Unit 2 Flashcards
a business with a only ONE owner is a ______
sole proprietorship 991
A sole proprietor has a _____ form of liability, thus sole proprietorship is a _____ form of business.
high, risky 991
2 reasons why someone might start a sole proprietorship?
- simple and inexpensive to startup
2. most people don’t consider the business form decision 991
legally, a sole proprietorship _____ be transferred to another person …..
cannot, the buyer of the soul proprietorship business and must create his own form of business to continue the business. 991
a _____ has two or more owners called _____.
partnership, partners 991
like a sole proprietorship, a partnership is not a ________ entity
tax-paying, The partners must claim the business income under their individual federal income tax returns 991
Identical to a partnership except that an ______ partner has no liability for most obligations; however, an ______ partner retains unlimited liability for his own wrongful acts, such as malpractice liability to a client.
Limited liability partnership (LLP) 992
A ______ has one or more general partners and one or more limited partners. ______ partners generally have _____ to manage the business, but are also insulted from unlimited liability.
Limited partnership, Limited, No 992
_________ is a limited partnership who’s partners have elected limited liability status for all the partners. A _____ is created by making a filing with the _________
Limited liability limited partnership (LLLP), LLLP, secretary of state. 993
a ______ is owned by shareholders who elect a board of directors to manage the business
Corporation 993
The _____ has the ability to attract the largest amount of capital because shareholders avoid ______ and shares are easily _____/____
corporation, unlimited liability, transferred/liquidated 993
By electing _______ , the corporation and its shareholders are taxed nearly entirely like a _______: income and losses of the business are reported on the shareholders’ individual federal income tax returns.
S Corporation status, partnership 993
S Corporation status is limited to ______, thus ability to raise capital is ______
100 shareholders, severely limited 993
The _______ permits professionals such as accountants, physicians, and dentists to incorporate their professional practices
Professional corporation 993
while professional shareholders have no personal liability for the obligations of the professional Corporation, they retain ________ to their clients for their ___________
Unlimited liability, professional malpractice 994
The ____ is the body of law that governs partnerships absent a written contract.
The Revised Uniform Partnership Act (RUPA) 996
The RUPA defines a partnership as an “______________”
1) Association of 2 or more persons ….
2) …carrying on a business…
3) …co-ownership….
4) …for profit 997
2 factors in determining co-ownership
- Sharing of profits
2. Sharing of management of the business 998
A _______ maybe found when a court is reluctant to call an arrangement a partnership because the purpose of the arrangement is not to establish an ongoing business involving many transactions but instead is limited to a single project
Joint venture 999
three elements of a purported partner
- a person purports to be or consents to being represented as a partner of another person or partnership.
- a third-party relies on the representation.
- the third-party transacts with the actual or purported partnership 1001
a ______ is an order charging all or part of the partners transferable partnership interest with payment of the unsatisfied amount of the judgment
Charging order 1006
A partner’s partnership interest are these 2 main things
- the partners’ transferable interest
2. the partners’ management and other rights 1006
a partner who transfers some or all of their interests _______ their management and other rights within the partnership.
doesn’t lose 1007
In a _______ a _____ must not act in competition of the _____ nor can they personally profit from the _____ without consent of the ______
partnership, partner, partners 1012
the ______ requires a partner to undertake his share of responsibility for running the day-to-day operations of the partnership business
duty to serve 1014
The _______ requires a partner make decisions that they believe are in the best interest of the partnership
duty of care 1014
partners have a ______ for their use or disposal of partnership funds and partnership property, as well as their receipt of any property, benefits, or profit, without the consent of the other partners.
duty to account 1014
a partner has a right to be ______ for payments made from personal funds and for personal liabilities incurred during the ordinary conduct of the business.
indemnified 1014
unless there is an agreement, partners share partnership profits ______, according to the ______, and not their __________.
equally, number of partners, capital contributions 1015
In a partnership or limited liability partnership, every partner has ______ as a _______ and may make contracts that bind the partnership.
implied authority, general manager of the business 1018
A partners express and implied authority together constitute their _______
actual authority 1018
a _______ has an inventory; that is, its regular Business is buying and selling merchandise, such as retailing, wholesaling, importing, or exporting.
trading partnership
a partner for trading partnership has ______ and _______ to _____ for the partnership.
implied and apparent authority, borrow money 1019
a _________ has no substantial inventory and is usually engaged in providing services.
nontrading partnership 1019
a partner for a nontrading partnership has _________ or _____ to borrow money for the partnership.
