Business Law Chapter 31

Front 1

Sole proprietorship

Back 1

An unincorporated business owned by one person.

Front 2

If an individual runs a business without taking any formal steps to create an organization, they are automatically...

Back 2

..A Sole Proprietorship.

Front 3

A sole proprietorship is a ______ Tax entity.

Back 3

Flow through;means that owner must pay personal income tax on the profits. Business itself does not pay income tax.

Front 4

What is a D/B/A?

Back 4

Some states require sole proprietorships to register their business name if it is different from their own. DBA=Doing business as, certificate.

Front 5

Is the sole proprietorship responsible for all business debts?

Back 5

yes, the owner is personally liable.

Front 6

Sole proprietorship work best for small businesses without large capital needs because...

Back 6

...Of limited options for financing the business.

Front 7

Limited liability in a corporation

Back 7

A corporation protects managers and investors from personal liability for the debts of the corporation and the actions of others, but not against liability from their own negligence.

Front 8

Transferability of interest in a corporation

Back 8

Corporations provide flexibility for enterprise. Corporate stock can be bought and sold easily.

Front 9

Corporations have a ________ existence.

Back 9

Perpetual, they may continue even after the founders die.

Front 10

Corporations are _____ entities.

Back 10

Taxable; must pay income tax on their profits.

Front 11

Shareholders of a corporation must pay tax on _________.

Back 11

Dividends from the corporation. This means all profits are taxed twice, once from corporate, another from the shareholder.

Front 12

The corporation pays tax at a top rate of __%.

Back 12

35%, this is a federal tax rate;most states also levy a corporate tax.

Front 13

The shareholders are then taxed at the dividend rate of __%.

Back 13

15%.

Front 14

Partnerships are taxed at an individual rate of __%.

Back 14

35%

Front 15

True or false, on the Federal level a company may be considered a S corporation, but in State law it may be considered a regular corporation.

Back 15

True

Front 16

S Corporation

Back 16

Smaller corporation

Front 17

Shareholders of S Corps (S Corporation) have both the _______ and the _______.

Back 17

Limited Liability of a corporation, and the tax status of a partnership.

Front 18

C Corporation

Back 18

Regular Corporation

Front 19

How many classes of stock may an S corporation have?

Back 19

One, only one class of stock.

Front 20

In a S corporation, the maximum number of shareholders is...

Back 20

100, there can be no more than 100 shareholders in a S corporation.

Front 21

To qualify as a shareholder in a S Corporation, one must...

Back 21

Be a citizen of these UNITED STATES OF AMERICA.

Front 22

To be considered an S corporation...

Back 22

...All shareholders must agree that the company should be an S corporation.

Front 23

Close Corporation

Back 23

A company whose stock is not publicly traded. AKA Closely held/privately held corporation.

Front 24

A close Corporation offers protection of minority shareholders. This means...

Back 24

...that a minority shareholder wont be mistreated by the majority due to the inability to just sell their stock. Therefore, minority shareholders are protected.

Front 25

Transfer restrictions in a Closed Corporation mean...

Back 25

...That a statute typically permit the corporation to require that a shareholder first offer shares to the other owners before selling them to an outsider.

Front 26

Flexibility in a closed corporation often means that...

Back 26

Close corporations can typically operate without a board of directors, a formal set of bylaws, or annual shareholder meetings.

Front 27

Dispute resolution in Closed Corporations mean...

Back 27

That the shareholders are allowed to agree in advance that any one of them can dissolve the corporation.

Front 28

If shareholders in a closed corporation come to a stalemate about dissolving the company...

Back 28

The problem is solved by dissolving the corporation.

Front 29

In a close corporation, a share holder can ask a court to dissolve a close corporation if....

Back 29

...the other owners behave opressively or unfairly.

Front 30

Limited Liability Companies offer...

Back 30

The limited liability of a corporation and the tax status of a partnership.

Front 31

In an LLC, Members are not personally....

Back 31

Liable for the debts of the company.

Front 32

Tax status of an LLC

Back 32

Like a partnership, income flows through the company to the individual members.

Front 33

To organize an LLC, you must have....

Back 33

...A charter and you should have an operating agreement.

Front 34

LLCs can have members that are.....

Back 34

Corporations, partnerships, and nonresident aliens.

Front 35

LLCs can't issue ______ __________.

Back 35

Stock Options

Front 36

The members of the LLC must obtain the unanimous permission of the remaining members before....

Back 36

transferring their ownership rights.

Front 37

Does an LLC continue after members withdraw?

Back 37

Yes

Front 38

If an LLC Goes Public...

Back 38

Then it loses its favorable tax status and is taxed as a corporation, not a partnership.

Front 39

If a Corporations or LLC do not comply with the technicalities of the law,

Back 39

They may be held personally liable for the debts of the company.

Front 40

Deritative lawsuit

Back 40

a lawsuit in the name of the corporation against the managers.

Front 41

In short, many issues of law that are well established for corporations still remain ____ when it comes to LLCs.

Back 41

Foggy

Front 42

B Corporation and LLC

Back 42

Benefit organization, aka B Corporation, is one that has pledged to have in a socially responsible manner. People, Planet, Profits.

Front 43

Partnership

Back 43

An unincorporated association of two or more co-owners who operate a business for profit.

Front 44

Each co owner is called a

Back 44

general partner.

Front 45

In a partnership, each partner is

Back 45

personally liable for the debts of the enterprise.