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89 Cards in this Set
- Front
- Back
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Strict Compliance with Formation
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1) File articles of incorporation INCLUDE
2) Name of corporation, including the word: "association," "corporation," "incorporated." 3) Name and address of agent for service of process 4) Number of directors, plus names and addresses of initial directors and incorporators. 5) Capital structure: number of shares authorized, classes of stock, par value; 6) Purpose of corporation THEN 6) Properly execute and File with Commission along with fees. |
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Piercing the Veil: Generally
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Corporation looked upon as a separate legal entity unless used to commit fraud or achieve inequitable results.
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Agency: Generally
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A consensual fiduciary relationship wherein one person (the principal) authorizes another to act at his direction and on his behalf (the agent)
Director owes fiduciary duty to corporation. (Director is an agent of the corporation) |
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Partnership: Generally
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Association of two or more persons who share a business for profit.
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Partner's Profits and Losses:
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Each partner is entitled to be repaid for his contributions whether made through capital or labor to the partnership property, and to share equally in the profits and surplus remaining after all liabilities, including to partners, are satisfied.
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Organization of Corporations:
Formation |
DE JURE: (wholly valid corporation)
Formed when incorporators, either person or entity, sign and file articles of incorporation and certificate of disclosure with the State Corporations Commission and pay required fees. |
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Organization of Corporations:
Articles of Incorporation |
Must contain:
1) Corporate name (including association, incorporation, company or incorporated) 2) Name and address of agent designated for service of process. 3) Corporate purposes 4) Number of directors 5) Capital structure, including number of shares authorized, classes of stock and par value For de jure corporation, the articles of incorporation must be duly signed and filed with the corporations commission along with the required fees. Board must then hold a meeting to select officers and adopt by-laws. Once this takes place, shareholders are not personally liable because the corporation is then a legal entity. |
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Organization of Corporations:
Ultra Vires Doctrine: Generally |
Articles of Incorporation contain a brief statement of corporate purpose--the business that the corporation initially intends to conduct.
Common law rule of UV is that corporations are prohibited from acting beyond the scope of their purpose. |
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Organization of Corporations:
Ultra Vires Doctrine: AZ 3 times UV can be raised |
IN AZ: Exceeding purpose statement does not invalidate Ks, nor does it limit corporations conduct.
1) Proceeding by shareholder to enjoin proposed act 2) Proceeding by corporation against officers or directors 3) Proceeding by the state to enjoin the act. Claim of UV cannot be used to invalidate corporate act, K or transfer of any property by or to a corporation. Officers, directors and employees who cause the corporation to commit an ultra vires act may be held PERSONALLY liable. |
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Organization of Corporations:
Legal Significance of Formation |
Corporation is a separate legal entity that can sue, be sued, K, and hold property. Shareholders are not personally liable, generally, only liable for the price of their stock unless a court "pierces the veil"
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Organization of Corporations:
PreIncorporation Ks (Promoter Liability) |
When a party undertakes to incorporate and procure rights and capital for her corporation, party(ies) are treated as joint venturers, and will be held liable for Ks they enter into on behalf of the corporation. If K is silent as to promoter's liability, promoter is PERSONALLY liable. Corporation can approve a preincorporation K and by novation excuse the promoter's liability.
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Organization of Corporations:
Corporation De Facto: 4 factors |
Corporation:
1) Statutory basis for corporation to be incorporated 2) Good faith attempt to comply with statute (technical failures) 3) Corporation must hold itself out as a corporation and behave as such (board meetings, exercise corporate privilege, execution of bylaws) 4) BOTH parties must be looking to CORPORATION for performance of K. De Facto corporation valid as against all parties EXCEPT the state. |
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Corporation by Estoppel
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A K may also be enforced where there is a corporation by estoppel. Available ONLY in K actions (not tort) and requires that corporation have held itself out as corporation, and both parties looked to K for performance (K duty cannot be avoided by "corporation" for technical failures)
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Action by and Liability of Directors and Officers: Statutory Requirements--Directors / Board Actions
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In AZ, regular board meetings do not require notice. However, special meetings require at least two days notice of date, time and place of meeting.
