Business Law Final

Front 1

Four important factors which must be considered when deciding which form of business organization is suited

Back 1

1. Ease of creation
2. liability of owners
3. tax considerations
4. need for capital

Front 2

Sole proprietorship definition

Back 2

One person who does business -the owner is the business

Front 3

simplest form of business

Back 3

sole proprietorship

Front 4

_________ of american businesses ar ein this form

Back 4

over 2/3

Front 5

Advantages of sole proprietorships

Back 5

Owner (proprietor) receives all the profits.
easy to form
inexpensive to form
flexible- one person makes all the decisions
taxes : sole proprietor pays only personal income taxes on business's profit. No separate income tax, like corporation.

Front 6

Disadvantages of sole proprietorships

Back 6

owner bears all of the losses and liabilities individually
potential unlimited liability of owner
no continuity on death of proprietor: when owner dies business dies.
capital raising capability is limited to personal funds and loans

Front 7

Franchises

Back 7

an arrangement in which an owner of a trademark, trade name or copyright licenses to use the trademark trade name or copyright in the selling of goods and services

Front 8

a franchise is _________ a separate form of business organization, in the way that a sole proprietorship corporation or partnership are business organizations. it is a business ARRANGEMENT

Back 8

NOT

Front 9

Franchisor

Back 9

seller of the franchise

Front 10

franchisee

Back 10

purchaser of the franchise

Front 11

up to ____% of retail sales in US are the result of franchises

Back 11

40%

Front 12

3 types of franchises

Back 12

1. Distributorships
2. Chainstyle business operation
3.manufactoring or processing plant operation

Front 13

Distributorships

Back 13

franchisor licenses a dealer to sell its product (car dealerships)

Front 14

Chain-Style business operation

Back 14

Franchisee generally required to follow certain standardized methods of operation, or purchase materials supplies through franchisor

Front 15

Manufacturing or processing plant operation

Back 15

essential ingredients or formula supplied

Front 16

Franchise contract

Back 16

Terms, conditions, rights, duties of parties

Front 17

Franchise termination

Back 17

set time may be specified in the contract
may be trial period
contract may provide for termination "for termination"
wrongful termination lawsuits are reason for much franchise litigation;

Front 18

General Partnerships

Back 18

Two or more persons to carry on a business or profit

Front 19

____________are co-owners of the business

Back 19

PARTNERS

Front 20

________ applies to partnerships because each partner is considered the agent of the other partners

Back 20

Agency principles

Front 21

Difference between partnership and traditional agency relationships

Back 21

the ownership's interest

Front 22

When does a partnership exist

Back 22

1. sharing of profits and losses
2. joint ownership of the business
3. equal right in the management of the business

Front 23

Sharing in _______ and ______ indicate a partnership

Back 23

profits, losses

Front 24

Partnerships treated as an entity

Back 24

law now provides partnership may sue and be sued in the name of the partnership, hold title to real property, file bankruptcy

Front 25

Partnerships treated as an Aggregate

Back 25

For tax purposes income and losses are "passed through" to the partners on their individual tax returns

Front 26

Partnerships are not taxed like a corporation why?

Back 26

Because the tax "passes through" to the partners and they pay an individual income tax on partnership profits on their individual tax returns

Front 27

Partnership agreements may be established in three ways:
1.
2.
3.

Back 27

1. Oral
2. Written
3. Implied

Front 28

Terms included in a partnership agreement

Back 28

Basic structure
contributions
management and control
Sharing of profits (proportion)
Dissociation and dissolution

Front 29

Benefits to having a written agreement

Back 29

Duration established: may be specified or have no fixed term

Front 30

Partnership by estoppel

Back 30

no partnership agreement but acting as if there is a partnership- law may presume partnership

Front 31

Rights of general partners in partnership

Back 31

management
interest
compensation
inspection
accounting
property rights

Front 32

right to management

(in partnership)

Back 32

in a general partnership all partners have equal rights in the management of partnership business

Front 33

right of interest

(in partnership)

Back 33

each partner is entitles to proportion to profits and losses as stated in the agreement: if not specified will be shared equally.

Front 34

right of compensation

(in partnership)

Back 34

agreement may provide for additional compensation

Front 35

right of inspection

(in partnership)

Back 35

to inspect books and records

Front 36

right of accounting

(in partnership)

Back 36

may be requested or court ordered

Front 37

property rights

(in partnership)

Back 37

Interest in the firm and interest in partnership property depends on name property acquired and in what capacity

Front 38

two Duties of partnership

Back 38

Fiduciary Duties
& Authority Duties

Front 39

Fiduciary Duties

(in partnership)

Back 39

Duty of loyalty and care owed by partner to the partnership and the other partners

Front 40

Authority Duties

(in partnership)

Back 40

Agency principles apply, implied powers (authority) probably broader than traditional agency

Front 41

Partnerships are _______ liable for debts of partnerships

Back 41

personally

Front 42

Partnership Dissociation

Back 42

a partner leaves or ceases to be associated with the partnership

Front 43

Two stages of Termination of a partnership

Back 43

1. dissolution
2. Winding up

Front 44

Dissolution

Back 44

by acts of the parties, operation of law, judicial decree

Front 45

Winding up

Back 45

once dissolution has occurred winding up of partnership business begins payment of debts, return of capital contributions and distributions of profits to partners (if any)

Front 46

Buy-Sell Agreement

Back 46

Provides for one or more of the partners to buy the other should one partner choose to leave

Front 47

Limited Liability partnerships: LLPS

Back 47

Designed for professionals who do business as partners, such as attorneys accountants, family businesses as well.

