Business Structure Flashcards
An association of two or more persons (or entities) organized to carry out a single business undertaking (or series of related undertakings) for profit
Joint ventures
Law for Limited Liability Companies
Revised Uniform Limited Liability Company Act (RULLCA)
A form of business in which the liability of all owners is limited to their capital contributions (including any obligation to make contributions in the future) plus any equity
LLC
An LLC in which all members have authority to bind LLC under agency law to contracts on behalf of LLC
member-managed LLC
LLC in which only managers have authority to bind LLC to contracts for LLC
manager-managed LLC
Specifies the manner in which an LLC with conduct and wind up operations–can contain restrictions of authority that can negate claims of apparent authority, if restirctions are given to the 3rd parties
Operating Agreement
A statement that lays out who has what authoirty in an LLC that, if filed with the SEcretary of State, is deemed proper notice to 3rd parties
Statement of Authority
A form of business that works well for professionals who want ot do business as professionals in a partnership but still pass through tax benefits while limiting personal liability of the partners (popular for accounting and law firms)
Limited Liability Partnership (LLP)
Divided corporations into 2 categories: Subchapter S and Subchapter C
Federal Subchapter S Revision Act
A corporaiton that operates and does business within the state in which ti was incorporated
Domestic corporation
A corporaiton that does business in any state except the state in which ti was incorporated–“doing business” means having an office or selling personal property in that state
Foreign corporation
Corporations that allow professionals to incorporate under state laws (doctors, accountants, attorneys)–shares can typically onnly be owned by licensed professionals and shareholders retain personal liability for their professional acts
Professional corporations
Corporations with 50 or fewer shareholders that are allowed to function without a BOD, shareholder meetings, and restricted transfer of ownership rights—has to be elected by 2/3 of corp and declared as one
Close corporation (Closely-held, closed)
Act passed to allow corporations to choose to be close corporations
Model Statutory Close Corporation Supplement
A corporation that has been formed in fact but has not been formed properly under law
De facto corporation
A corporation that has been formed properly in compliance with the incorporaiton statute
De jure
Persons who form corporations and arrange capitalization to begin corporations; handle issuing of prospectus, draw charter; has fiduciary re-ship with corp, but not an agent of the corp
Promoter
A corporate charter filed with the state that contains teh name, address, purpose, powers, etc.
Articles of incorporation
Adopted by the directors at the start of a corporation that provide specific rules for management–do not need to be filed wth a gov/t agency
Bylaws
Securities not represented by written documents
Uncertificated securities
Amount and type of stock permitted to be issued in Articles of Incorporation
Authorized stock
Stock authorized and delivered to shareholders
Issued stock
Stock authorized but not yet issued
Unissued stock
Stuck that has been issued and not repurchased by the corporation
Outstanding stock
Stock that has been issued but is not outstanding
Treasury stock
Stock purchased or received by a corporation that is canceled (no longer issued or outstanding–makes room for more stock to be issued)
canceled stock
Stock issued without a set par value
No-par stock
The number of shares issued times par/stated value
Stated (legal) capital
The cumulative amount of income (net of dividends) retained by the corporation during its existence or since a defict was properly eliminated
Earned surplus (retained earnings)
Excess of total assets over total debts
Net assets
Excess of net assets over stated capital
Surplus
Entire surplus of corporation less earned surplus
Capital surplus
Total consideration received by corporation upon issuance of stock
Contributed capital
Stock that participates further in corporate earnings reamining after a fixed amount is paid to preferred shares
Participating prefrred stock
If a periodic dividend is not paid at the scheduled time, it accumulates and must be satisfied before common stock may receive a dividend if these exist
Cumulative preferred stock
Preferred shares that have no claims on past, nonpaid, dividends
Noncumulative preffered stock
Stock that may be redeemed at a fixed price by the corporation as laid out in the Articles of Incorporation
Callable/redeemable stock
Stock that gives the shareholder the option to convert preferred stock to common stock at a fixed exchange rate
Convertible preferred stock
Written contracts to purchase a given number of shares in an existing corporaiton or one to be organized–not binding until accepted by the corporation
Stock subscriptions
Stock in which the cash or property exchanged is less than par value or stated value–most states require stock to be issued at par, so creditors can recover hte difference
Watered stock
Long-term unsecured debt
debenture
long-term secured debt
bond
Any benefit given to the corporaiton for the shares received
Valid consideration
Acts in violation of statute or public policy
illegal acts (ex. false advertising)
Acts that are merely beyond the scope of corporate powers—may be legal
Ultra vires acts (ex. even though it’s legal to become a surety, the Articles of Incorporation may not allow it)
If a director is acting in good faith they will not be held liable for errors of judgment unless they are negligent
Business judgment rule
fiduciary duties of an agent (3)
loyalty, due care, and obedience
Act that prohibits dividneds that cause total liabilities to exceed total assets after the effect of the distribution is considered
Model Business Corporation Act
A lawsuit in which the shareholder sues on behalf of the corporation, with all damages going to the corporation
Derivative suit
When a corporation is a sham, engages in Fraud or other wrongful acts, or is used solely for the personal benefit of its directors, officers, or shareholders, courts may disregard the separate corporate existence and impose personal liability on the directors, officers, or shareholders.
Piercing the corporate veil–rarely happens
The union of 2 corporations where one is absorbed by another and surviving corp issues its own shares to shareholders of the original corp
merger
The joing of two or more coroporations int o a single new corporation
Consolidation
The winding up of affairs and distribution of assets
Liquidation
Occurs when winding up and liquidation are completed
Termination
Dissolution that occurs when BOD passes resolution to dissolve and the resolution is ratified by majority of SH’s
Voluntary dissolution