IF Directors cannot all meet together, they must participate through some other means of communication by which all participating directors can simultaneously hear each other. An exception may be made by corp's bylaws. |
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Action by and Liability of Directors and Officers: Board Approval
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Only required when a fundamental corporate change is taking place. NOT day-to-day running of company level decisions. E.g. transfer of ALL or substantially all of the assets NOT in the ordinary course of business.
Board of Directors may ratify an act by a majority vote if a quorum is present. Quorum exists when a majority of all of the board is present, unless articles or bylaws provide otherwise. Directors may NOT vote by PROXY. |
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Action by and Liability of Directors and Officers: Shareholder Approval
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Where there is a disposition of all or substantially all the assets, there must be approval of the board's action by shareholders. BoD must adopt a resolution setting forth the proposed action for a vote at a shareholder's meeting. WRITTEN NOTICE of the meeting must be sent to each shareholder of record entitled to vote.
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Duty of Care: Diretors
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Director must act in GOOD FAITH, with a REASONABLE BELIEF that her actions are in the BEST INTERESTS of the corporation. and act with the care that a REASONABLY PRUDENT PERSON in a LIKE POSITION would exercise.
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Duty of Care: Directors: Misfeasance
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If Director's misfeasance causes a loss, they will be liable unless they are protected at common law by the BUSINESS JUDGMENT RULE.
The BJR says that a director is not liable if a decision was made in GOOD FAITH, was INFORMED and had a RATIONAL BASIS. Decision will not be undone if there is a rational basis for the director's decision, even if the corporation suffers as a result. |
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Duty of Loyalty: Generally
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A director and an officer owe the corporation a duty of loyalty and will not be permitted to profit at the expense of the corporation or to take advantage of corporate opportunities.
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Duty of Loyalty: Corporate Opportunity
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Duty of Loyalty prevents director from diverting corporate business or opportunities IN THE CORPORATION'S LINE OF BUSINESS without first giving the corporation an opportunity to act on the opportunity. IF corporation has a LEGITIMATE EXPECTANCY in the opportunity, then the D may not take the opportunity unless the CORPORATION DECLINES IT.
Courts look to corporate purpose in determining whether something was a corporate expectancy. |
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Remedy:
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Director's action may be ratified by the remaining disinterested directors on the Board after full and fair disclosure, which will relieve D of any liability to the corporation. If actions NOT ratified, then D will be required to disgorge her profits on the transaction since these were profits that she should have secured for the corporation had she complied with her duty of loyalty.
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Officers: Status
Actual agency & Apparent agency |
Officers of a corporation are the corporation's agents, and if acting with authority can bind the corporation. There are two types of agency authority.
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Officers: Status
Actual Authority |
Actual Authority: May be either express or implied.
Express authority exits when an officer is given authority in the corproations by laws or articles or through an express corporate resolution. Implied authority exists by virtue of the title held. "President" traditionally connotes a person who is able to bind the corporation in the ordinary course of business if the corporation regularly deals in that type of business. |
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Officers: Status
Apparent Authority |
Exists when the corporation holds the officer out as having the authority to act, and it is reasonable for the other party to believe that the authority exists. Apparent authority makes a K binding even though actual authority did not exist.
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Officers: Status
Duty of Care |
Officer's standard of care is similar to the standard for directors. Officer owes the corporation a duty of care. He must carry out his duties in good faith and do what an ordinary prudent person in a similar position would do. He must act in a manner he reasonably believes to be in the best interests of the corporation.
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Shareholder Direct Action
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Shareholder may pursue direct action against officers and/or directors if both she and the corporation were harmed by their action. To succeed, shareholder must show that she suffered harm from a breach of duty owed to her individually as a shareholder.
