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BK REG > REG 8 BUS STRUCTURES BK > Flashcards

REG 8 BUS STRUCTURES BK Flashcards

1
Q

Eye of the Tiger

What is the only Business Structure that does not have “flow through” taxation? What type of taxation does it have?

A

A corporation– it has double taxation.

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2
Q

Eye of the Tiger

What is the only difference between a Corporation and a Subchapter S Corporation?

A

A corporation has double taxation, while a Subchapter S Corporation has flow through taxation.

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3
Q

Eye of the Tiger

With what type(s) of business structure(s) can you transfer interest without unanimous consent?

A

A corporation or a subchapter S corporation.

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4
Q

Eye of the Tiger

What are the management rights of members of an LLC? How about an LLP?

A

In both cases, members/partners have the right to participate in management absent an agreement to the contrary.

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5
Q

Eye of the Tiger

General rule for corporation and management?

A

Corporations are managed by the Board of Directors.

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6
Q

Eye of the Tiger

What are management rights for an LP?

A

General partner(s) is (are) the exclusive managers. Limited partners ordinarily don’t manage.

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7
Q

Eye of the Tiger

LLP and liability?

A

Partners are generally not liable for partnership obligations.

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8
Q

Eye of the Tiger

General rule for corporations and liability?

A

Shareholders are generally not personally liable beyond their investment.

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9
Q

Eye of the Tiger

Liability structure for LP?

A

General partner(s) have unlimited personal liability. Limited partner(s) are liable up to their investment.

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10
Q

Eye of the Tiger

General rule for general partners and liability?

A

General partners have unlimited personal liability for all partnership obligations.

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11
Q

Eye of the Tiger

What is the liability of shareholders, officers, etc. of corporations?

A

They are not personally liable for contracts made by their corporation.

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12
Q

Eye of the Tiger

In what ways is an LLC not like a corporation?

A

In an LLC, you can’t transfer your interest without consent of all members. LLC, like a general partnership, terminates upon death, retirement, etc. of a member. An LLC is taxed like a partnership. Also, members have a right to participate in management absent an agreement to the contrary.

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13
Q

Eye of the Tiger

How are profits shared in a GP/LLP?

A

Equally, absent an agreement to the contrary.

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14
Q

Eye of the Tiger

How are voting strength and profit and loss allocated with an LLC?

A

In proportion to contributions (because it is a corporation).

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15
Q

Eye of the Tiger

What must you do to start any business that has limited liability?

A

File with the state.

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16
Q

Eye of the Tiger

How is an LLC taxed?

A

Like a partnership (“flow through”) taxation.

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17
Q

Eye of the Tiger

Who has limited liability with an LLC?

A

Every member.

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18
Q

Eye of the Tiger

GR for limited partners and their rights with respect to management?

A

They can’t participate in management.

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19
Q

Eye of the Tiger

Major difference between a general partnership and an LLP?

A

LLP– partners are generally not personally liable for acts of their fellow partners agents, employees.

20
Q

Eye of the Tiger

General partnership and management rights?

A

Equal rights to manage, unless agreed otherwise.

21
Q

Eye of the Tiger

Difference between general partnership and joint venture?

A

A joint venture is formed for a single transaction or series of transactions. A general partnership if formed as an ongoing business.

22
Q

Eye of the Tiger

Justifiable reasons for piercing the corporate veil?

A

Only the following: Shareholders commingle personal funds with corp. funds, corp inadequately capitalized at time of formation, committing fraud on existing creditors. “CCC”– “C for corp”

23
Q

Eye of the Tiger

What are bylaws?

A

Internal rules for running a corporation.

24
Q

Eye of the Tiger

What must the Articles of Incorporation of a corp include?

A
  1. Name and address of corp’s registered agent 2. Name and address of incorporators 3. Name of corp 4. # of shares authorized to be issued “Ric’s Pizza”
25
Q

Eye of the Tiger

Type of taxation of S Corp?

A

Flow through

26
Q

Eye of the Tiger

How many members are required for an LLC?

A

One.

27
Q

Eye of the Tiger

How long does a partnership continue for?

A

Until dissolved. A partnership is not of unlimited duration.

28
Q

Eye of the Tiger

Rights of assignee when a partner transfers his interest?

A

His only right is to get whatever distribution the partner would have gotten. He can’t manage the partnership, inspect books, etc.

29
Q

Eye of the Tiger

Describe partners’ rights in partnership property.

A

The partners don’t own it. Thus, they have no right to possess it except for partnership purposes. They can’t sell it, have their personal creditors attach to it, etc.

30
Q

Eye of the Tiger

What type of law governs partnerships? What type of authority do partners have?

A

Agency law. Partners have actual and apparent authority to bind the partnership.

31
Q

Eye of the Tiger

What areas require unanimous consent of the partnership? Exception(s) to this rule?

A

Matters outside the course of the partnership’s business. This includes admitting new partners, assigning partnership property, admitting liability (confessing a judgment), a fundamental change in the partnership, and changing the partnership agreement. The exception is when a partner dissolves a partnership by leaving. You can’t force a partner to stay. “AAAFC”– “AAA is f***ing cool”

32
Q

Eye of the Tiger

How are decisions regarding matters within the ordinary course of partnership business determined?

A

By majority vote, unless partnership provides otherwise.

33
Q

Eye of the Tiger

Elements of a general partnership?

A

2+ people who agree (expressly or impliedly) to carry on as co-owners of a business for profit.

34
Q

Eye of the Tiger

Difference between a merger and a consolidation?

A

Merger: A + B = A Consolidation: A + B = C

35
Q

Eye of the Tiger

Must the shareholders approve a proposed action?

A

Yes, a majority is required.

36
Q

Eye of the Tiger

In what instances does a shareholder have a right to dissent and demand that the corporation pay them the fair value of their shares?

A

“DAMS” mnemonic

37
Q

Eye of the Tiger

Directors rights and duties to corporation?

A
  1. To act in good faith 2. Indemnification– corporation can indemnify you for lawsuits brought against you, but not for fraud. 3. Right to rely on reports, opinions of officers, employees, etc. 4. Duty of loyalty “GIRL”– Directors are “girls”
38
Q

Eye of the Tiger

Who manages a corporation on a day-to-day basis?

A

The officers (ie CEO, CFO, etc.).

39
Q

Eye of the Tiger

Who selects, removes, and compensates officers?

A

The Board of Directors.

40
Q

Eye of the Tiger

Who declares dividends?

A

The Board of Directors.

41
Q

Eye of the Tiger

Explain stock dividends and taxation.

A

When a company declares a stock dividend, it takes money out of retained earnings to distribute stock. Thus, it is non-taxable, because there is no change in equity (RE goes down and APIC goes up)

42
Q

Eye of the Tiger

Once the board declares a dividend, what happens to shareholders?

A

They become unsecured creditors.

43
Q

Eye of the Tiger

What are the reasons for which a shareholder can/can’t inspect books/records?

A

They can inspect them to start a derivative suit, or to solicit shareholders to vote for certain directors. They can’t inspect them for improper purposes, such as to obtain a retail mailing list of shareholders.

44
Q

Eye of the Tiger

Who must agree to a fundamental corporate change? Must it be unanimous?

A

The board and the shareholders. It need not be unanimous.

45
Q

Eye of the Tiger

What are the fundamental changes that require shareholder approval?

A

Dissolution, Amendment of the Articles of Incorporation, Merger/consolidation, Sale of substantially all of the corp’s assets outside the ordinary course of business (“DAMS”)

BK REG (11 decks)

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