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Business Associations > Types of Companies > Flashcards

Types of Companies Flashcards

1
Q

What is a partnership?

A

An association of two or more persons to carry out as co-owners of a business for profit

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2
Q

What are the 4 key features of a partnership?

A

1) A partnership has no limited liability

2) Each partner has the ability to participate in management & control

3) Profits & losses are shared

4) income is not taxed, profits and losses flow through the partners to be included in their tax returns

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3
Q

Agency of a partnership

A

Each partner is an agent of the partnership for conducting its business.

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4
Q

What issues usually occur with voting in a partnership

A

Deadlock, because each partner has equal voting rights.

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5
Q

How is deadlock usually solved in a partnership?

A

Eather deligating decision-making power to a small, odd-numbered group. OR addressing the problem in the partnership agreement & giving some people more power than others.

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6
Q

Half the partners in a partnership want to vote to shift the direction of the partnership, and the other half wants to shift, but in a different way. What happens?

A

Nothing, Partnerships can’t take new actions in the event of deadlock and the status quo persists. (National Buiscit Co.)

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7
Q

What duties do a partner owe the partnership?

A

The duties of Loyalty & care & to account for profits, property, or benefits on behalf of the partnership and to refrain from competition or self-dealing

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8
Q

When can a partner engange in actions that violate the duties of loyalty & care?

A

When the action was ratified by a specific action or authorized

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9
Q

What is a partnership’s property?

A

everything the partnership owns, including both capital and property that is subsequently acquired in partnership transactions and operations.

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10
Q

How may a partner use the partnership property?

A

They may use and possess property only on behalf of the partnership, not for personal reasons

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11
Q

Can you sell your partnership interest?

A

you can sell the economic rights to profits and losses, but not the right to be a partner which requires unanimous consent.

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12
Q

Can a creditor recover from a partner’s individual assets?

A

Yes, but they must first seek to recover from the partnership’s assets.

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13
Q

What is a limited partnership?

A

A partnership with one or more general partner and one or more limited partners.

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14
Q

How is a limited partner different from a general partner?

A

LPs don’t participate in the day-to-day management of affairs. “LPs invest & general partners run”

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15
Q

What is a limited liability company?

A

A company in which the personal assets of the people who invest money in the LLC are protected. With limited exceptions the can’t be held liable beyond their investment.

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16
Q

What is the Check-the -box rule?

A

How you become an LLC, an LLC can elect to be taxed as a corporation by “checking the box” on an IRS form. Usually can only be done once.

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17
Q

What documents are needed to form a partnership?

A

None, can happen anytime two or more persons to carry out as co-owners of a business for profit

18
Q

What documents are required to form an LLC?

A

Articles of organization (with designated state office, usually the secretary of state)

19
Q

What is required for the articles of organization of an LLC?

A

Name, PPB, & name/address of agent for service of process

20
Q

What other document may be needed for an LLC?

A

An Operating (LLC) Agreement

21
Q

What does an operating (LLC) agreement include?

A

 How the LLC will be governed (voting, management, etc.)
 The financial obligations of the members
 How profits, losses, and distributions will be shared
 How membership interests (ownership units) will be handled upon separation, death, disability, etc.

22
Q

What restrictions exist in creating an operating agreement?

A

There is relative freedom in selecting governing rules only limited by the mandatory provisions set fourth by the RUICA.

23
Q

What type of authority do members and managers of LLCs have?

A

Apparent Authority.

24
Q

How are profits and losses allocated in an LLC?

A

on a pro rata basis according to the member’s contributions

25
Q

When can aspects of fiduciary duties be altered?

A

If they are not manifestly unreasonable

26
Q

What does the DE act say about fiduciary duties?

A

fiduciary duties exist by law and may be expanded, restricted, or eliminated by contract, except for the elimination of the duty of good faith & fair dealing.

27
Q

What are the rights of shareholders?

A

1) Vote: on any shareholder issues, including board elections which are most important

2) Sue: claims against the corporation, board, officers, and other controlling shareholders

3) Sell: shares of stock to exit company

4) Yell: make their voice & opinions heard

28
Q

What are a shareholders responsibility?

A

to approve of actions outside the ordinary course of business & fundamental transactions like a merger.

29
Q

What do directors do?

A

Manage the company or delegate to officers, they act as a collective body.

30
Q

What are the directors responsibilities?

A

the fiduciary duties they owe to the corporation itself, not shareholders. Are not agents of the corporation.

31
Q

What are the duties of Officers

A

Officers manage the day to day affairs & any tasks delegated to them by the directors. They also owe fiduciary duties to the corporation and not shareholders.

32
Q

How can shareholders file suit against managers as cooperation?

A

They would require a derivative suit

33
Q

What documents are required to form a corporation?

A

Articles of incorperation

34
Q

What are the other key organizational documents for a corporation?

A

The bylaws

35
Q

What information is needed for the articles of incorporation?

A

Entity name, registered agent, address for service of process, and # of authorized shares.

36
Q

What are authorized shares?

A

The maximum amount of shares that a cooperation is allowed to sell

37
Q

What are issued shares?

A

of shares sent out into the world

38
Q

What are outstanding shares?

A

of shares still issued after a stock buyback

39
Q

What are stocks held in treasury?

A

shares that have been issued and then bought back

40
Q

What are bylaws?

A

A contract between the shareholders. They cover the powers of directors & officers, procedures for electing directors, and voting issues.

41
Q

What is the difference between non-profit & for-profit corporations?

A

Non-profits don’t have shareholders, they are sometimes viewed as owned by the state.

42
Q

How are private corporations different than public ones?

A

Stock is owned by private individuals, and sales of shares must be handled “face-to-face.” Not anyone can buy stock.

Business Associations (8 decks)

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