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Shareholder Derivative Action
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A derivative suit is brought by a stockholder on behalf of the corporation. To bring a derivative action in AZ, the shareholder must have owned shares at the time of the breach. Stockholder must have made a demand on the directors that the corporation bring suit, unless it would have been futile to do so. IF the directors were all wrongdoers, it would be futile to demand the directors to bring a cause of action against themselves. In AZ, the corporation will bear its own expenses, including attorney's fees in a derivative action. If the stockholder loses, then she may be required to apy the winning party's expenses, including attorney's fees.
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Rights and Liabilities of Shareholders
Declaration of Dividends |
As a general rule, the declaration of dividends is within the discretion of the board of directors. It requires a very strong case to induce a court of equity to order the directors to declare a dividend. Only when ABUSE OF DISCRETION is shown will courts substitute their own judgment and order a distribution of dividends. An abuse of discretion is found only when there is evidence of FRAUD or BAD FAITH.
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Rights and Liabilities of Shareholders
Declaration of Dividends: Abuse of Discretion |
-Relatively high compensation compared to dividends paid, intense hostility, freeze-out, or other oppression of minority shareholders. The fact that surplus exists to pay dividends is generally an insufficient basis on which to compel payment.
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Fundamental Corporate Changes:
REQUIRES |
Approval from BoD and notice to shareholders of a meeting is required when fundamental corporate change occurs. A fundamental corporate change occurs when there is a merger, an amendment to the articles, a dissolution, a disposition of all or substantially all of the corporation's property outside the usual and regular course of business.
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Fundamental Corporate Changes:
Dissolution: Ct. of Equity |
Court of equity has no inherent power to dissolve a corporation.
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Fundamental Corporate Changes:
Dissolution: Involuntary |
AZ provides that a corporation may be dissolved involuntarily in an action brought by
1) the AG 2) Shareholder 3) Creditor Any shareholder may apply to court for liquidation of corporation IF: 1) the directors are deadlocked in the management of the corporation, shareholders are unable to break the deadlock and corporation is suffering or threatened with irreparable injury. 2) Shareholders are deadlocked in voting power and have failed for at least two consecutive annual meetings to elect successors to the directors whose terms have expired or would have expired on the election of successors. 3) Directors have acted or will act in a manner that is illegal, oppressive or fraudulent. 4) Corporate assets are being wasted, misapplied, or diverted for non-corporate purposes. |
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Fundamental Corporate Changes:
Removal of Directors |
AZ: Directors can be removed at any time with or without cause by shareholders unless articles of inc. provide that removal may ONLY be for cause.
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Forms of Business
Corporation vs. Partnership |
Partnership: Generally no entity status, individuals remain personally liable and accountable for debts and obligations of ownership, single taxation. Interest non-transferable, each partner has a voice in management, and dissolution occurs when partner dies or leaves partnership.
Corporation: Double taxation, entity status, shareholders not personally liable for more than the value of their stock, shareholders rights freely alienable, no management rights, corporation of indefinite duration. |
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Forms of Business: Corporation
Shareholders Right / Duties |
1) Elect BoD to manage business
2) Attend meetings and vote on fundamental corporate changes. 3) Can remove directors with or without cause unless articles/bylaws say otherwise. 4) Right to inspect books and records of corporation on written demand and in good faith 5) Votes on all stock held 6) Investment protected to the extent that a shareholder not personally liable for the acts and debts of corporation unless there are grounds to pierce the corporate veil. |
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Forms of Business: Corporation
Directors Duties |
Manage business of corporation. Governed by duty of due care and duty of loyalty.
Duties include 1) Setting corporate policy 2) supervising officers 3) Declaring distributions 4) Recommending fundamental corporate changes. |
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Forms of Business: Corporation
Officers Duties |
Officers have the same duty of care and loyalty that Directors do, but serve as AGENTS of corporation who can bind the corporation.
