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EXAM 3 Flashcards

1
Q

Who creates an Entity?

A

State Statutes

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2
Q

Entities have _______ and ______ like an individual

A

rights and duties

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3
Q

Entities and owners are __________

A

SEPERATE

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4
Q

Biggest advantage for Entities:

A

LPL

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5
Q

Limited Personal Liability

A

Entity owner is NOT liable for the debts of the entity

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6
Q

Unlimited Personal Liability

A

Owners ARE liable for the debts of the entity

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7
Q

Sole Proprietorship

A

One person owns controls…NOT AN ENTITY

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8
Q

General Partnership

A

2+, co-owners, for profit

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9
Q

Joint Venture

A

2+, for profit

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10
Q

Limited Partnership

A

at least one general partner and at least one limited partner

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11
Q

LLC

A

members participate in management of the business

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12
Q

Limited Liability Partnership

A

a limited partnership in which the liability of the general partners has been limited to some or all of the partnerships obligations

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13
Q

Can lose capital contribution in:

A

LPL

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14
Q

Risk Type for Sole Proprietorship:

A

Unlimited

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15
Q

Risk Type for General Partnership/Joint Venture:

A

Unlimited AND Lose CC

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16
Q

Risk Type for LLC and Corporations:

A

Limited AND Lose CC

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17
Q

Risk Type for Limited Partnership (GENERAL PARTNER):

A

Unlimited AND Lose CC

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18
Q

Risk Type for Limited Partnership (LIMITED PARTNER):

A

Limited AND Lose CC

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19
Q

Loopholes to LPL:

A

Guarantees liability for entity OR is wrongful actor that gives rise to liability

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20
Q

3 Ways to create an Entity:

A

(FAL) File, Agreement, Law

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21
Q

Who must file a document w State Secretary to form Entity?

A

Corps, LLCs, LPs

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22
Q

Who must enter into agreement to form entity?

A

GP/JV (sometimes LLCs/LPs but not req. for them)

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23
Q

This entity is the ONLY ONE that forms by law:

A

GP/JV

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24
Q

3 Requirements for entity to be created by law:

A

2+, for profit, profit SHARING

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25
________________ is DIFFERENT than ____________
Gross Profit, Revenues
26
Profit sharing key notes:
Doesn't have to be paid out or equal
27
What entity is for a specific period of time
Joint Venture
28
LLCs are taxed on a:
Personal level ONLY
29
Flow Through for Tax Purposes:
Entity is not taxed
30
Which entity is subject to double taxation
C corporation
31
Which entities have Flow Through
LLCs, LPs, S Corporations, GP/JV
32
Owners for LLCs are called
Members
33
Member Managed
Members manage the LLC
34
Manager Managed
Members elect manager, members only vote on big stuff
35
Operating Agreement includes:
Rules, rights/duties of members/managers
36
7 Steps to forming an LLC:
(CCROPS) 1. Choose name 2. Certificate of Formation 3. Registered Agent 4. Organizer signs document 5. Pay filing fee 6. Sign Operating Agreement
37
Filing fee amount for LLCs
$300
38
How can Entities isolate risk?
Forming subsidiaries
39
Advantages to corporations:
(CLEP) Centralized Management, Limited, Easy ownership transfer, Perpetual Existence
40
Who elects BoD in corp?
Shareholders
41
When/How are BoD elected?
Annually, vote thru proxy
42
Can shareholders act on behalf of entity?
NO
43
2 big voting topics:
Mergers, Loan Facilities
44
3 powers of BoD:
Elect officers, amend bylaws, Approve BIG items
45
Can the director (or board) act on behalf of entity?
NO, they just approve
46
Officers get to:
Make decisions and act on behalf of the entity WITHIN THEIR AUTHORITY
47
Can employees act on behalf of entity?
Sometimes, can act on behalf of explicit direction from officers
48
Entities are domestic to where they:
Filed their certificate of formation
49
If an entity wants to "do business" in a foreign territory, they must:
Register for tax/RA purposes
50
"Not Doing Business"
Defending a lawsuit, Having bank account, Owning real estate, Collecting a debt (outside of lawsuit)
51
When does the court expand NDB to DB?
Operating real estate, Performing services, Office located within state
52
Penalties to not registering to "do business"
Fines, cannot sue as plaintiff
53
Subchapter S
<100 shareholders, no foreign or entity shareholders, one class of stock, only USA
54
Want a _______ issue of stock
HIGH
55
Want a ________ par value on stock
LOW
56
Why is Delaware the most common state for entity formation?
Revised often, Case Law (predictable, consistent)
57
Shareholder Agreements in Publicly Traded Companies
Typically don't exist
58
Shareholder Agreements for Privately Traded Companies
VERY IMPORTANT
59
What does Entity Owners Agreement include?
(RFAW) 1. Restrictions on ownership transfer 2. Future Capital Contribution Requirements 3. Action Approval 4. Withdrawal?
60
Default for transfers:
Consent for new owner needed
61
First Right of Refusal:
First offer to owners, then sell to outside party if time expires
62
Drag-Along:
May force owner to sell
63
Tag-Along:
May force other owners who are selling to include you
64
Are Capital Contributions Required?
No
65
What happens if an owner does not contribute capital?
Dilution
66
Supermajority percentage:
75-90%
67
Majority percentage:
>50%
68
Withdrawal
Can shut entity down, typically prohibited unless payed off over time
69
ACTIVE requires that an entity abides by:
Reporting and tax requirements in each state
70
If entity is DISSOLVED/INACTIVE, owner can become __________________
Personally Liable
71
Piercing the Veil is when:
Owners are held personally liable for the debts of the entity
72
PtV is __________________
Common Law
73
Court can accept PtV if:
Entity is Owner's Alter Ego OR Entity is sham to perpetuate fraud
74
Entity is considered an Alter Ego when:
Owner uses assets as their own, Comingles entity and owner assets, Lack of corp. formalities
75
Owners can be held liable when:
Involuntarily terminated/dissolved, PtV, Improper Distributions

BL 3305 (8 decks)

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