R8 Flashcards
M1 Bankruptcy Part1: What is the chapter 7
Chapter 7: liquidation of assets where a trustee is appointed. The trustee collects the debtor’s assets and use the proceeds to payoff creditors. when and individual, partnership, corp: debts are discharged and individual relieved of debts with certain expectation to pay debts. When a corp. and partnersip are dissolved no discharged. relieved of debt with the expectation dissolved corp and partnership will pay debts. NO hope business is gone. Involuntary and voluntary. unsecured credit
What is Chapter 11
reorganization of debts this is usually done for businesses (corp and partnerships) but in some case individuals. Trustee is not appointed. Debtor still have assets and payoff debts at different times and /or amounts. Creditors are paid and business continues. Hope: businsess continues
Involuntary and voluntary unsecured
What is Chapter 13
Trustee is appointed. Debtor pays debts to creditors over a three year to 5yr maximum period. At the conclusion of payment period debts are discharged. For individuals only. voluntary
What is Chapter 15: Ancillary and Cross-border cases
It is a US adoption of model law on cross boarder insolvency promulagated by UN. It was adopted to legal regime for cross boarder insolvency.
What are involuntary & voluntary bankruptcy
Chapter 7 and 11 could be voluntary or involuntary. Chapter 13 voluntary only
Voluntary: when debtor files for relief of debt. Individual have to pass income test. Married couples can file for voluntary.
Involuntary: When creditor are not getting paid and file to put indv or business into bankruptcy.
- Only unsecured creditors can petition for involuntary.
Rules : Debt are not paying debts when they are due (does not include farmers or chartity organization) - Debt must owe $15,775 in unsecured debt
- if you have less than 12 creditors, you must have at least one creditor owned $15,775. If you have more than 12 creditors, you must have 3 in the aggreagate that are owed $15,775 in unsecured debt. It could be one but in the aggregate 3 must be owed $15,775. There is a estimated 20 day gap period for courts to rule or involuntary bankruptcy. there is a priorty list of which creditors get paid first.
What is chapter 12 bankruptcy
is a reorganization bankruptcy for family farmers and fisherman. … It allows “family farmers” and “family fisherman” to restructure their finances and avoid liquidation or foreclosure. It’s very similar to Chapter 13 bankruptcy, but provides additional benefits to debtors.
Test of income and median test for chapter 13
Chapter 13 is for individual with regular income. If your income is less than the state median, you could probably stay in chap 7.
If income greater than the state median, then you go tot the means test: Avg monthly income - monthly allowed expenses * 60= a dollar amount. If its less the $7700 you can stay in chap 7. If it is greater the $12,850 you must switch to Chapter 13. If you are in between 7700 and 12850 trustee wants to know if you can pay off 25% of creditors claims.
What is chapter 9
Chapter 9 is a bankruptcy proceeding that provides financially distressed municipalities with protection from creditors by creating a plan between the municipality and its creditors to resolve the outstanding debt.
What is included and excluded from bankruptcy estate
debtor property of bequest, devise, inheritance, property settlements, divorce decree, or beneficiary interest in a life insurance policy or death benefit plan within 180 days after filing petition.
Not included: Earned income after case commence.
Does a debtor have to be insolvent or owe three or more creditor to file chapter 7
No: does not have to be insolvent just can not meet payment as they come due. no list of amount of creditors.
If a person petition for chapter seven bankruptcy and paid off a credit card balance of $500 one month before bankruptcy petition be consided a preferential insider
NO. payments of debt of less than $600 on comsumer debt would not be preferential insider.
What are preferential insiders
- transfer made to or benefit of a creditor
- on an account that already exist during bankruptcy
- made within 90 DAYS PRIOR TO FILING OF THE PETITION (one year if the creditor is an insider, such as officer, of debtor or close relative)
- made while insolvent
- results in creditor receiving more than the creditor would have received under bankruptcy code.
What is contemporaneous exchange
when not considered a preferential payment and new purchase before petitiion.
