Introduction

Question 1

Other Types of Business Orgs

Answer 1

o Proprietorship
o Partnership
o Limited Liability Partnership
o Limited Partnership
o Limited Liability Company (LLC)

Question 2

Corporations definition McBride, quoting “The Incorporation of America”

Answer 2

“any association of individuals bound
together into a corpus, a body sharing a
common purpose in a common name.”

Question 3

Dominance of Corporations

Why?

Answer 3

• Favorable environment

* Characteristics of the corporation

Question 4

Favorable environment for Corporations

Answer 4

o Physical technology
   - Large firms/economies of scale
o Social “technologies” 
o Private ownership
   - Dispersion of wealth

Question 5

Characteristics of the Corp

Answer 5

o Legal personality
o Limited liability
o Free transferability of ownership interests 
o Centralized management
o Investor ownership

Question 6

Proprietorship definition

Answer 6

o No legal status as an entity (no separate existence from its owner).
o Proprietorships are easy to set up (no creation formalities).
o The owner is personally liable for all the debt.
o Proprietorships are common amongst low liability businesses

Question 7

Partnership definition

Answer 7

A partnership is an association of two or more individuals to carry on as co-owners of a business for-profit.

Question 8

Limited Liability Partnerships

Answer 8

Certain partners have limited liability (innocent partners – those partners that have not taken part in the misdeeds of other partners).

Question 9

Limited Partnership

Answer 9

General and limited partner

Question 10

Most significant disadvantage of the corporate form (McBride)

Answer 10

Separation of ownership from operating control of the business:
▪ Classic problem of management operating the entity for its personal benefit
▪ Gave rise to the imposition of fiduciary duties
▪ Significant threat to the efficacy of the corporate form because trust is so essential to the maintenance of all forms of cooperative human activity.

Question 11

Essential purpose of a corporation—or any other form of legal entity

Answer 11

is to facilitate collective action by individuals