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Forms of Business: LLP
Partnership |
LLP can be general or limited partnership, thus, management can be centralized like a corporation or spread among the partners. However, LLP is like a corporation in that partners are not personally liable for business obligations. Instead each partner is responsible to the extent of their contribution and part of the business. Statutory formalities apply.
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Forms of Business: LLP
Partners' Liability |
Partners are liable for their own wrongful acts, but not for obligations of the group. There is no protection against personal liability as there is in a corporation
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Forms of Business: Corporations vs. Partnerships:
Capitalization Consideration |
Corporation: Risk of losing the protection of corporate entity and subjecting shareholders to personal liability
Court can pierce the veil IF shareholder has abused the privilege of incorporation and fairness demands that the shareholder be personally liable. EX: When shareholder treats the corporation as alter-ego (fails to respect the corporate entity) OR by "undercapitalization" (failing to invest enough to cover the prospective liabilities when the corporation was formed. Partnerships are more flexible than corporations as partnership can allocate profits in accordance with contributions. |
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Taxation: Corporations vs. Partnerships
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Corporation has double-taxation (tax on profits, then taxed on distributions)
Forming an "S Corproation" can avoid tax at the entity level, and requires fewer than 75 stockholders, all shareholders being human and ONE class of stock. Partnership: Has flow-through taxation---tax flows through to the partners who are taxed on their distributions. Distributions are made based on partner's share of investment. |
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S. Corporation:
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Avoids personal liability AND double taxation, in corporate form.
S corp. taxed like a partnership, as only investors are taxed on their distributions which are made based on their share of investment. S is limited to 75 shareholders (who generally must be individuals, although they can be marital parties) and ONE class of stock. S corporation is desirable when losses are expected for the first year as it allows owners to offset the losses against their current income. |
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Close Statutory Corporation
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May be operated with less formality than other corporations, thus avoiding undue formality in the daily operations.
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Forms of Business:
Close Corporations |
Refer to capital units rather than shares of stock.
Incorporators must apply to AZ Corporations Commission and satisfy certain requirements. Incorporators must apply, pay fees, and file articles of incorporation which include: 1) Corporate name containing words "Arizona Close Corporation" or an abbreviation 2) Name and address of corporate managers 3) Names addresses and amounts of initial contribution of capital units to each original investor 4) Aggregate amounts of initial capital units to be paid to the corporation 5) Name and address of agent for service of process. NO NEED TO STATE CORPORATE POWERS OR PURPOSE. |
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Forms of Business:
Close Corporations: Management: |
Operated on a daily basis by a manager. Managers have the same rights and duties as a director or officer of a regular corporation. Investors (shareholders) have rights in setting policies and major procedures. Unanimous consent of all outstanding capital units is required to amend the articles to change relative rights such as voting, dividend distribution and restrictions on transfer.
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Forms of Business: Close Corporations
Financial Structure: Investors Rights |
Unless stated to the contrary in the Articles, the relative rights among investors is proportionate to the dollar amount of the capital units. If the incorporaters wish to deviate from this assumption and provide variable rights, they must include such a provision in the articles.
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Forms of Business: Close Corporations
Financial Structure: Piercing the Veil |
If the corporate entity is not respected or is undercapitalized, the corporate "veil" could be pierced subjecting the incorporators to personal liability. To preserve corporate veil, the incorporators must hold a meeting and elect a manager and draft bylaws.
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Forms of Business: Close Corporations
Financial Structure: Avoiding undercapitalization |
Careful evaluation of initial contributions to ensure sufficient assets to cover prospective costs and liabilities. Assets include combination of product, equipment, cash and services.
Services ARE valid consideration. |
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Forms of Business: Close Corporations
Financial Structure: Shareholders |
Shareholders must generally be individuals and not corporations. S Corporations allow for only one class of stock. If shareholder accepts preferred stock in exchange for the investment, the ability to use S-status will be restricted.