What is the status of a debtor who petition for bankruptcy on 8/1 and on 5/15 gave a mortgage on home to a bank to secure a loan that debtor had with bank. the bank also employees his brother
This would be preferential but not insider: the bank was a creditor that now is getting preferential treatment and transaction happen 90 prior to petition. The brother working at the bank is irrelevant.
If a party suceed in a petition dimissed he could recover
Court cost, compensatory, punitive
If a payments are fully secured within 90 days or 1 year for insiders. will they be considered preferential transfer
No. payments that are fully secured are not preferential.
In CPA question do I avoid answering question with must in trustee questions and questions in general
Yes. Always for trustee appointed for chapter 7
Are lawsuits by creditors able to move when a petition is filed
No. they will be in a stay position
Can an insurance company’s creditor file involuntary of insurance company file voluntary bankruptcy petition
No.
Is debtor solvency relevant during a loan made
NO.
If a creditor has secured interest does he have priorty over unsecured if perfected before bankruptcy petition
Yes.
If a prior to petitioning for chapter 7 sales a car that is worth 20000 to some one for 100. What would the trustee call the preference
Cancle the transaction and voidable under fruad.
Not a voidable preference because one creditor odes not have preference over another creditor ( antecedent)
M2: Claims priority
- Secured creditors get paid first to the value of their collateral to the extent the value of securing their claim. So if their value of claim is not enough, the go to the back with general creditors
Who get claims issued by trustee after secured and general creditors: SAG WAGE CITI
Support: child and spouse
Admin fees: laywers and trustees
GAP creditors: if involuntary petition any unsecured creditor that come is during the petition period
Wages up to $12,850 as long as it is earned within 180d prior to filing.
Employee benefits plan contribution up to $12,850 for each employee if earned within 180 days prior to petition reduced by wage claims.
Grain farmers and fishermen claims up to $6325
Consumer deposits for goods paid for but not delivered up to $2850
Taxes
Injurys claims caused by intoxicated driving.
Unsecured and remaing $ secured creditors
Example of trustee payment of claim’
Co. has been involuntary petitioned ( 7 or 11) into bankruptcy. the following claims and expenses:
Fees earned by trustee 15,000
claims by secured creditor 5000
fee by attorney 10000
claims by employee wages
filed within 180 of petition 2000
amount to be distributed by trustee $15,000
Fees earned by trustee 15,000
claims by secured creditor 5000
fee by attorney 10000
claims by employee wages
filed within 180 of petition 2000
amount to be distributed by trustee $15,000
Priority: Cash avail 15,000 Secured ( 5000 avail 10,000 if not enough remaining amount pro rata and based on priority next is attorney and trustee; prorata for 10,000 trustt 15000 attorney 10,000 = 25000
Remaing cash 10,000
15/25= 60% (6000)
10/25= 40% (4000)
remain 0
others can file to get their share other options
What are the certain debts that will never be discharged
FAT WED
Fraud, Larnceny, embazzlement
Alimony and child support
Taxes
Willful and maliscious injury/ good faith accident is discharged. Education loan ( possible if undue hardship) permanent disable is an example of undue hardship. UnDISCLOSED debts forgot to discharge in bankruptcy court.
Are luxury goods dischargble and happen within 90 days of petition. Bank holding luxury item as collateral is bank secured and paid first
Not dischargeble
Secured collateral bank paid first is trustee distribution/
If debtor paid taxes will trustee have debtor payoff credit card
open balance that are done with 70 days of filing for relief not discharged
If creditor does not file claim is he part of priority
No would be part of if money left over after general claims
If a secured bank that had a debtor of 75K and amount in bankruptcy is 70K. what is paid in sec and general
70K secured and 5K general based on allocation.
