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Law exam 3 > Law Exam > Flashcards

Law Exam Flashcards

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1
Q

Close Corporations:

A
  • A company whose stock is not publicly traded and usually has no more than 30-35 shareholders
  • Common provisions of close corporations:
  • protection of minority shareholders
  • transfer restrictions
  • If C Corp it is a separate taxable entity
  • Usually are family owned and operated

Examples: Dell, Chick-fil-a, Hobby Lobby, M&M’s
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2
Q

Corporations: Cons

A

Regular Corporatoins account for about 18% of all businesses:

  • Protects managers and investors from personal liability for the debts of the corporation and the actions of others
  • transferability of interests- provide flexibility for enterprises small and large
  • duration: perpetual existence- can continue without their founders
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3
Q

Corporations: Pros

A
  • Protects managers and investors from personal liability for the debts of the corporation and the actions of others
  • transferability of interests: provide flexibility for enterprises small and large
  • Duration: perpetual existence: can continue without their founders
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4
Q

Covered Business Forms

A
  • Sole propiertorship
  • General Partnership and Limited Liability Partnership
  • Limited Liability Company
  • Regular Corporation
  • S corporation
  • Close Corporation
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5
Q

Disadvantages of LLC’s

A
  • newer form of business and there are still legal uncertainties as to how corporate law applies
  • LLCs are not favored by venture capitalists
  • you cannot merge, sell or take public an LLC
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6
Q

General Partnership

A

An unincorporated association of two or more co-owners who operate a business for profit

  • Pros: Taxes pass through to each partner
  • Cons: Liability: Partner is personally liable for the debts of the enterprise and for the acts of the other partners
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7
Q

Limited Liability Companies

A
  • Pros: an LLC offers the limited liability of a corporation and the tax status of a partnership
  • limited liability- members are not personally liable for the debts of the company
  • tax status- income flows through the company to the individual members, avoiding double taxation of a corporation
  • Formation: to organize an LLC, charter and operating agreement is necessary
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8
Q

Limited Liability Companies (LLCs)

A

flexibility- can have members that are corporations, partnerships, or nonresident aliens

  • transferability of interests- members must obtain the unanimous permission of the remaining members before transferring ownership rights
  • duration: LLC can continue in operation even after a member withdraws
  • going public: loses its favorable tax status and is taxed as a corporation, not as a partnership
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9
Q

Limited Liability Partnerships (LLP’s)

A
  • LLP’s are particularly well-suited to professional groups, such as lawyers and accountants
  • Pros: all partners enjoy limited liability. A partner is only personally liable for his own acts, not the acts of other partners
  • Pass through tax structure
  • Cons: not well-suited for all types of businesses; cannot raise a lot of capital and cannot transfer your interest
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10
Q

Examples of Limited Liability companies

A

Examples are the boston celtics, pacers, cavaliers, red sox, etc.

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11
Q

S Corporations:

A

Pros: Shareholders of S Corps have:
-the limited liability of a corporation
-the tax status of a partnership
Cons:
-There can only be one class of stock
-Shareholders cannot be partnerships or other corporations
-Shareholders must be US citizens or residents
-Shareholders must agree that company should be an S corporation

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12
Q

Sole Propietorship

A

Pros:
-Can run a business without taking any formal steps
-Not required to register the government
-not required to file a separate tax return
Cons:
-owner responsible for all of the business’ debts
-owner has limited options for financing the business

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13
Q

Things to consider when deciding business forms

A
  • liability protection
  • tax treatment
  • ease of formation/maintenance
  • abililty to raise capital
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14
Q

Adoption

A

board of directors takes a formal vote or act as if they adopted it

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15
Q

Authorized and issued (outstanding) stock

A

stock that has been authorized and sold

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16
Q

Authorized and unissued stock

A

stock that has been authorized but not yet sold

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17
Q

Bonds

A

long-term secured debt

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18
Q

Bylaws

A

document that specifies the organizational rules of a corporation, such as the date of the annual meeting and the required number of directors

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19
Q

Charter’s require provisions

A
  • name
  • address and registered agent
  • incorporators
  • purpose
  • stock
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20
Q

Corporation by estoppel

A

if a party enters into a contract believing in good faith that the corporation exists, he cannot later take advantage of the fact that it does not

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21
Q

Courts pierce the corporate veil in four circumstances:

A
  • failure to observe formalities
  • commingling of assets
  • inadequate capitalization
  • fraud
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22
Q

Debentures

A

long-term unsecured debt

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23
Q

De facto corporation

A

“in fact”; promoter has made a good faith effort to incorporate and has actually used the corporation to conduct business

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24
Q

De jure corporation

A

“by law”; the promoter has substantially complied with the requirements for incorporation but has made some minor error

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25
Q

Exculpatory clause

A

provision that protects directors from personal liability to the corporation and its shareholders for anything other than egregious misbehavior

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26
Q

Idemnification

A

requires a company to pay the legal fees of directors who are sued for actions taken on behalf of the company

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27
Q

Minute book

A

contains a summary of a company’s official actions

28
Q

Notes

A

when issues by a company, short-term debt, typically payable within five years

29
Q

Novation

A

creates a new contract

30
Q

Piercing the corporate veil

A

court holds shareholders personally liable for the debts of the corporation

  • failure to observe corporate formalities
  • commingling of assets
  • inadequate capitalization
  • fraud
31
Q

Preferred stock

A

owners have preference on dividends and also, typically, in liquidation

32
Q

Promoter’s Liability

A
  • personally liable on any contract signed before the corporation is formed
  • corporation is not liable on any contracts signed before incorporation unless it adopt the contract after incorporation
  • even if the corporation adopts the contract, the promoter is still liable until the third party (aka landlord) agrees to the novation
  • if it is clear that the parties did not intend the promoter to be liable, then he is released from liability once the corporation adopts the contract
33
Q

Qualifying to do business

A

registering a corporation in a state in which it is not organized but it which it has an ongoing presence

34
Q

Quorum

A

percentage of stock that must be represented for a meeting to count

35
Q

Termination (3 step process)

A
  • vote
  • filing
  • winding up
36
Q

Treasury stock

A

stock the company has sold, but later bought back

37
Q

Ultra vires doctrine

A

a corporation cannot undertake a transaction unless permitted to do so by its charter

38
Q

Abandoned Property

A

Property that has been discarded by the owner, who has no intention of reclaiming it.

