Exam 3 Flashcards
What is Corporate Personhood?
A business entity possess similar, but not all, right to a natural person. It can be sued/sue, enter contracts, and donate to political campaigns
What can’t a corporation do under Corporate Personhood?
Cannot give an Affidavit
What are the main factors of choice in choosing a type of business organization?
- Limited Liability
- Formalities
- Ease of Financing
- Management
- Taxes
What is a Sole Proprietorship?
An extension of the business owner with the intention to carry a commercial enterprise to make a profit.
What are optional things a sole proprietor can do?
- Register a DBA
- Create a business plan
- Financing activities
When referring to Partnerships, what should be assumed unless otherwise specified?
We are referring to General Partnerships
What is required for a Partnership?
2 or more individuals with the intent to make profit.
Is an Expressed Agreement required in a Partnership?
No, it’s not necessary
Against whom are liabilities and contracts enforceable in a Sole Proprietorship?
The owner
Against whom are liabilities and contract enforceable in a Partnership?
All parties (owners) and/or the partnership (business) itself
What is joint and several liability?
Someone who is suing the partnership can sue each individual partner or as a group (whether whole or not)
What is a trade name? How is it created?
trade name is a “DBA” for partnerships and filed through notice in Superior Court and notice in the newspaper.
What is a Partnership Agreement?
Also called Articles of Partnership. It is a contract between all partners that outlines how the partnership is run (ex. profit distribution, ownership %, death of a partner)
What vote is required to transact business?
Ordinary course = Majority
Non-ordinary = Unanimous
What is Express Authority?
The principal defines an agent’s express authority.
What is Implied Authority?
Authority that is not expressed but is implied through the nature of the agency-principal relationship.
What is Apparent Authority?
Causes a third person reasonably to believe that another has the authority to act for the principal.
What is the exception for a third party’s
defense of Apparent Authority?
When the third party known or should have reasonably known the agent had no authority.
What does “Respondeat Superior” mean?
“Let the master answer”
What Legal Duties to partners owe each other in a Partnership?
- Duty of Loyalty
- Duty of Good Faith
- Duty of Care
- Duty to Inform
- Duty to Account
What are the basic types of partnerships?
- General
- Limited Partnership (LP) where partners are split into general (no limited liability) and limited (limited liability)
- Limited Liability Limited Partnership (LLLP) where both types of partners enjoy limited liability
What is stock?
Ownership in a corporation
Who issues stock of a corporation?
The Board of Directors
Who is liable for corporate contracts, liabilities, and debts?
The corporation only
What is piercing the corporate veil?
Shareholders can still be held liable beyond the corporate entity
How is piercing the corporate veil commonly achieved?
- Co-mingling of personal and corporate assets
- Treating corporation as alter ego
What are Municipal Corporations?
Corporations formed by legislature by the State
What is a Close Corporation?
Small corporation in which shareholders share a relationship with each other. Typically not publicly traded.
What is the basic structure of a corporation?
- Officers (day-to-day)
- Board of Directors (elect Officers)
- Shareholders (elect Board of Directors)
If a corporation has only one class of stock, what is it called?
Common
If a person purchases stock from a corporation, they are said to…
Subscribe to the stock
What rights do shareholders have?
- Inspection
- Elect board of directors
- Receive dividends
What is treasury stock?
Stock owned by the corporations either because they have not been issued or they purchased them back.
What meetings must be held for shareholders?
Annual meetings
What is Proxy voting?
Granting authority to another shareholder to vote on your behalf.
What is Cumulative voting?
Using number of votes for certain issues. This must be in the by-laws.
What are dividends?
Distribution of profits to shareholders
How are dividends calculated?
- Knowing the # of owned shares to # of shares outstanding and the profit
- Other classes (such as preferred) an effect this calculation
What is the role of the Board of Directors?
- Decide to issue dividends
- Elect officers
- Set price of stock
- Buy/lease/sell company property in ordinary course of business
What are Officers and what do they do in a corporation?