Can creditors confirm decree
No. only courts
When the court confirmed the chap 11 reorg plan what describes the effect
Debtor will be discharged from debts that arose before confirmation excpt those that are in the plan
Would failing to answer the petition questions and listing one creditor revoke debtor’s discharged
yes for question answering.
no. for listing one creditor
under a chap 11 reorgan if committee is formed would it consist of unsecured creditors
Yes/
Is foreign entity may file on under chap 15 and automatic stay not avail under chap 15 true
You get ancillory proceeding and not foreign entity
automatic stays are available.
What is and not allowed under chap 15
Allowed: discrimination against foreign interests
not Allowed: foreign interest
US courts have affirm duty to cooperate with foreign courts
foreign reps may participate in other uS bankruptcy cases
If debtor refuse to explain losses can his discharges be denied
Yes.
If a secured creditor perfected a assets to a debtor that was sold for lower the market value, will the secure credit have the same priority the cash sell was not sufficcient
No. would have same prior after secured portion and unsecured creditors for remaining balance.
If a debtor is a corp or partnership will his discharged be apporved
No. must be disolved
If debtor kept bad books and frauduently paid wrong tax liab to government will it be discharged
Yes for bad bookeepping
no for tax fraud.
M3: Fed. Reg. 33 and 34 acts
1933 act: regulates IPO. gives investors enough and sufficient information to make an inform decision.
via information: Registration statement S-1 and prospectus, Audited F/s, who are officers, directors, principal stockholder.
20day wait period befor selling. can advertising. no selling.
SEC; does not garurantee that you will make or lose money with securities. Just check the IPO paper work for completness
SEC can suspend of revoked a licsense.for security violation. for criminal caes, SEC will investigate and give information to US justed for criminal investigation.
1934 act; regulates the reporting and trading of securities. and the anti-fraud provision.
Must register with SEC:
Shares are traded national exchanges
More than $10M in assets and at least 2000 shareholders ,in any outstanding class
More than $10M in assets at least 500 shareolders who are not acredited, in any outstanding classes
National stock exchanges, brokers and dealers.
Business report Annual reprot 10K 10Q unaudited 8K material events outsided of the corp., who are the 5% stockholders. tender offer whol are thinking of buyieng 20 or more of stock, proxies,. Make sure there is no false inform.
Under the 1934,you wanted to sue one for fraud you must justify all 5 MAIDS
Misrep of material fact
Actual & Jusitfiable reliance.
Induced with False information
Suffered Damages (losses)
Scienter: did intentional on purpose,gross negligence of reclessness.
If suing under the 1933 act for MAIDS must have to LAMS
Suffered of Loss
Aquired a stock
Material Misstatement.
Securtiy: any investment contract. If investor is passive, i.e. relies soley on the management of others to make money- then the investment most likely is a security. If management takes part in investing than it is not a security under the 1933 act.
1933: IPO: act securities: stock, bonds, warrants, T-bills, investng captial.
Partnership:
Genreal partner involved in day to day managment is not passive income.
Limited Partner: passive income.
Things that are not regulated by the SEC:
CD’s
BRINKS: Banks, Railroads, Insurance Co (policies), Not for Profit, Governments, S-T Commercial paper.
General Partnerships. Municipal Bonds
A person wishing to sue under Section 11 vs. Rule 10b-5of the 1933 act need only show which of the following Plaintiff was initial purchaser of stock Defendent was negligent Defendant signed registration statement Plaintiff suffered a loss Defendant acted with scienter Plaintiff acquired stock Plaintiff relied on registration statement
Must Prove LAM
Suffered of Loss
Aquired a stock
Material Misstatement.
Plaintiff was initial purchaser of stock: NO (not IPO)
Defendent was negligent: NO
Defendant signed registration statement: Yes ( when signed liable. best defense is due dilligence; i.e. directors, officers, accountants, lawyers. Privity is not a requirement.