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Conversion from Close-Corporation
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Close corporation may convert its status to that of a regular corporation by amending its articles to delete all references to the term "close corporation" The amendment must be adopted by 2/3 vote of the voting rights, unless the articles specify otherwise. The amended articles must provide for CANCELLATION OF CAPITAL UNITS, and the basis on which SHARES will be issued. Corporation must substantially comply in good faith with the requirements of the AZ Business Corporation Act.
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LLCs: Formation
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LLC offers limited liability of a corporatoin with the flow-through taxation of a partnership. Incorporators must sign and file articles of organization with the state. Name must include LLC and articles must include the date, if any of dissolution.
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LLCs Management
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Management decisions require majority vote, yet management may be vested in a manager or the members. To achieve major changes, amend the articles or the operating agreement, agreement of all members is required.
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LLC Financial Structure
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Determined on the basis of a member's contribution. Profits and losses allocated on the basis of contribution.
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Partnership and Agency:
Liability of Principal (PS) for Acts of Agent (A): Respondeat Superior / Vicarious Liability |
PS will be liable for torts committed by A if PS/A relationship exists; and, the tort was committed in the scope of the relationship.
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Partnership and Agency:
Liability of Principal (PS) for Acts of Agent (A): Respondeat Superior / Vicarious Liability REQUIRED RELATIONSHIP: ABC |
Assent: Agreement (formal or informal) between PS and A.
Benefit: A's conduct is for PS's benefit Control: PS has right to control A. |
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Partnership and Agency:
Liability of Principal (PS) for Acts of Agent (A): Respondeat Superior / Vicarious Liability UNIQUE SITUATIONS: |
Sub-Agent: No assent or control by PS, no liability for sub-agent's tort.
Borrowed Agent: Probably not control, no liability with two exceptions: --> Ultra-hazardous activities: Cannot delegate liability to independent contractor and absolve oneself of liability. --> Estoppel: Hold out independent contractor with the appearance that he is an agent, you will be liable as an SP. |
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Partnership and Agency:
Liability of Principal (PS) for Acts of Agent (A): Respondeat Superior / Vicarious Liability SCOPE: Factors |
1) Conduct of the kind A hired to perform & tort occurred in scope of performance of duties.
2) Intended to Benefit SP/Detour or Frolic: Detour mere detour from assigned task, vs. frolic--new and independent journey (outside scope) 3) Intentional torts: Unless conduct was SPECIFICALLY authorized, NATURAL from employment, or MOTIVATED BY DESIRE TO SERVE PS. |
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Liability of PS for Ks entered by A:
ACTUAL EXPRESS AUTHORITY |
PS is liable for Ks entered by A, IF:
-Actual express authority: PS used words to give A authority. May be oral and private (narrowly construed), Equal dignities doctrine: If K must be under seal, authority to enter must be under seal. Revocation of authority may be made by: Either Party, or on death/incapacity of PS, but authority will NOT terminate on death if A has a durable power of atty. |
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Liability of PS for Ks entered by A:
ACTUAL IMPLIED AUTHORITY |
A reasonably believes that PS has given him authority through:
Necessity: Implied authority to do all tasks necessary to accomplish an express task Custom: Implied authority to do all tasks customarily performed with A's title or position. Prior Dealings: Built up understanding of authority through prior dealings. |
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Liability of PS for Ks entered by A:
Apparent Authority |
PS has cloaked A with the appearance of authority and 3rd Party relies on appearance of authority:
1) Secret limiting instruction: A has actual authority, but PS has secretly limited it and A acts beyond limitation 2) Lingering Authority: Actual authority has been terminated, but A continues to act on PS's behalf, PS liable unless he has provided notice to all potentially deceived parties. |
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Liability of PS for Ks entered by A:
Ratification |
Authority granted after K has been entered if PS has knowledge of all material facts regarding the K and PS adopts the K expressly or impliedly (by accepting its benefits)
NOTICE THE RETROACTIVE EFFECT! |
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Liability of PS for Ks entered by A:
Expand / Limit Authority "Statement of Authority" |
Statement of Authority: A partnership may expand or limit a partner's ability to enter into transactions by filing a "statement of authority" with the Dept. of State.