Officers are agents of the corporations and manage the dat-to-day operations of the corporation
What duties to Officers and Directors owe to the corporation?
- Loyalty
- Care
- Good Faith
How is a corporation formed?
- Pre-Incorporation
- promoters
- optional name reservation
- choice of State - Articles of Incorporation (w/ Secretary of State)
- pertinent information
- registered agent - Organizational Meeting
- Adopt governing doc’s
- ratify actions - Governing Documents
- Articles of Incorporation.
- Bylaws - Issue Shares
- Board of Directors
Who is the person who files the Articles of Incorporation?
The Incorporator
What is a Shareholder Agreement?
A governing document that is an agreement of all shareholders.
What is the Right of First Refusal?
Either the corporation or its shareholders are given the right to buy shares offered for sale to an outsider willing to purchase them.
How are corporations taxed?
It depends on if the corporation is a Sub-Chapter C or S-Corp (according to IRS requirements)
How is a Sub-Chapter C corporation taxed?
It is doubled taxed. This type is subject to income tax and shareholder tax when dividends are paid.
How is an S-Corp taxed?
Only taxed at the income tax level.
What are the IRS requirements for an S-Corp?
- Shareholders must all be individuals
- Shareholders must be U.S. Citizens
- No more than 100 shareholders
- Only one class of stock
How are Non-Profit corporations structured?
- Officers
- Directors
(Attorney General)
What are the IRS requirements to be a Non-Profit corporation?
- Charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals.
- No part of net earnings may inure to the benefit of private shareholder/individual
- Unrelated business income less than 30%
What is Unrelated Business Income (UBI)?
Income that does not relate not non-profit purposes. UBI cannot exceed 30% of total income.
What happens to non-profit assets upon dissolution?
Must go to another non-profit
How are LLCs formed?
- Promotors and Pre-Organization
- Organizer files Articles of Organization
Filed with Secretary of State
Registered Agent - Operating Agreement and other Governing Documents
How are LLCs structured?
LLCs are flexible in structure. Think of this:
- Officers (optional)
- Directors (optional managers or members)
- Members (Owners)
Who manages the LLC business?
- Member-managed = members are managers and operate day-to-day
- Manager-managed = the owners elect a manager or managers to handle day-to-day business decisions
(Officers are optional)
What are owners called?
Owners are called members
How is ownership structured?
It’s flexible. Two common options:
- Units = stock-like shares in LLC
- Membership Interests (%) = partnership-like
How are LLCs taxed?
IRS does not formally recognize the LLC, so the tax structure is flexible
Who is responsible for contracts, liabilities, and debts in an LLC?
The LLC, which enjoys Limited Liability. However, it can still be pierced through the veil like a corporation.
What is a security?
Any note, stock, bond, or other debt, certificate of ownership, investment contract, etc.
What is the difference between a Note and Bond?
- Notes are enforceable promises to pay
- Bonds are typically referring to long-term debt
What were the Big 3 reasons for the 1929 Stock Market Crash?
- Trading on margins
- Market speculations
- Abusive bank practices
What is the SEC?
Securities Exchange Commission. Formed by the Securities Act of 1933.
What are the basic requirements of the Securities Act of 1933?
All securities sold must be registered and comply with the act or be exempt under an exception
What are the main exemptions for securities under the Securities Act of 1933 and 1934?
Securities:
1. Government-issued
2. Short-term notes (< 270 days)
3. Non-profit securities
4. Finc. Institution securities
5. Life insurance annuities
What is required to be identified as an Accredited Investor under Private Offerings?
- Individual has a $1M net worth
- Income of at least $200k in last 2 yrs.
What are the main exemptions for transactions under the Securities Act of 1933 and 1934?
Transactions:
1. Private offerings
2. Small offerings (Company less than $5 million in first year as business)
3. Intrastate offerings
What is a Registration Statement?
Also known as Prospectus. It is the historical and current company data. It includes financial statements, details of securities, and how raised capital will be used for the company.
What are the basic requirements of the Securities Act of 1934?