Plaintiff suffered a loss: NO
Defendant acted with scienter: NO
Plaintiff acquired stock: YeS
Plaintiff relied on registration statement: NO
Registration statement included a material misstatement: YES
For an action under rule 10b-5 of the 1934 act, proof of negilence is insufficient. Which of the folowing must be proven:
Plaintiff bought or sold the security: Defendant was negligent Defendant signed registration statement Plaintiff suffered a loss Defendent acted with Scienter Plaintiff acquried stock Defendent made a material misstatement Plaintiff actually relied on the misstatement
Must prove Fraud with MAIDS
Under the 1934,you wanted to sue some one for fraud you must justify all 5 MAIDS
For federal prosecuction it must be interstate commerce
Misrep of material fact
Actual & Jusitfiable reliance.
Induced with False information
Suffered Damages
Scienter: did intentional on purpose,gross negligence of reclessness.
Plaintiff bought or sold the security: Yes
Defendant was negligent: NO must prove intent
Defendant signed registration statement: No
Plaintiff suffered a loss: YES
Defendent acted with Scienter: YES
Plaintiff acquried stock: No
Defendent made a material misstatement: Yes or intent
Plaintiff actually relied on the misstatement: yes
Can a investor resell securities under Reg D. sec. 3 1933 sec act
Yes may resell security transactions exempt for registration
If a sale of a security to a non profit the contains material misrep. due to negligence that appeared in the audited f/s would be consider under Sec act 1933
Normally non profits exempt however when material mistatements appear in audited f/s in is included in Sec act 1933 fraud.
Are there some language the insurance policies are exempt rom SEC act 1933 but insurance com. must register
Yes. Sec act 3 a 8 must registrer.
what are shelf offering and do the require orgianal reg statement to be updated and first time offerer of secuirty
Shelf permited are well know seasoned issure (WKSI) are require registration updates. However, no first oofer are part of shelf registration under SA 415
What are some of the registristrants document that must be link to SeC fo rSEc 1934
10k 10q Proxy statement and solicitation Report by tender offer prospectus
does sale of securites other than issuer, underwriter,and dealer make it exempt under SEc 1933
Yes.
Under Sec act of 1933 is the prospectus part of the registration statement
yes.
Under Reg A of sec 1933 requires that filing an offer cirrcular with the SEC is in compliant what are there $ requirements and accredited and uncredited investors
Yes. on filing offer circular.
two tires for Reg A 1 Upto $20M has no limitation of investors.
2. up t o $50M unaccredited investor ay invest but can not invest more than the greater of 10% of their incme or 10% of their net worth.
Under SEC 1094 with voting stock, is the requirement person who owns 10% or more stock must file a report with the SEC
Ye.
What is the time period a person must make under reg. 596 D of the sec 1933
Must notify SEC within 15 days after the first sale of the offering. Can be sold to unlimited number of accredited investors but no more than 35 unaccredited investors.
A company must reg with SEC when it?
- has both 2000 or more shareholders in any clss or shares and total assets of more than $10M
- hs both 500 or more of shareholders who are unaccredited in any outstanding clas plus more than $10M in asstes
- currently trading on a national stock exchange
- issure is required to register under sec act 1933
SEc 1934 requires and not required the following
file periodical reports lisitng new officers
person making tender offer notify SEC
Not needed: reported changes in market price. normally it is in annual report
short swing or long swing profit: internal informaton
If some succeed in SEC 1933 they are entilted to miney damages
yes
Under Reg D sec 1933 what are the reuqirements
- no general soliciation
- buyers’ righs to resell is restricted for 1 yr.
- non-accredited investrea are limited to 35, must be sophisticated investors, and must must prvided with an audited b/s and other f/s/ reliance.
Under reg d rule 506 is co requre to provide accredited investors with specific information
No. just to unaccredited investors.
Under sec 1933 registration of interestate sec offerings are
Require reegistratio of all publice securites sales unless they are applicable exemptions.
Under Reg D 506 sec act 1933 is the limit sell of securitires
no limit on sales. just limit on unaccredit investors to 35.
Under 147 of SEc is there a limt to intrastate issues and secuity sells
Yes. under rule 147 states 6 months after last sale of securty resales can only be made to residents of the state.
