.
What does “winding up” refer to?
When a partnership is liquidated. involves completing unfinished business, collecting debts, taking inventory, reducing assets to cash, auditing the partnership books, paying creditors, and distributing the remaining assets to the partners.
What is a Limited Partnership?
Partnership of 2 or more people formed in compliance with a state’s limited partnership statute with one or more general partners and one or more limited partners as members of the firm.
- Governed by the ULPA
How is a limited partnership different from a general partnership?
Need to comply with specific statutory requirements which include filing a certificate. Limited partners may not participate in the management of the business.
The Revised Uniform Limited Partnership act requires an LP to maintain an office in _______?
The state of incorporation, which need not be its place of business
How are profits, loses, and distributions allocated among the partners?
according to the LP agreement. If the agreement is silent, then the profits, losses and distributions are allocated on the basis of the value of contributions made by each partner.
How is the LP managed?
General managers manage the business and incur liability to creditors. Limited partners are investors only and generally have no voice in management. They may have voting rights (BUT ONLY IF THE AGREEMENT STIPULATES THAT!)
Can the surname of the LP be used as part of the firm name?
No, unless it is also the name of a General Partner or unless the firm has used the named before admitting the limited partner.
What is an LLC?
- Limited Liability Company
- non-corporate business organization that provides limited liability to ALL of its owners (MEMBERS) and permits all of its members to participate in the management of the business.
- Requires a certificate of organization filed with the state and an operating agreement (which should include the LLC’s purpose, the type/amount of member investment, allocation of income, transferability of members interest in the LLC, and the procedure to be followed in the event of dissolution
How long may an LLC exist?
for a specific period of time or perpetual as prescribed within the certificate of organization
What are the 2 components of a member’s interest in an LLC?
1) Financial Interest –> right to share profits and to receive distributions
2) Management interest –> consists of all other rights granted to a member by the LLC operating agreement and the LLC statute.
Does the LLC member have an interest in property owned by the LLC
NO
What is a joint venture?
involves the combining of efforts by 2 or more persons for one transaction or for one event only. Does not contemplate a continuing relationship between or among the parties.