--> Real Property: A grant of or limit on authority to transfer real property is good only if in addition to DOS, it's recorded at county recorder's office where property is located. |
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Liability of PS for Ks entered by A:
Expand / Limit Authority Buyer is Deemed to Know: |
Other Transactions: If statement of authority grants partner power to enter transactions other than real property: Conclusive for a BFPV (one who has not notice authority is lacking--e.g. subsequently partners voted and took away grant of authority.
Statement of DENIAL: Partner listed in a statement can limit his authority by filing a Statement of Denial with the DOS. |
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Liability of PS for Ks entered by A:
General Rules of Liability on K's: |
If NO authority, PS is not liable on K, but A is.
If authority, then PS is liable on K, and A is not EXCEPT: IF PS partially disclosed (only identity of PS is concealed) or undisclosed (FACT of principal concealed) the authorized agent MAY be liable at the election of the 3rd party. |
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Liability of PS for Ks entered by A: Duties A Owes to PS:
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Duty to exercise reasonable care
Duty to obey reasonable instructions Duty of loyalty: --> NO self-dealing (A cannot receive benefit to PS's detriment) --> NO usurpation of opportunity --> NO secret profits. REMEDY: Losses caused by breach and A may be made to disgorge profits. |
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PARTNERSHIPS:
Formation |
No formalities required.
Partnership MAY file registation statement with DOS (filing a prerequisite for filing statement of authority, denial or dissolution) |
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Partnership: Definition
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Association of two or more persons carrying on as co-owners of a business for profit.
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Partnership: Profit-Sharing
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Prima facie evidence of a partnership (e.g. sharing of gross receipts) does not create a presumption.
Limited Partnerships require filing of a LP certificate. |
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Liability of Partnerships to 3rd Parties
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Agency principles apply:
1) Partners are As of the partnership for carrying on ordinary partnership business. 2) Partnership is bound by torts committed by partners in the scope of partnership business. 3) Partnership is bound by contracts entered by partners with authority to do so. |
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Partnerships: Joint and Several Liability for Debts of Partnership
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1) PS creditor must exhaust partnership resources before recovering from partners individually
2) IF partnership was liable, then there's a right to indemnification from the partnership and contribution from other partners. 3) Incoming partners have no liability for pre-existing debts, but capital contributed by an incoming partner to the partnership may be used to satisfy pre-existing debts. 4) Outgoing partner remains liable to existing creditors, even on subsequent debts, for one year or until notice of withdrawal has been given to all known and potential creditors. -->Outgoing partner can protect himself by filing a statement of dissociation with the DOS (effective 90 days from filing) 5) LIMITED Partners are only liable to the extent of their capital contribution. |
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Partnerships:
Partnerships by Estoppel |
One who represents to a third party that a partnership exists, will be liable as if a partnership DOES in fact exist. (Partnership will be bound too, if allowed a third party to hold themselves out as partnership)
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Rights and Liabilities between Partners
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Partners have fiduciary duty to one another. Partnership cannot eliminate these duties.