Under sec act of 1933 is there an exemption for security exchange of other securtity to same stock holder with no commission exmpt
yes.
Under sec 1933 what is the time period that a offering is exempt
12 mpnths and not to exceed $5m under rule 506 referred to as private placement.
Under sec act of 1933, if an issuer sells a security and fails to meet the certain disclosure requirements, the purchasre may sell it back to issure and recover $$
yes.
Under insider trading act of sec 1934, the CFO and CEO knew the company was going under. the CFO told his friend about who had stock in the co. along with the CFO and CEO. they all sold their stock and made mone. What are they considered for prosecution
CFO and CEo are insider and friend is tippee.
Under Sec 11 of the SEC 1933 would a person filing suit use this when there is know reliance on f/s
yes.
are the following exempt from, 1933 registration:
public sale of stock in a trucking company regulated by the ICC
issuacne of stock by a public traded corp. to its existing shareholders because of stock split.
public sale of muni bonds
public sale of 110 yr corp negotiable bonds
public sale of stock in a trucking company regulated by the ICC: sec reg withing common carriers are exemp
issuacne of stock by a public traded corp. to its existing shareholders because of stock split. exchange withing shareholders are exempt
public sale of muni bonds: exempt due to reg by govt body
public sale of 110 yr corp negotiable bonds
M4- Other Federal Laws and Regulations
What are employee classification FICA Unemployment Insurance Workers Comp Affordable Care Act
What are employee classification: you paid by the hour, week, month. Employer control the manner in which you work. You are issued employer tools to work.
Employment relationship or agreement. However, if you have your own business and get paid by the job, you are an independent contractor.
w2 employee 1099 independent contractor
FICA: workers and their dependents in case of death, disability or retirement including divorced spouse. Funded by employer and employee. Self employed indiv, pay of of SE tax @15.3%
FICA uniqiure to FICA and ACA; Employer match the employee payment.Both contribute 7.65%. Employee portion is 6.2% of gross income maxed at $118K.
Medicare (and not medicaid) is 1.45% of your entire gross wages no max. = 7.65%. 7.65% paid by emploer and 7.65% paid by employee.
Self employed, you pay both halfs at 15.3 % on your net profits. one half the portion of SE tax deductible by self employed.
Unemployment Insurance: no job terminated through not fault of your own,( left job to travel the world).
Excludes the self employed
Employer funded only
Subject to FUTA if your qrtly payroll is greater than or equal to $1500. or one employee 20 weeks a year.
Deductible by the employer. Benefits can exceed employer contributions.
Workers Comp; strict liab. for on the job incidents. can be your fault accident happent but it can’t be self inflicted. can’t sue your employer but can sue third party (manufacture of equipment that you were injured.)
State run program, nost emplyer have to participate and deductble. can’t employer.
Affordable Care Act:access to everyone to have affordable health care: improve workers to cheaper health insurance.
Employer and employee contrib.
Most have 50 or more employer
They all apply if we have a employee and employer relationship
Are minor workers and eligible for workers como and temporary worker not eligible
Yes. minors
No. Temps
Are occupational diseases and employment aggravated preexsting diseases covered under workers compensataion
Yes.
If an employer is having an experience unemployment tax rate of 3.2% in a state having an standard unemployment tax rate of 5.4% how much may it credit against 6% fed unemployment
it could take up to the 5.4% state tax rate.
What does and does not work comp privide benefits on
It does: cost of prostetic and other medical body supports
burial expenses
monthly payments to surviving dependents children
does not: Full pay during disability
If a employer fail to withhold employee contribution of fica and pays both is entitle to
get reimburse from employee
Is employer paid Fica and fed and state unemployment insurance deductible as a business expense
yes.
Is an employee precluded (prevented) from collecting workers comp when he: self inflicted and was in non complane of employer rules
Yes. for self inflicted
No. for non employer rules. workers comp can be dueto employee negligence.