Requires Annual and Quarterly financial reports.
What are the main statutes discussed covering Antitrust?
Sherman Act and Clayton Act
What is a monopoly?
the exclusive possession or control of the trade of a commodity or service.
What is the purpose of Antitrust laws?
To promote competition among businesses.
What are penalties for violating Antitrust laws under the Sherman Act?
Criminal:
1. Up to $100M fine
2. 10 yrs. in prison
Civil:
1. Treble damages
2. Attorney fees and costs
(Self-reporting)
What is required for remedy under the Sherman Act?
The Act requires standing. A direct wrong to the plaintiff must have been made.
What are penalties for violating Antitrust laws under the Clayton Act?
It is a Civil penalty and is up to the jury.
What are the main points of Section 1 of the Sherman Act?
Section 1 requires joint action to restrain trade.
Per Se:
1. Price-fixing
2. Group boycotts
3. Division of markets
+ Rule of Reason violations
What are the main points of Section 2 of the Sherman Act?
Targets monopolizing. Two important factors:
1. Monopoly power = 70% or more of market
2. Intent to monopolize
What is the most common violation of Section 2 of the Sherman Act?
Predatory pricing
What is the most common violation of the Clayton Act?
Tie-In Contracts
What is the Clayton Act?
An act that aims to prevent monopolies before they happen by focusing on behaviors. It also looks at mergers that pose a threat to competition.
What must be true of mergers to violate the Clayton Act?
It must be more than a mere possibility of competitive harm. It does not need to be a certain harm.
What is the FTC?
Federal Trade Commission. Create and enforce regulations for consumer protection trades.
Truth in Lending Act
Requires interest rates and other key terms to be clearly stated.
Fair Credit Reporting Act
A person can access their credit and can appeal their score.
Equal Credit Opportunity Act
Prohibits discrimination in credit.
Fair Debt Collection Practices Act
Prohibits harassment and certain intrusive practices of debt collectors.
Lemon Laws
State laws that govern consumer protection and offers relief from faulty goods (ex. automobiles)
What are the primary environmental laws?
- National Environmental Act
- Clean Air Act
- Clean Water Act
- Resource and Recovery Act
How can an Agency be formed?
Express contract or by implication – primary requirement is the agent’s indication of consent that he or she will act for the principal’s benefit and under the principal’s control.
What are examples of Agency?
- Power of attorney
- Business entities
- Employment
What are the Agent Duties?
- Loyalty
- Obey Instructions
- Exercise Reasonable Care and Skill
- Communicate
- Account
What are the Principal Duties?
- Compensate
- Reimburse
- Indemnify
What is the difference between Embezzlement and Conversion?
- Embezzlement = Crime
- Conversion = Tort
(Both can occur at the same time)
How can agencies terminate?
- Will of the parties
- Operation of law
What obligations are Principals liable for?
Contracts of the agent and negligence
What obligations are Agents liable for?
Intentional Torts/Crimes
What is the difference between an employee and an independent contractor?
Degree of control
What is Employment At-Will?
Employer can terminate the employee for any reason
What laws limit Employment At-Will?
- Title VII
- Family and Medical Leave Act (FMLA) - 12 unpaid weeks
- Age Discrimination in Employment Act
- Americans with Disabilities Act (ADA)
What are the # of employees required for each of the 4 Employment Laws?
- Title VII is 15+
- FMLA is 50+ how have worked 1,250 hrs. in 12 months
- Age Discrimination Act is 20+ and has BFQ exceptions
- ADA is ALL employers
What is Worker’s Compensation?
Employer may be liable, regardless of fault, for workplace injuries in the course of employment. Applies to employers with 3+ employees.
What is OSHA?
Promote and enforce rules for workplace safety standards
What are the requirements for the Affordable Care Act? What is it?
- 50+ employees
- Act that requires employer-provided health insurance that included incentives for smaller businesses.
What is FLSA?
Fair Labor Standards Act. Sets the minimum wage and overtime pay for employees. There are outlines exempt employees such as independent contractors.
