(Q4) Sole Proprietorship, Partnerships, Corporations Flashcards
Sole Proprietorship
- One person as owner
- Not a partnership or corporation
Partnership
Association of two or more people to carry on a business for profit
General Partnership
- Most common form of partnership
- Created under the Uniform Partnership Act (UPA)
- Partnership ownership is tendency in common
Limited Partnership
- At least one partner is limited as to their liability
Trading Partnership
Deals in goods
ex. casket manufacturer
Non-Trading Partnerships
- Deals in services
- funeral homes are considered non-trading partnerships
Uniform Partnership Act (UPA)
- Governs the creation, operation, and termination of partnerships
- adopted in most states
General Partnership
Created under the UPA
Limited Partnership
- Limited as to liability
- state must have a limited partnership act
Secret Partnership
- Partner is not known to the public but has a voice in management
Silent Partner
- Partner is known to the public and has a voice in management
ex. Elon Musk and Twitter
Dormant Partner
Combination of both silent and secret partner
Nominal Partner
- Partner in name only.
- Known to the public and has no voice in management
Liability of Partners
Fiduciary relationship (a relationship of trust)
Contract Liability
Completely liable if partner is acting within the scope of partnership business
Tort Liability
Completely liable but if the other partner commits a tort, he must reimburse partnership for loss
Joint Stock Company
Ownership is evidenced by shares of stock, but have unlimited liability
Joint Venture
Partnership for only one specific transaction
Liability of Limited Liability Company or Partnership
Limited as to liability like a corporation
- has “flow through taxation” like a partnership
- Partnership does not pay taxes, but each partner does
Creation of Partnership
- By agreement (contractual relationship)
- By estoppel
Dissolution of Partnership
- If a partner leaves for whatever reason
- If the partners all decide to close
Effect of Dissolution
Termination of a partnership but the remaining partners can form a new partnership
Corporation
An entity formed by individuals on a business for or not for profit, to adopt a corporate name, and to change it’s members without dissolution
Classifications of Corporations
- Public Corporation (can be governmental or private)
- Close Corporation (limited number of shareholders)
- Domestic Corporation (foreign/alien)
- Promoters (prepare articles of incorporation: file with the state and appoint a board of directors)
Board of Directors
Policymakers for a corporation
Officers
Elected by the Board initially
Powers of a Corporation
- Expressed
- Incidental
- Implied
Ultra Vires Acts
- any acts that lie beyond the authority of a corporation to perform
- is not limited to illegal acts, although it encompasses actions barred by statute as well as by the corporate charter.
Promotors
Incorporators (those who create a corporation)
- File articles of incorporation
- elect a board of directors
- may elect officers
- may hire and fire people
Stockholders
the owners of a company’s outstanding shares, which represents a residual portion of the corporation’s assets and earnings as well as a percentage of the company’s voting power.
Classes of Stock
- Capital
- Common
- Preferred
- Par Value
Capital Stock
Declared value of outstanding stock
Common Stock
Has voting privileges
- Proxy: authoriation given to someone by a common stockholder to vote on their behalf
Preferred Stock
- Special advantages for dividend and capital
- Has not voting privileges
Par Value Stock
Has assigned face value
Treasury Stock
Stock reacquired after saile
Watered Stock
Stock paid for with property of inflated value
Stock Options
Right to purchase shares at a set price
Dividends
Profits of the corporation allocated to the stockholders
Rights of Stockholders
Have the right to inspect books, vote, and have a share in profits (dividends)
Management
- Officers of a corporation
- Usually “line management”: type of management that refers to a chain or line structure of management, with each link in the chain working towards a CEO, managing director or board of directors.
Dissolution of a Corporation
- Winding up of the affairs
- Does not equal termination