M5-Business Structure
what are types, attributes and important information for the exam
- Sole Proprietorship: flow through tax return from Sch c p/l to 1040: Advantage; no double taxation.
Disadvantage: owner reliable for all liabilities of the business
Advantage: owner can sell the business at will
Advantage: can just start you business. no filing is required.
Advantage: you can manage your business or you can get someone to manage your business. need no other authorizaton. - Partners: two or more individuals get together to form a business for profits.
A. General and joint ventures
- general partnership on going
- joint ventrure : two or more separate business coming together for a specific purpose and then disolved
GP/JC: formation may be verbal or written. you want written if more than one year.; Liab of owner - unlimited personal liable for all partners obligations; transferability- partner cannot transfer ownership interst without unanimous consent but can transfer ou equity in business.
Management-owners manage directly or appoint managing partner: All partners are agents for business. they all have Actual and Apparent authority. and have fiduciary duty.
Advantage: flow through taxation. no double taxation. In less there is an agreement, p/l is split equally and not based on capital contribution.
B. Limited Liability (LLP): Same rules that apply to general partnership applys to LLp. One differene you have to file with LLp and you must linmited the acts of others.LLP is very simular to a general partnership.
Formation: Filed with state a statement of qualification
Advantage: not liab. for others but are liab for your own acts and negligence nor the debts of the business.
transferability- partner cannot transfer ownership interst without unanimous consent but can transfer ou equity in business.
Management-owners manage directly or appoint managing partner: All partners are agents for business. they all have Actual and Apparent authority. and have fiduciary duty.
Advantage: flow through taxation. no double taxation. In less there is an agreement, p/l is split equally and not based on capital contribution.
C. Limited Partnership: at least one partner is the general partner: ulimited personal liab. and you run the business. one of more partners is limited partner (LP) you don’t get involved in the business; sort of like a stockholder; not involved with day to day managment of business, can’ t have your signature on anything oprational wise; your loses are only what you put into Or basis) in entity. LP you have to file to limit your liab.
Formation- filed certificate of limited partnership with state.
Liab. of owners - general partner: unlimited liab; runs the day to day operation of the business. limited partner:like sharholders ; only investment at risk.
Transferability- partner cannot transfer ownership interst without unanimous consent but can transfer your equity in business.
Management: general partner exclusinve managers unlimited liab; fiduciary daty. Limited partners are passive investors do not manage.
Advantage: flow through taxation. no double taxation.
P/L is based on Capital contributed unless agreed other wise. Losses are limited to your capital contribution
- Limited Liab. Co, (LLC); it is a hybrid of partnership an corporation. for tax purposes. No double taxation. Like a corp. you have limited liab. P/L based on contributions; like copr voting strenght on ops and earnings; with LLC you are not a stockholder but a member
Formation- file articles of organization with state.
Liab. members are not personally liab. bbeyond their investment.
Transfer: member cannot transfer ownership interst without unanimous consent but can transfer your equity in business.
Management : all members can manage.membes are agents all have fiduciary dutyOr appoint manager then manager need to have fiduciary duty. or have of BOD and officers. It must be spelled out in your artlcles of organization.
Advantage: flow through taxation. no double taxation.
- Corp. unless exam tell me otherwise, it is a C Corp.
Owners have shares of stock’
form: file articles on incorp or corp charter with state.
Liab. - sharholders not generally personally liab. beyond their investment. there are exeception wher shareholders are laib when they pierce the corp veil: if you do something tht is not reighte against the company.
Set up corp to perpetrate a fruad, you mixed you funds with ops funds or corp. when form corp, ot is undercapitalized.
management: management by BOD; elected by stockholders, which appoints officers to run the day-to-day ops. Principals are shareholders. Agents are BOD and officers. All have fiduciary duties.
Transf: shareholders are free to transfer ownership interest unless they agree otherwise. only execption is when small closely held.
