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Business Law II > Unit 2 > Flashcards

Unit 2 Flashcards

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1
Q

a business with a only ONE owner is a ______

A

sole proprietorship 991

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2
Q

A sole proprietor has a _____ form of liability, thus sole proprietorship is a _____ form of business.

A

high, risky 991

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3
Q

2 reasons why someone might start a sole proprietorship?

A
  1. simple and inexpensive to startup

2. most people don’t consider the business form decision 991

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4
Q

legally, a sole proprietorship _____ be transferred to another person …..

A

cannot, the buyer of the soul proprietorship business and must create his own form of business to continue the business. 991

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5
Q

a _____ has two or more owners called _____.

A

partnership, partners 991

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6
Q

like a sole proprietorship, a partnership is not a ________ entity

A

tax-paying, The partners must claim the business income under their individual federal income tax returns 991

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7
Q

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.

A

Limited liability partnership (LLP) 992

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8
Q

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.

A

Limited partnership, Limited, No 992

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9
Q

_________ 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 _________

A

Limited liability limited partnership (LLLP), LLLP, secretary of state. 993

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10
Q

a ______ is owned by shareholders who elect a board of directors to manage the business

A

Corporation 993

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11
Q

The _____ has the ability to attract the largest amount of capital because shareholders avoid ______ and shares are easily _____/____

A

corporation, unlimited liability, transferred/liquidated 993

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12
Q

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.

A

S Corporation status, partnership 993

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13
Q

S Corporation status is limited to ______, thus ability to raise capital is ______

A

100 shareholders, severely limited 993

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14
Q

The _______ permits professionals such as accountants, physicians, and dentists to incorporate their professional practices

A

Professional corporation 993

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15
Q

while professional shareholders have no personal liability for the obligations of the professional Corporation, they retain ________ to their clients for their ___________

A

Unlimited liability, professional malpractice 994

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16
Q

The ____ is the body of law that governs partnerships absent a written contract.

A

The Revised Uniform Partnership Act (RUPA) 996

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17
Q

The RUPA defines a partnership as an “______________”

A

1) Association of 2 or more persons ….
2) …carrying on a business…
3) …co-ownership….
4) …for profit 997

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18
Q

2 factors in determining co-ownership

A
  1. Sharing of profits

2. Sharing of management of the business 998

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19
Q

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

A

Joint venture 999

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20
Q

three elements of a purported partner

A
  1. a person purports to be or consents to being represented as a partner of another person or partnership.
  2. a third-party relies on the representation.
  3. the third-party transacts with the actual or purported partnership 1001
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21
Q

a ______ is an order charging all or part of the partners transferable partnership interest with payment of the unsatisfied amount of the judgment

A

Charging order 1006

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22
Q

A partner’s partnership interest are these 2 main things

A
  1. the partners’ transferable interest

2. the partners’ management and other rights 1006

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23
Q

a partner who transfers some or all of their interests _______ their management and other rights within the partnership.

A

doesn’t lose 1007

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24
Q

In a _______ a _____ must not act in competition of the _____ nor can they personally profit from the _____ without consent of the ______

A

partnership, partner, partners 1012

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25
Q

the ______ requires a partner to undertake his share of responsibility for running the day-to-day operations of the partnership business

A

duty to serve 1014

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26
Q

The _______ requires a partner make decisions that they believe are in the best interest of the partnership

A

duty of care 1014

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27
Q

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.

A

duty to account 1014

28
Q

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.

A

indemnified 1014

29
Q

unless there is an agreement, partners share partnership profits ______, according to the ______, and not their __________.

A

equally, number of partners, capital contributions 1015

30
Q

In a partnership or limited liability partnership, every partner has ______ as a _______ and may make contracts that bind the partnership.

A

implied authority, general manager of the business 1018

31
Q

A partners express and implied authority together constitute their _______

A

actual authority 1018

32
Q

a _______ has an inventory; that is, its regular Business is buying and selling merchandise, such as retailing, wholesaling, importing, or exporting.

