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20 Cards in this Set

  • Front
  • Back
Types of Business Structures
1 sole proprietorships
2 general partnerships
3 limited partnerships
4 limited liability partnerships (LLP)
5 joint ventures
6 limited liability companies (LLC)
7 corporations
Advantages of a Sole Proprietorship
1 easy to form & operate
2 business can be sold w/o approval from others
3 owner has right to make all business decisions
4 profits are not shared w/others
Disadvantages of a Sole Proprietorship
1 the owner suffers all of the loss
2 capital is limited by what the owner has or can borrow
3 unlimited personal liability
Definition of Partnership
An assn of two or more persons and/or entities to carry on a business as co-owners for profit (not including passive co-ownership & not-for-profit unincorporated assns)
Elements of Co-ownership in a Partnership
1 profit sharing (is not always in equal increments)
2 joint control (each partner has = right to participate in mgmt)
3 RUPA states that partner is no longer co-owner of partnership property
Characteristics of a Partnership
1 limited duration
2 ownership transfer requires agreement
3 may sue & be sued as separate entities
4 unlimited liability of partners for partnership debt
5 formation is easy
Differences b/t Limited & General Partnerships
LIMITED:
1 relationships consists of 1 or more general partners & 1 or more limited partners
2 ltd partners only contribute capital
3 ltd partners do not take part in mgmt
4 limited liability

GENERAL:
1 partners share in the mgmt of the partnership (w/exception of silent partner)
2 have unlimited liability to creditors of partnership
Partner's Rights & Responsibilities
1 partnership agreement (oral or written depending on duration of the partnership)
2 partnership interests
3 partnership property
4 participation in mgmt
5 share in profits & losses (equally unless specified in agreement)
6 may request formal accounting of partnership affairs
7 each partner owes a fiduciary duty to each partner
8 incoming partners have same rights as previous partners
As Agents of the Partnership Each Partner Can:
1 bind partnership to contracts w/3rd parties
2 buy & sell goods, receive money & pay debts for the partnership
Unanimous Consent of Partners is Needed for;
1 admission of a new partner
2 amendment of partnership agreement
3 assignment of partnership property
4 making partnership a surety or guarantor
5 admitting to a claim a/g partnership in court
6 any action outside the scope of the business
Partner Liability:
1 each partner is jointly & individually liable for all debts (creditors req'd to attempt collection from partnership 1st)
2 still liable to 3rd party despite agreement (meaning that if any partner pays more than req'd the others are to reimburse the overage)
3 incoming partners are liable for existing debts to the extent of their capital contributions (unless agreed otherwise)
4 outgoing partners are liable for existing & subsequent (if notice is not given to 3rd parties) liabilities
Partnership Terminates when:
1 dissolution (stop carrying on business together)
2 remaining partners elect to wind up & terminate partnership
Distribution Order upon Termination:
1 creditors (including partner loans to partnership)
2 equity due to/from each partner
Priority of Creditors:
1 partnership creditors ---> 1st to partnership assets, excess to personal creditors
2 personal creditors ---> 1st to personal assets. excess to partnership creditors
Creation of Limited Partnership
1 file certificate w/the SOS (to include names of all general partners)
2 requires @ least 1 general & 1 limited partner
3 contributions may be in the form of ---> cash, svcs performed & property (also includes promises of the previous)
Limited Partner CAN do this w/o the Risking Loss of Limited Liability:
1 act as agent or employee of partnserhip
2 consulting with & advising general partner
3 voting on amendments to the partnserhip agreement
4 voting on: dissolution, winding up, loans, change in the nature of the business or removal of a general partner
5 bringing derivative lawsuit on behalf of the partnership
6 being surety for partnerhip
Limited Partnership on Sharing of Profits (Losses)
1 shared as agreed upon in agreement
2 if no agreement, then based on % of capital contributions
Termination of Limited Partnership Occurs When:
1 completion of time period
2 specified event in the agreement
3 unanimous written consent of all partners
4 court decree
5 event that causes business to become illegal
6 w/drawal of GENERAL partner (unless ALL partners agree to continue)
Characteristics of LLC's:
1 all owners have limited liability (liability limited to capital contributions + equity in the LLC)
2 separate legal entity (can sue & be sued in own name)
3 must have LLC in name
4 adopt agreement & file w/SOS
5 has personal property interest in LLC (no specific interest)
6 member has mgmt interest
7 member may assign financial interest (unless otherwise specified)
Liability Provisions of LLP Partners:
1 each partner is a limited partner
2 specified amounts of liability malpractice insurance REQUIRED (takes place of "general" partner)
3 retain unlimited liability for OWN negligence & wrongful acts
4 partners avoid some personal responsibility for mistakes or malpractice of other partners