Taxation: income taxed at corp level and taxed again at to the shareholders when div are distributed. double taxation
It has a perpetual life. All other buinsess have a limited life.
Would a joint venture be two or more separate business forming a single business to sale a specific product.
& an association of perosons engaged as co-owners in a single undertaking fro profit
Yes.
A partner in a LLP will avoid personabilty by being
Personal liab for his own torts and his subordinates torts
When a patner does not have apparent or actual authority but a person who sign contract think he does a later finds out he does. The other can can
ratify contract . but not amend partner agreement
Is the partnership an agreemt to cnduect business for profits and gross reciepts
Profits yes.
Gross reciepts no.
is a written agreement valid for an express partnership
No can be orally. but if partnership is for more than one year, needs to be written.
In an LLC if one member dies what is the results of the LLc
the LLc will dissolve unless the other members consent to continue
partnership agree to buy real estate would that be a partnership agreement
NO
If there is no agreement or agreement is silent. how are the p/l divided
equally when no agreement is known.
Can a secured and unsecured creditors be in a limited partnership
Yes
If a partner sive his interest to someone out side of partner does this person have rights in the partnership
No. just to proifts. can not look at books or make decisions
does third party agreements to be bind must formal resolution need by menbers and thirty party must know that member had apparent authority
Yes.
When a partner does not have a duration or time limt can a partner withdrawal at any time
Yes.
Which entity is the most freely trnasferable in interest
Corp: other need consent of ownership
ahow are partnership desolves handles twith a/p, cash and owner capital
Total cash avail- ap- owner capital= amoutn to be distributed based on distribution agreement
In a disolve where ther is a shortfall . Do partners with negative balances need to come up with shortfall
yes
Can joint venture disolve after single undertaking an dhow are they treated
hey will not disolved after a single undertaking. they treated as a partnership
M6-Business Structures C Corp S Corp
Key features of a C Corp and S Corp:
Formation: file a article of incorporation or charter
Liability of owners: limited liab.
Management:are agents; hired by board,board hire,elect, compensate and remove officers
Transfer: sale when every you want unless it is a small closely held corp Or S Corp
Tax C Corp double tax, S Corp not tax flow through the shareholders like partnership.
Important information for exam: choice of type Operations Rights and duties of owners and management Authority of owners and management.
S Corp:
- Stock can be by no more than 100 person
- Shareholders must be individual, estates, or certain trusts.
- The corporation must generally be a domestic corp
- there can be only one class of stock
- foreign shareholders are generally prohibited
- S Corp are like partnership; profits are not taxed are corporate level but rather treated as income to shareholders
- Generally can not freely transfer stock like C Corp
C Corp:
Disadvantage: taxed twice
Management by the BOD. Officers are the agents
Shareholder of the Principal, BOD are the go between of principal and agents, Officers are the agents.
Shareholder are generally liab to the extent of interest in corp, unless pierce the corp veil. overall shareholders have limited liab.
File: article of incorp or corporate charter with state.
To amend the articles you shareholders and BOD approval.Not unanimous but majority or super majority.
Advantage: Freely transfer interest or shares. As long as it is not a small closely held corp or S corp.
Principal are the owners: i1 share = 1 voted. corp via unlimited liab. protect shareholder from breach of contract, creditors, corp torts and liab. With the exeception shareholders’ torts and if pierce the corp veil.
Shareholders elect BOD and BOD appoints officers.
BOD and Officers have fiduciary duties to shareholders
Officers are agents.