Front 48

advantages of LLPS

Back 48

limits personal liability of all partners for acts of other partners, allows tax advantages of partnership (pass-through)

Front 49

Formation needs:

Back 49

Must file with secretary of state, and use "LLP" in name

Front 50

Limited Partnerships

Back 50

limits liability of SOME of the partners the limited partners only

Front 51

Limited partnerships consists of one _____ and one _____.

Back 51

General Partner and or more Limited partners

Front 52

General Partner

Back 52

Manages and handles day to day responsibility
has full responsibility for debts as well.

Front 53

Limited partner

Back 53

does not and can not manage and is not personally liable for partnership debts beyond his or her investment

Front 54

Formation of limited partnership

Back 54

Statutory requirements:RULPA
must file certificate with secretary of state

Front 55

Liability of limited partners

Back 55

limited to the capital which they contribute so long as they do not participate in management of the partnership

Front 56

LLLP: Limited Liability Limited Partnership

Back 56

special type of limited partnership
Liability is limited to what they invest

Front 57

LLCs: Limited Liability Companies

Back 57

Governed by state statutes

Front 58

Structure of LLC

Back 58

Owners are called "members" similiar to shareholders in a corporation in that members have limited liability

Front 59

LLC Formation

Back 59

"Articles of Organization" must be filed with the secretary of state
Business's name must include LLC or "Limited Liability company"

Front 60

advantages of LLC

Back 60

Liability of members is limited to their original investments
Flexibility with regard to business operation and management
Flexibility with choice of tax status

Front 61

Disadvantages of LLC

Back 61

not uniform from state to state
lack of case law because they are so new

Front 62

two types of management of LLC

Back 62

Member-managed
Manager-managed

Front 63

Member-Managed

Back 63

All members participates

Front 64

manager-managed

Back 64

more like a larger corporation; a group of members designated to managed the LLC

Front 65

Dissociation and dissolution of LLC member

Back 65

similar to partnerships: member has the power to dissocite, but may not have the right
-Loses right to participate in LLC

Front 66

Nature of the Corporation

Back 66

One or more "natural Persons" identified under a common name
governed by state law-varies widely
Liability is separate and apart from its shareholders

Front 67

Limited liability of shareholders

Back 67

key advantage of corporate form of business
normally, shareholders not personally liable for obligations of the corporation

Front 68

Board of Directors

Back 68

Responsible for overall management

Front 69

Board is elected by_______

Back 69

Shareholders

Front 70

Officers-

Back 70

hired by board to run the daily business of the corporation

Front 71

Corporate profits are taxed by_______

Back 71

federal and sometimes state and local government

Front 72

corporations pay (income tax)

Back 72

a separate income tax on profits (corporation files its own return)

Front 73

________ are also taxable to shareholders as known as "double taxation"

Back 73

DIVIDENDS

Front 74

Rights and Liabilities of Corporations

Back 74

Access to the courts: can sure and be sued

Front 75

Torts (in corporation)

Back 75

liable for torts of agents committed within the scope of employment under respondent superior

Front 76

Crimes (in corporations)

Back 76

Corp. may be charged for crimes of agents and ined and directors and officers can be imprisoned

Front 77

Domestic alien and foreign corporations-

Back 77

need certificate of authority if foreign

Front 78

Public (government owned) or private ("C" Corp.)

Back 78

Corporations

Front 79

Closely held corps:

Back 79

few shareholders or family-owned: restrictions on transfer of shares

Front 80

"S" corporations

Back 80

no more than 100 shareholders, no non-resident alien shareholders

Front 81

Advantages of "S" corporations

Back 81

taxation similiar a partnership when corporation has losses, those losses cab be used to offset the shareholder's other income

Front 82

Piercing the corporate veil

Back 82

if the owners of a corporate entity use the corporation to commit fraud, circumvent the law or do something illegal, the court will ignore the corporate protection against individual liability and expose the owners to personal liability.

Front 83

Bonds

Back 83

are evidence of debt, lots of different types

Front 84

stocks

Back 84

evidence of ownership in the corporation

Front 85

2 different stocks

Back 85

common and preferred

Front 86

Rights of directors

Back 86

right of participation and inspection- notification of meetings - for judgements and defense of corporate-related suits

Front 87

Management responsibilities of directors

Back 87

authorization of major corporate policy decisions
appointment supervision and removal of officers and managerial employees
financial decisions: issuance of stock, declaration of dividends

Front 88

Role of corporate officers and executives

Back 88

Hired by board of directors
day-to-day management of corporation
agents of a corporation
can be both director and offier

Front 89

Duties of directors and officers

Back 89

Fiduciary duties- relationship of trust and confidence with shareholders and corporation

Front 90

Duty of care (directors)

Back 90

1. informed and reasonable decisions
2. exercise reasonable supervision
3.status of dissenters

Front 91

Duty of loyalty (directors)

Back 91

Conflicts of interest: disclosure requirements

Front 92

Liabilities of Directors and officers

Back 92

increasing exposure to liability
crimes and torts
business judgement rule

Front 93

Role of shareholders

Back 93

owner of a share of stock makes you owner and shareholder in the corporation
no responsibilities for the daily management of the corporation
SH must approve fundamental changes in corp. elect and remove board.

Front 94

Shareholders' meetings

Back 94

Must occur atleast annually
SH's must receive written notice
Proxies-- votes can be solicited by management, or by a group of shareholders

Front 95

Shareholder Voting

Back 95

Corporate business matters are presented as resolutions which shareholders approve or disapprove.
Quorum- he minimum number of members of an assembly or society that must be present at any of its meetings to make the proceedings of that meeting valid.

Front 96

Cumulative voting of shares-

Back 96

a system of voting in an election in which each voter is allowed as many votes as there are candidates and may give all to one candidate or varying numbers to several.