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Legal Business 1 > Ch 14 > Flashcards

Ch 14 Flashcards

0
Q

Publicly held

A

Have hundreds or thousands of owners

Ex. Business whose stock is traded on public exchange

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1
Q

Closely held

A

Organizations owned by few people

Ex. Family owned and operated businesses

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2
Q

5 factors to consider when selecting business organizations form

A 
1 creation cost
2 continuity (stability)
3 managerial control of decisions
4 owner's personal liability
5 taxation/distribution of earnings
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3
Q

Creation

2 Examples of issues with creation

A

Legal steps necessary to form particular business organization

Ex. Issues, cost and length of time to create

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4
Q

Continuity

A

Durability, how can the organization continue to operate

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5
Q

Dissolution

A

Any change in ownership that changes legal existence of

Organization

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6
Q

Managerial control, important issue

A

Have mechanisms in place to solve disputes about who

Has control over decisions in the company

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7
Q

Sole proprietorship: creation

A

No formal documentation, business licenses only

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8
Q

Sole proprietorship: continuity

A

As long as proprietor desires, but no transfer to others

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9
Q

Sole proprietorship: control

A

Total control by proprietor

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10
Q

Sole proprietorship: liability

A

Personal obligation for all debts and laibilities

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11
Q

Sole proprietorship: taxation

A

All business income subject to personal taxation

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12
Q

Partnership: creation

A

Automatic based on business conduct

Modified by agreement

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13
Q

Partnership: continuity

A

Dissolved when 1 partner withdraws

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14
Q

Partnership: control

A

Each partner has equal voice, though can be modified

By agreement

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15
Q

Partnership: liability

A

Personal obligations for all debts and liabilities

Joint and several liability

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16
Q

Partnerships: taxation

A

All business income subject to personal taxation divided

equally

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17
Q

Corporation: creation

A

Incorporators apply for state charter with articles of

Incorporation

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18
Q

Corporation: continuity

A

Perpetual, as long as it can conduct business

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19
Q

Corporation: control

A

Managed by officers, appointed by directors, who are

Elected by shareholders

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20
Q

Corporation: liability

A

Shareholder obligations limited to investment, absent

Other commitments

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21
Q

Corporation: taxation

A

Corporate income taxed

Shareholders taxed on income distributed

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22
Q

Limited partnership: Creation

A

Partnership agreement and certificate filed in public

Office where business is conducted

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23
Q

Limited partnership: continuity

A

Dissolved when general partner withdraws

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24
Q

Limited partnership: control

A

General partners have total control

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25
Q

Limited partnership: liability

A

Personal obligation for general partners

Limited partners obligated for investment

26
Q

Limited partnership: taxation

A

All business income subject to personal taxation

27
Q

S Corporation: Creation

A

Incorporators apply for state charter with articles of

incorporation

28
Q

S Corporation: continuity

A

Perpetual, so long ad number of shareholder limited

29
Q

S Corporations: control

A

Managed by officers, appointed by directors, who are

Elected by shareholders

30
Q

S Corporation: liability

A

Shareholder obligations limited to investment, absent

Other commitments

31
Q

S Corporation: taxation

A

All business income subject to personal taxation

32
Q

Limited liability company or partnership: Creation

A

Organizers file articles of organization with state official

33
Q

Limited liability company or partnership: continuity

A

Dissolved when member withdraws, but may be continued

By those remaining

34
Q

Limited liability company or partnership: control

A

Equal management by members unless manager designated

35
Q

Limited liability company or partnership: liability

A

Members are agents, but liable only for investment

36
Q

Limited liability company or partnership: taxation

A

All business income subject to personal taxation

37
Q

Articles of partnership

A

Formal agreement drafted among parties to form partnership

38
Q

State assumed name statute

A

If name of partnership is other than name of partners,

The partners must give notice of their actual identity

39
Q

Partnership: Buy and sell agreement

A

Agreement provides for amount and manner of compensation

for deceased or withdrawing owner of partnership

40
Q

Domestic corporation

A

Name for Corporation within state it is incorporated in

41
Q

Foreign corporation

A

Name for corporation when it is in all other states that

It’s not incorporated in

42
Q

Alien corporation

A

Corporation created under the authority of a foreign country

43
Q

Charter of incorporation AKA Articles of incorporation

A

Application to set up corporation

44
Q

Incorporators

A

Individuals who founded the corporation

45
Q

Corporations outside of state they are incorporated in must be…

A

Licensed in any outside state it operates in

46
Q

Board of directors, 2 functions? How are they elected?

A

Set goals for corporation and appoint officers

Elected by shareholders

47
Q

Why are a lot of corporations incorporated in Delaware? 2 reasons

A

1 Respected judiciary deciding issues related to general
Corporation law

2 no income tax

48
Q

Proxy

A

Agent appointed by shareholder for purpose of voting the

shares

49
Q

Derivative suit

A

Lawsuit brought on when board of directors (majority
Shareholders) act illegally oppressing the rights of minority
Shareholders

50
Q

The alter ego theory: Piercing the corporate veil

A

Situations where corporate organization is being misused

And shareholders face unlimited liability

51
Q

Methods for avoiding double taxation 3 things

A

1 Deduct reasonable salaries, interest from debt and meals

2 Not pay dividends (but IRS then makes company pay tax)

3 Elect to file subchapter s of internal revenue code
Which eliminates corporate tax

52
Q

4 advantages of being organized as a corporation

A

1 transferring ownership
2 limited shareholder liability
3 control held by those of minority investment
4 perpetual existence

53
Q

4 Disadvantages of forming corporation

A

1 high costs of formation (license, franchise fees, procedural)
2 must be qualified in all states where business is conducted
3 subject to more gov. Regulation
4 corporate income subject to double taxes

54
Q

6 Advantages of partnerships

A

1 easily formed
2 low costs
3 not a tax paying entity
4 each partner has equal voice in management
5 may operate in more than 1 state without liscences
6 less gov regulation

55
Q

4 disadvantages of partnerships

A

1 only limited # of people can be partners
2 partnership dissolved when any partner leaves
3 unlimited liability
4 partners taxed on share of profits whether distributed
Or not

56
Q

Limited partner

A

Partner not personally responsible for debts of business

Organization

57
Q

General partners of limited partnership

A

Managers of limited partnership

Personally liable for organization’s debts

58
Q

Articles of Organization

A

Filings to create a limited liability company

59
Q

Organizers

A

Creators of limited liability company

60
Q

Members

A

Owners of LLC’s

61
Q

LLC’S: managerial control

A

Unanimous consent by all members or managers is

Necessary to make a binding decision

62
Q

What has the Dodd Frank Act given Shareholder’s the right to do?

A

1 non binding periodic shareholder votes to whether
Executives are overpaid

2 shareholders can include own board of director candidates
In their proxy

Legal Business 1 (25 decks)

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