1) Duty of loyalty: No self-dealing, no usurping, no secret profits. 2) Duty of good faith and fair dealing 3) Duty of Care; Partner must refrain from grossly negligent or reckless conduct or intentional misconduct (no liability to other partners for ordinary negligence). 4) Partner must provide (a) without demand, information about the partnership reasonably required for another partner to exercise her rights under the partnership agreement. (b) On demand, any other information about the partnership unless it's unreasonable. 5) Partners can inspect the books and get formal accounting when reasonable. 6) A partner can sue partnership or another partner during the life of the partnership, (SOL begins to run immediately) even if during the life of hte partnership. |
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Partnership Property:
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1) Property acquired in the name of the partnership is partnership property
2) Property acquired in name of partner is partnership property if instrument transferring title suggests being acquired in partnership 3) Property purchased with partnership assets is presumed to be partnership property, although th epresumption is rebuttable. 4) Property acquired in name of partner without using partnership funds presumed to belong to partner if instrument transferring title does NOT suggest partnership acquiring. |
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Partner's Rights in Partnership Property
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1) Specific partnership property: Individual partners may not transfer without partnership authority
2) Share of profit and surplus: Personalty which may be devised. 3) Share in management: Partnership asset which individual partner may not transfer. |
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Partnership Management:
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Absent an agreement, each partner is entitled to equal control.
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Partnership: Salary
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Absent an agreement, partners get no salary.
Exception: Partners get compensation for helping to wind up partnership business. |
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Partner's Share of Profits / Losses
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Absent an agreement, profits are shared equally.
Absent an agreement, losses are shared equally. |
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Partnership: Admission of a new partner
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Under the UPA, a new partner requires unanimous consent.
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Transfer of Partnership Realty
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1) Names in title and conveyance must match (title and conveyance instruments both in partnership name)
2) If partner lacked the authority to transfer, then partnership may be able to recover property from INITIAL transferee. (A) If conveyance gives indication that property might be partnership's, Partnership can get back from transferee if partner had no authority to convey. 3) If transferee transfers property to another, the other person is protected as long as they were a BFPV. |
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Partnership: Dissociation
Defined: |
Occurs when partner ceases to be associated with partnership
1) Express 2) Expulsion, Death or Incapacity 3) Appointment of Receiver 4) Distribution of All of Partner's Interest |
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Partnership: Wrongful Dissociation
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Constitutes a breach of the partnership agreement.
1) If partnership for definite term or particular undertaking, it's a breach to walk away. 2) If it's a partnership at-will: Can walk away with no breach. |
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Partnership: Consequences
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Dissociating partner: If Partnership continues in business, then partnership must buy out liquidation or going concern without dissociater, whichever is greater.
Consequences for Partnership: Dissociater retains ability to bind partnership for a year after dissociation. Partnership can prevent this by giving notice to all known and potential creditors and/or filing a statement of dissociation with the Dept. of State to put all potential creditors on notice. |
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Partnership Dissolution:
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Any material change like death, withdrawal or insolvency of a partner.
Termination: Real end of partnership Winding Up: Remaining partners liquidate partnership assets to satisfy partnership creditors. Partner who wrongfully dissociated has no right to wind up. Partners compensated for winding up. Partnership's liability for winding up: 1) PS retains liability on all Ks entered prior to wind-up. 2) PS retains liability on new business transactions until --> Notice of dissolution has been given to actual and potential creditors --> Filing statement of dissolution with DOS. |
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Partnership Dissolution:
Priority of Distribution |
Outside creditors, inside creditors
Capital contributions Profits or losses. |
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Partnership Dissolution:
Creditors Rights: |
Partnership creditors have priority on partnership assets.
If individual creditors and partnership creditors both assert claims against partner's separate assets, BOTH have equal claims. |
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Other Entities: Always Liable for Tort
General Partnership |
All partners jointly and severally liable for all partnership obligations.
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Other Entities:
Limited Liability Partnership |
Member vicarious tort liability: none unless directly supervising
K liability: None for K member or others, only LLP liable. Must file an annual report. |
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Other Entities:
Limited Partnership |
General partners jointly and severally liable.
No liability AT ALL for limited partners, unless they have control. --> Safe Harbors: Employed by limited partner, advising general partner, guaranteed note: Okay to do so without losing limited partner protection. |
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Limited Partner Liability:
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-->IF limited partner does MORE: then apply the reliance test: did someone rely on the reasonable belief that the limited partner was a GENERAL partner?
1) Conduct 2) Let name be used in company title |