no implied or apparent authority 1019
because it is sometimes difficult to determine trading from nontrading partnerships, the most important thing to distinguish is whether the partner’s borrowing was done _________.
within the normal course of business. 1019
the RUPA requires that any partnership not in the ordinary not in the course of ordinary business be _________, absent a contrary agreement.
approved by all partners 1020
an innocent partner of an LLP has ________ for the professional malpractice of his partners.
no liability 1023
The LLP itself ______ for the tort of a wrongdoing partner or employee under the doctrine of respondeat superior.
is liable 1023
partners are _____ and ____ liable for partnership obligations, whether based in contract or tort.
jointly, severally 1024
for LLP partners, only the ____ is liable on contractual obligations, and only the ____ may be sued on such a claim.
LLP 1024
for tort allegation only the ____ as well as the _____ are liable.
LLP, partner who committed the tort 1024
Early American corporations received _______ from state legislatures, however, few were granted these because incorporation was considered a privilege.
Special Charters 1071
Most business corporations are _________. These business forms issue stock to their shareholders, who invest in the corporation with the expectation that they will earn a profit on their investment.
for-profit corporations 1071
General Electric is an example of a ___________ because it’s shares are generally available to public investors
publicly held corporation 1071
Corporations with very few shareholders who’s shares are not available to the general public are called ___________
close corporations 1072
A _________ or S corporation, is a special type of close corporation in that it is treated nearly like a partnership for federal income tax purposes. It’s shareholders report the earnings or losses of the business on their individual income tax returns.
subchapter S corporation 1072
S corporations benefit with taxes because they avoid the ________ penalty.
double tax (double because typical corporations are taxed and then the individual shareholders are also taxed) 1072
The IRS requires S Corporations to limit their shareholder to ______ or fewer shareholders.
One Hundred 1072
__________ do not issue and do not expect to make a profit. These corporations have members rather than shareholders, and none of the surplus revenue from their operations maybe distributed to their members.
Not-for-profit corporations 1072
___________ perform ________ and business functions. Examples include a municipalities, public school corporations, and water companies.
government-owned corporations, government 1072
To become a corporation, a business must incorporate by complying with an _______
incorporation statute 1073
The revised version of ____________ is a model statute created by the ABA for adoption by state legislatures and is the basis for corporation law in 29 states and the District of Columbia.
The Model Business Corporation Act (MBCA) 1073
Incorporation under state law requires delivering articles of incorporation to the
Secretary of State 1073
Most states have statutes governing nonprofit corporations based on the revised ___________.
Model Nonprofit Corporation Act (MNCA) 1073
The circumstances under which states may impose their laws on a business incorporated within another state is determined by the law of ________.
foreign corporations 1074
A corporation is a _______ in the state that has granted its charter. It is a ______ in all other states in which it does business.
Domestic corporation, foreign corporation 1074
A corporation domiciled in one country is an _______ in other countries in which it does business.
alien corporation 1074
In the the leading “International Shoe Case” the Supreme Court established that the ________ clause requires that a foreign corporation have sufficient contacts with a state before a state may exercise jurisdiction over the corporation. Under the _______ corporations that avail themselves of the protections of the state laws, should also suffer any reasonable burden that the state imposes.
Due Process, benefit theory 1074
Under the _________, the power to regulate interstate commerce is is given to the federal government. A state government may require a corporation to abide by their laws but cannot regulate interstate commerce.
Commerce Clause 1074
To aid the courts determination of whether a state may constitutionally impose its laws of a foreign corporation, courts have traditionally used the concept of ______. The 4 determining purposes are _______.
doing business, whether a corporation is subject to……
- a lawsuit in a state’s courts
- taxation
- qualify with the state to carry on its activities
- state regulation of the corporation’s internal affairs. 1074
a __________ is a foreign corporation that conducts most of its business in a state other other than the one in which it is incorporated.
pseudo-foreign corporation 1079
To promote justice and to prevent inequity, courts will sometimes ignore the separateness of a corporation and its shareholders by _________ thereby taking away the shareholder’s limited liability
piercing the corporate veil 1080
2 requirements must exist for a court to pierce the corporate veil:
- domination of a corporation by its shareholders; and
- use of that domination for an improper purpose 1080
(domination occurs when a shareholder causes a corporation to act for their personal benefit.)
Inadequate capitalization called _________, is proved when capitalization is very small in relation to the nature of the business of the corporation and the risks the business necessarily entails
thin capitalization 1080
Transfer of corporate assets to shareholders for less than their fair market value, called _______, also defraud creditors
looting 1081
