Chapter 16 Addressing legal issues and managing risk Flashcards
Sole proprietorship
owned by one person with unlimited liability and unlimited rights to profits
Partnership
two or more owners who make joint decisions and share profits, losses, assets, and liabilities
Corporation
legal entity composed of stockholders under a common name
Sole Proprietorship Pros
- Relatively easy to start
- Registration is low cost, with little paperwork
- Fewer government regulations
- Owner can make quick decisions
- Owner is entitled to all profits
Sole Proprietorship Cons
- May be difficult to raise funds by oneself
- Often long hours alone, without help or feedback from others
- No way to limit personal legal responsibility
- All profits are taxed personally
Limited partnership
one or more “limited” partners are not liable and have no official say in daily operations
C corporation
- Most common type of corporate structure
- Can sell ownership as shares of stock
- Income taxed twice: as corporate income, and as personal income when dividends are distributed to shareholders
Subchapter S corporation
- Has a limit of 75 stockholders
- Income taxed once, as personal income of owners
Professional corporation (PC)
- Used by doctors, lawyers, and small groups of professionals
- Subject to special rules, such as licensing requirements
Nonprofit corporation
- Purpose is to improve society; all net profits go toward advancing the mission
- Tax exempt; must follow applicable laws and regulations to keep this status
- May not sell stock or pay dividends
Limited liability company (LLC)
- Combines features of partnership and corporation
- Good choice for small business owners seeking liability protection
- Income taxed once, as personal income of owners
- Less rules on number/type of shareholders than S corp.
A Successful Contract Achieves the Four A’s
Avoid misunderstanding
Assure work
Assure payment
Avoid liability
***Chapter 11:
Reorganization—creating a plan and continuing operations
***Chapter 7:
Liquidation—converting assets to cash with a business closure
***Chapter 13:
Individual Debt Reorganization—consumer version of Chapter 11
***Copyright
is good for a lifetime + 70 years. After 70 years it expires and becomes a public domain
***Patents
You have invented a product that you intend to market yourself or sell to a manufacturer.
***Trademark
all trademarks are brands that have legal protection
***Three forms of patents:
- Utility (process or improvement)
- Design
- Plant (varieties of vegetation)
***Brandmark
is like your logo, symbol, etc, but not all brands are legally protected.
A contract is:
A formal, written agreement between two or more parties that is enforceable by law
A “building block” of business, defining relationships in the production–distribution chain
Never sign a contract without:
Having an attorney examine it for you
Reading and understanding every word
Breach of Contract
- A contract is broken (breached) when a signatory fails to fulfill it.
- The injured party may sue for breach of contract.
- A lawsuit is an attempt to recover a right or claim through legal action.
- Options aside from lawsuits include small claims court and arbitration.
Uniform Commercial Code (UCC)
Directs a broad range of transactions, such as loans and contracts, for the purpose of consistency
A recommendation for laws that U.S. states can choose to adopt or modify
Focuses on movable property rather than real (immovable) property
Service mark
word, phrase, symbol, and/or design that distinguishes a service
You need a patent if…
- You have invented a product that you intend to market yourself or sell to a manufacturer.
- You believe that someone else could successfully sell your invention by copying it.
Insurance:
system of protection which reimburses people/businesses when their property or wealth is damaged or destroyed
Premium:
amount paid for insurance
Deductible:
amount of loss or damage you agree to cover before insurance pays a claim
- A lower deductible = a higher premium
- A higher deductible = a lower premium
Communications:
Identify who will get in touch with employees, vendors, and customers. Maintain a detailed contact list.
Base of operations:
Decide where people should go if business location is inaccessible.
Priority activities:
Identify which business activities are most essential/time-sensitive.
Return to facilities:
Outline a process for regrouping and planning.
Permit:
official document that gives the right to put on a specific event
License:
official document that gives the right to engage in an activity for as long as the license is valid
Certificate:
official document that verifies or proves something