Six Main rights of Shareholders
1. Voting power: 1 share = 1 vote. Can be a situation of cummulatie shareholders to get stronger representation on the Board. Get to vote for BOD and fundamental changes to business not day to day operations
2. Partial ownership: Different types of stock: common, pref stock,. However if you are Scorp only one type
3. Trading rights: free to transfer. unless it is a small closely held corp or S Corp.
4. Dividends: no rights to dividends unless declared by the board.
5. Inspection of corp records:yes as long as it for a proper purpose.
6. Sue for wrongful acts: yes. its called a derivative actions suit because BOD or officers and not bring certain actions a for business. sometime stockholders can sure on their own behalf this called a direct actions
BOD: rights , duties, obligations, and authority:
1. they are not agents
2.Only handle business under a quarum
3. duties are to elect, compensate and remove officers
4.Initiate those fundamental changes to the business:
a. Dissolutions
b. amend the articles
c. Mergers
d. sales of majority of assest out of the ordinary course of business. don’t need unanimous consent just majority.
5. Act in good faith. have a fiduciary duty
a. must have a due dilligent. if this is done and things went wrong in the transaction, BOD would not be liab.
6.Indeminfy if acted in good faith to BOD and Officers.
Officer: 1. Hired by the BOD 2. Are the agents 3. handle the day to day operations. 4.Fiduciary responsibility: a. Loyalty b. obedience c. reasonable d. account 5. Have actual authority: written or oral 6. Apparent authority: Because they are officers 7. sometime officer are shareholder. Shareholders 1. Select the BOD 2. BOD Supervise Officers
What are derivatives and what are direct actions suit
When a shareholder is suing the BOD and officers for lask of fiduciary duty, this is a deritive. Shareholder is acting for the Corp. Any money from suit goes back to Corp.
Direct : when shareholder suing on his behalf would be considered Direct suit
How do cumulative PF received dividends
In the cureent year and prior years. so if dividends are released in the current year, cum pf get prior yr and current year.
If Participating PF, would get current shares and if any dividends remaining would get those a pf div per share.
Yes.
What are some of the grounds for denying a chapter 7 discharged
- failure to keep books and records
2. If you had a prior discharged within 8 years
If a CPA gives an unqualified decision and then relized there were material misstatements and the person relied on statements can cpa held for damages on rule 10b-5 and section 11 under sec 1933
Yes. when there is relience and person suffered a loss. Defense could be person new.
Can unsecure or secure creditors petition a involuntary bankrputcy
only unsecured.
what are the occurences that could cause a corporatio to disolve
- Judical dissolution filed by shareholders or creditors
- Dissolution when a corp is merged out of existence
- Dissolution by director and shareholders approval.
Can a partnership be formed by intent
No.
only by contract capacity of partnes
intent to carry on partnership to make a profit (strongest)
Intent to be co-owners of a business( and inccurr losses)
If there is no agreement on final decision in a partnership, how is it done
through majority rules
If a partner dies and leave his interst to his sister. who owns the assets
the partnership. jsut because interest is willed does not have any effect on partnership ownership
If joe and diane form a partnership and have creditors. joe leaves and dont come back. Diane decides she can’t continue to partnershp. supplier sues how much is diane to pay
the parntership is liab for the debts. diane is liable to the extent the partnership lack funds. each partner is joint and severable liable for debts on partnership. If diane is served papers then partnersh is liab.
In a limited partnership how are p/l distributed
based on proportion of contribution to partnershp.
What are simularity and difference between Corp and Limited partnership
simular: they both are created under state statue and each must file organizational documents to proper governamental body
Diff: limited partner do not owenfiduciary duty to partnership
In a limited Liab co does operating agreement need to be in writing in all states and is the operating agreement based on the designed in the forestalling and resolving disputes among owners
In writing not required in all states
Yes the designed of forestalling used to resolve disputes.
Under Sec 11 sec act 1933 a cpa is not liab if he can prove due dilligience
Yes it is an defense.
Purchse negligence is not a defense to CPA
Under llc a member has the following order office supplies if designated as a manager participate in management decison Have limited liab if manager righte to transfer membership
order office supplies if designated as a manager yes
participate in management decison yes
Have limited liab if manager yes
righte to transfer membership no (only interest)
Under security act of 1933 how are offering of securites sold undre transaction exemption
Transaction exemption are susequent resell and are registratio nor a differenct exemption provision under sec 1933 act.