A

trading partnership

33
Q

a partner for trading partnership has ______ and _______ to _____ for the partnership.

A

implied and apparent authority, borrow money 1019

34
Q

a _________ has no substantial inventory and is usually engaged in providing services.

A

nontrading partnership 1019

35
Q

a partner for a nontrading partnership has _________ or _____ to borrow money for the partnership.

A

no implied or apparent authority 1019

36
Q

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 _________.

A

within the normal course of business. 1019

37
Q

the RUPA requires that any partnership not in the ordinary not in the course of ordinary business be _________, absent a contrary agreement.

A

approved by all partners 1020

38
Q

an innocent partner of an LLP has ________ for the professional malpractice of his partners.

A

no liability 1023

39
Q

The LLP itself ______ for the tort of a wrongdoing partner or employee under the doctrine of respondeat superior.

A

is liable 1023

40
Q

partners are _____ and ____ liable for partnership obligations, whether based in contract or tort.

A

jointly, severally 1024

41
Q

for LLP partners, only the ____ is liable on contractual obligations, and only the ____ may be sued on such a claim.

A

LLP 1024

42
Q

for tort allegation only the ____ as well as the _____ are liable.

A

LLP, partner who committed the tort 1024

43
Q

Early American corporations received _______ from state legislatures, however, few were granted these because incorporation was considered a privilege.

A

Special Charters 1071

44
Q

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.

A

for-profit corporations 1071

45
Q

General Electric is an example of a ___________ because it’s shares are generally available to public investors

A

publicly held corporation 1071

46
Q

Corporations with very few shareholders who’s shares are not available to the general public are called ___________

A

close corporations 1072

47
Q

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.

A

subchapter S corporation 1072

48
Q

S corporations benefit with taxes because they avoid the ________ penalty.

A

double tax (double because typical corporations are taxed and then the individual shareholders are also taxed) 1072

49
Q

The IRS requires S Corporations to limit their shareholder to ______ or fewer shareholders.

A

One Hundred 1072

50
Q

__________ 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.

A

Not-for-profit corporations 1072

51
Q

___________ perform ________ and business functions. Examples include a municipalities, public school corporations, and water companies.

A

government-owned corporations, government 1072

52
Q

To become a corporation, a business must incorporate by complying with an _______

A

incorporation statute 1073

53
Q

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.

A

The Model Business Corporation Act (MBCA) 1073

54
Q

Incorporation under state law requires delivering articles of incorporation to the

A

Secretary of State 1073

55
Q

Most states have statutes governing nonprofit corporations based on the revised ___________.

A

Model Nonprofit Corporation Act (MNCA) 1073

56
Q

The circumstances under which states may impose their laws on a business incorporated within another state is determined by the law of ________.

A

foreign corporations 1074

57
Q

A corporation is a _______ in the state that has granted its charter. It is a ______ in all other states in which it does business.

A

Domestic corporation, foreign corporation 1074

58
Q

A corporation domiciled in one country is an _______ in other countries in which it does business.

A

alien corporation 1074

59
Q

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.

A

Due Process, benefit theory 1074

60
Q

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.

A

Commerce Clause 1074

61
Q

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 _______.

A

doing business, whether a corporation is subject to……

  1. a lawsuit in a state’s courts
  2. taxation
  3. qualify with the state to carry on its activities
  4. state regulation of the corporation’s internal affairs. 1074
62
Q

a __________ is a foreign corporation that conducts most of its business in a state other other than the one in which it is incorporated.

A

pseudo-foreign corporation 1079

63
Q

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

A

piercing the corporate veil 1080

64
Q

2 requirements must exist for a court to pierce the corporate veil:

A
  1. domination of a corporation by its shareholders; and
  2. use of that domination for an improper purpose 1080

(domination occurs when a shareholder causes a corporation to act for their personal benefit.)

65
Q

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

A

thin capitalization 1080

66
Q

Transfer of corporate assets to shareholders for less than their fair market value, called _______, also defraud creditors

A

looting 1081

Business Law II (7 decks)

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