Business Structure Flashcards
General partnership
2 or more person owns
Not require written agreement unless it is dissolved in less than 1yr
All partners have equal right
Ordinary courses required Majority vote
Major fundamental changes requires consent of ALL partners” Unanimous Consent”
Partners have right to their share of profit & surplus
Partners do NOT own Partnership property
Each partner owes a Fiduciary duty to Partnership
Personal liable for all partnership obligation debt
Sole proprietorship
1 person owns & manage (not separate entity -P&L report in Sch C)
No formality is required
Personal liability
Limited life of entity
Freely transferable by the owner
Change in partnership of General partnership
Apparent authority still bind the partnership until it gives Notice of Dissociation to 3rd parties
Dissociation partner may be held liable for up to 2year AFTER dissociation UNLESS the partner give NOTICE of DISSOCIATION to the 3rd parties
Life of partnership vs corporation
Corporation stay in business independent of the owners’ lives
Partnership is dependent upon owners’ lives
LLP
P&L shares same as GP
LLC, LLP, &LP must file with the State to limit their liability while Sole Proprietorship& GP don’t
Partners not generally liab for act of fellow partners& employees but can lose their investment
Personal liab for their OWN negligence and other under partner direct control
NOT personal liab for Debt and obligation
Limited partnership
Has >1GP and >1LP
Management is responsibility of GENERAL PARTNERS- personal liab for all partnership debt and loss
Limited partners is limited to his investment &has NO RIGHT to take part in management, NOT an AGENT & NOT owe FIDUCIARY Duty to the partnership
P&L allocate to Capital contribution
Only withdraw or death of General partner terminate of partnership
LLC
Hybrid of partnership&; Corp
NOT personal liable for obligation of entity
All members can participate in Management
Is Agent of partnership
Voting right are proportional to contribution
LLC
Hybrid of partnership& Corp
NOT personal liable for obligation of entity
All members can participate in Management
Is Agent of partnership
Voting right are proportional to contribution
Piercing the corporate veil=> shareholder, officers or directors can be held personal liable
Shareholder commingle personal funds with corporation fund
Inadequately capitalized at the time of formation
Committing fraud on existing creditors
Partnership properties
Properties purchase in the partnership name
Properties purchase by partner use partnership fund
General partnership take responsibility in the limited partnership as
Secured creditor of the limited partnership
If the limited partner act as general partner,
He will be hold personal liable as a general partner
When file to State to create a limited partnership, must include
Names of all general partnership
When admit a new general partner or a limited partner require
Consent of all general partners and all limited partners
Corporation-Legal Entity
Liab for Corporate obligations
Double taxation: taxed at Corporation level& taxed on dividend distribute to shareholders
Have perpetual life
Stock is free transferable
Formation of Corp
File with the State
Promoters starts a Corp to obtain financing& things for Corp
Promoters are NOT AGENT of Corp cuz Corp is not yet exit
Promoters are personal liable for the contract after Corp is formed unless there is NOVATION
Articles of Incorporation
Name of Corp
Corp’s registered Agent names & address
Name &address of each incorporators
Number of share authorized to be issued
Classes of stock authorized of issuance
Corporation Bylaws rules
Rules for running the corporation
S Corp- flow through entity is restricted by
No more than 100 members
Shareholders must be Individual, Estates and certain trust
Must be Domestic Corp
Only have one class of stock
Not permitted foreign shareholders
S corp &C corp have in common
Limited liability
Both are similar in their corporate mgt structures
Board of Directors in Corp has power to
Repeal the bylaws
Declare dividends
Fix compensation of directors
EXCEPT Amend the Articles of Incorporation
Own a Treasury stock?
Not Votable
Not receive dividends
Corp has power without shareholder approval?
Power to acquire their own shares
Power to make charitable contribution
EXCEPT make loans to directors need shareholders approval
Require to ensure the validity of a contract between a corporation and director of the corporation
Director must disclose the interest to the independent member of the board and refrain from voting
Director duties and power in Corporation
NO POWER to bind the corp, act as a board member at constituted meeting of the board
Declaration of dividends
Select officers
Must comply with Article of Incorporation( only amended by voting of shareholders)
Delegate some authority
Not entitled to compensation unless provided in Article
Personal service contract if is breached
The remedy of specific performance is not available for breach of a personal service contract
Which is considered as dividend distribution?
Cash div
Property div
Liquidating div
EXCEPT stock dividend
LLLP
An extension of limited partnership form
All partners, whether general or limited are limited liability
Piercing corporate veil is caused by
Stockholder commits fraud in dealing with Corp
Corp is thinly capitalized
Stockholder commingled their personal funds with corporation fund