39
Q

Accession

A

The addition of value to personal property by the use of labor or materials. In some situations, a person may acquire ownership rights in another’s property through accession.

40
Q

Bailment

A

A situation in which the personal property of one person (a bailor) is entrusted to another (a bailee), who is obligated to return the bailed property to the bailor or dispose of it as directed.

41
Q

Bailment Agreement

A

A bailment agreement can be express or implied.

Although a written contract is not required for bailments of less than one year

42
Q

The bailor’s duty to reveal defects to the bailee translates into two rules:

A
  1. In a mutual-benefit bailment, the bailor must notify the bailee of all known defects and any hidden defects that the bailor knows of or could have discovered with reasonable diligence and proper inspection.
  2. In a bailment for the sole benefit of the bailee, the bailor must notify the bailee of any known defects.
43
Q

Certain rights are implicit in the bailment agreement.

A
  • Right of Possession:bailee acquires the right to control and possess the property temporarily.
  • Right to Use Bailed Property: bailee may also have a right to use the bailed property.
  • Right of Compensation: Except in a gratuitous bailment, a bailee has a right to be compensated as provided for in the bailment agreement.
  • Right to limit their liability, provided that the limitations are called to the attention of the bailor and are not against public policy.
44
Q

Chattel

A

All forms of personal property.

45
Q

Community Property

A

If property is held as community property, each spouse technically owns an undivided one-half interest in property acquired during the marriage.

46
Q

concurrent ownership:

A

Persons who share ownership rights simultaneously in a particular piece of property

47
Q

Confusion

A

The mixing together of goods belonging to two or more owners to such an extent that the separately owned goods cannot be identified.

48
Q

Constructive delivery

A

Confers the right to take possession of the object in question, but not the actual possession.

49
Q

Conversion of Lost Property

A

When a finder of lost property knows the true
owner and fails to return the property to that person, the finder has committed the tort of conversion (the wrongful taking of another’s property

50
Q

Duties of the Bailee

A

The bailee has two basic responsibilities:

(1) to take appropriate care of the property and
(2) to surrender the property to the bailor or dispose of it in accordance with the bailor’s instructions at the end of the bailment.

51
Q

Estray Statute

A

A statute defining finders’ rights in property when the true owners are unknown.
Note: encourage report property has been found.

52
Q

fee simple.

A

A person who holds the entire bundle of rights to property

53
Q

The final requirement of a valid gift is acceptance by the donee.

A

Acceptance

54
Q

For a gift to be effective, three requirements must be met:

A
  1. Donative intent on the part of the donor (the one giving the gift).
  2. Delivery.
  3. Acceptance by the donee (the one receiving the gift).
55
Q

For such a transfer to BECOME A BAILMENT, the following three elements must be present

A
  1. Personal property.
  2. Delivery of possession (without title).
  3. Agreement that the property will be returned to the bailor or otherwise disposed of according to its owner’s directions.
56
Q

Gift Causa Mortis

A

A gift made in contemplation of imminent death. The gift is revoked if the donor does not die as contemplated.

57
Q

Gift Inter Vivos

A

A gift made during lifetime and not in contemplation of imminent death, in contrast to a gift causa mortis.

58
Q

Joint Tenancy

A

two or more persons owns an undivided interest in the property, but a deceased joint tenant’s interest passes to the surviving joint tenant or tenants.

59
Q

Lost Property

A

Property that the owner has involuntarily parted with and then cannot find or recover.
Note: A finder of the property can claim title to the property against the whole world—except the true owner.

60
Q

mislaid property.

A

Property that has voluntarily been placed somewhere by the owner and then inadvertently forgotten
Note: A person who finds mislaid property does not
obtain title to it. Instead, the owner of the place where the property was mislaid becomes the caretaker of the property because it is highly likely that the true owner will return.

61
Q

The most common (3) ways of acquiring personal property

A
  • Become the owner of personal property merely by POSSESSING it.
  • PRODUCTION—the fruits of labor
  • A GIFT is essentially a voluntary transfer of property ownership
62
Q

Personal Property

A

Property that is movable. Any property that is not real property.

63
Q

Real Property

A

Land and everything attached

to it, such as trees and buildings.

64
Q

Relinquishing Dominion and Control

A

An effective delivery also requires giving up complete control and dominion (ownership rights) over the subject matter of the gift.

65
Q

Special types of Bailments

A
  1. COMMON CARRIERS—Carriers that are publicly licensed to provide transportation services to the general public. A common carrier is held to a standard of care based on strict liability.
  2. WAREHOUSE COMPANIES—Warehouse operators differ from ordinary bailees in that they (a) can issue documents of title (warehouse receipts) and (b) are subject to state and federal statutes, including Article 7 of the UCC (as are common carriers). They must exercise a high degree of care over the bailed property and are liable for loss of or damage to property if they fail to do so.
  3. HOTEL OPERATORS—Operators of hotels are subject to strict liability for any loss or damage to their guests’ personal property.
66
Q

tenancy in common

A

a form of co-ownership in which each of two or more persons owns an undivided interest in the property. The interest is undivided because each tenant has rights in the whole property.

Law exam 3 (1 decks)

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