Forms of Business Flashcards
Sole proprietorship wrt dissolution
Dissolved on death; can pass down assets and liabilities
Agreement used to form partnership
Articles of partnership
Partnership wrt liability
Liable by interest (i.e. share of profits and returns on capital)
Partnership wrt legal entity
Considered own legal entity
Partnership wrt agency
Partners are mutual fiduciaries and agents of the partnership
Partnership by estoppel
Misrepresentation of partnership relied upon binds actions on partnership
Joint and several liability
Partnership can be sued all together or individually.
If one partner is responsible for a tort
Must repay partnership
Limited partner
Only liable to degree of investment but has no management interest
Dissociation of partnership wrt liability
2 years liability.
Dissociation of partnership wrt existence
Continues to exist until all business affairs tied up
Dissociation of partnership wrt agency
No duty of loyalty
Dissociation of partnership logistics
Requires notification
LLP
Limits liability for errors of partners; partnership is liable entity
LLP typically used with
Professionals
LLP rationale
Tax benefits of partnership with limited liability for partners
LLC rationale
Tax advantage of partnership with the limited liability of corporation
LLC wrt tax
Taxed individually on income (i.e. no double taxation)
LLC agreement
Operating agreement
LLC partners
Members
Manager of LLC must be
Member
Who can be a member of LLC?
Corps, partnerships (i e. not just humans but also legal entities)
Tax relevance of entity
Entity pays taxes as a person
Close corporation
Restrictions on transfer of shares
Typically closely held corporation is
Family business
S-Corp
Taxed as partnership with special requirements
First S-Corp requirement
Domestic
Second S-Corp requirement
Not members of an affiliated group of corporations
Third S-Corp requirement
Less than 100 shareholders
Fourth S-Corp requirement
One class of stock
Fifth S-Corp requirement
Does not hire aliens
S-Corp tax advantage
Losses can be used to offset income taxation
Corporate powers can be classified as:
Express (laid out in articles of incorporation), implied (legal and necessary to carry out business), or ultra vires (outside scope of charter)
Corporate organizing document
Articles of incorporation
Financing of a corporation
Stock = equity interest; bond = no ownership interest.
Caveat to public trading
More regulations; loss of control
When do stockholders receive dividends
On vote from board of directors
Stockholders wrt corp dissolution
Last to be paid
Stockholder degree of control over corporation
Only vote on directors and major issues
Common vs. preferred stock
Common stock takes lower priority for dividends and distribution of assets on dissolution
Dissolution of corporation can occur via:
Act of state legislature, shareholder/board of directors vote, expiration of articles, unanimous action by shareholders, court decree,
Winding up
Liquidation of assets.
Receiver wrt winding up
Appointed when creditors force liquidation
