Ch12 Flashcards
Sole Proprietorships income is
taxed to the individual owner of the business
Know the two disadvantages of a sole proprietorship
Unlimited liability
Difficult to raise capital
Know the things typically found in partnership agreements (Especially ownership shares)
Basics, Finances, Management, Dissolution
Know what the court in Norris v. Besel held regarding the wife’s status as a partner
Shelly was not liable as her limited role in the business did not indicate partnership status
Know what requires partners to act in good faith toward the partnership
Fiduciary duty
Know the disadvantages shared by sole proprietorships and partnerships
Partnership: Unlimited liability, raising capital
Sole proprietorship: Worse at raising capital, unlimited liability
Know what the court in Eagles Landing Development, LLC v. Eagles Landing Apartments, LP said about the liability of limited partners for the debts of a limited partnership
Limited partners are not liable for the debts of the limited partnership
Know what you do to create a corporation
Filed articles of incorporation
Know what constitutional rights a corporation does and does not have
Does: Free speech, equal protection under the law, and protections against unreasonable searches and seizures
Does not have: Do not have the privilege against self-incrimination under the Fifth Amendment
Know the duty of loyalty owed by a director to the corporation means
Directors place the interests of the corporation before their own interests
What in the Corporations’ best interest
Know what corporate dissolution means
Termination of a corporation (termination of a partnership)
Know what a professional corporation is
Other doctors or lawyers to do medical/legal practices
Know the advantages of a Limited Liability Company
Profits are taxed only once as LLC owners’ income
Have the liability shield of a corporation but taxation of a partnership
Know what must be in LLC’s articles of organization
Whether Member managed or manager managed
Know the limitations on transferring ownership of an LLC
Normally you cant sell your membership interest without the consent of the other members
Know what an LLC operating agreement is
Provides rules about the operation of the company and the relationships of the members
Know what In re 1545 Ocean Avenue, LLC said regarding the requirement for a court dissolve an LLC
Court did not dissolve the LLC
Limited liability is the advantage of Corporations and LLCs
Limited liability is the advantage of Corporations and LLCs
Know what the court in State Ex Rel.Yost v. Leobard held regarding piercing the corporate veil when the owner knew of environmental problems the LLC has but did nothing to stop them
In addition, a corporate officer can be held personally liable for tortious acts he or she has committed and, under such circumstances, a plaintiff need not pierce the corporate veil to hold individuals liable who have personally committed such acts.
Sole Proprietorship
Unlimited liability
Pass-through entity for tax purposes
Hardest to raise capital
