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20 Cards in this Set
- Front
- Back
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Types of Business Structures
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1 sole proprietorships
2 general partnerships 3 limited partnerships 4 limited liability partnerships (LLP) 5 joint ventures 6 limited liability companies (LLC) 7 corporations |
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Advantages of a Sole Proprietorship
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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 |
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Disadvantages of a Sole Proprietorship
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1 the owner suffers all of the loss
2 capital is limited by what the owner has or can borrow 3 unlimited personal liability |
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Definition of Partnership
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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)
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Elements of Co-ownership in a Partnership
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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 |
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Characteristics of a Partnership
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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 |
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Differences b/t Limited & General Partnerships
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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 |
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Partner's Rights & Responsibilities
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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 |
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As Agents of the Partnership Each Partner Can:
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1 bind partnership to contracts w/3rd parties
2 buy & sell goods, receive money & pay debts for the partnership |
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Unanimous Consent of Partners is Needed for;
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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 |
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Partner Liability:
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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 |
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Partnership Terminates when:
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1 dissolution (stop carrying on business together)
2 remaining partners elect to wind up & terminate partnership |
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Distribution Order upon Termination:
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1 creditors (including partner loans to partnership)
2 equity due to/from each partner |
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Priority of Creditors:
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1 partnership creditors ---> 1st to partnership assets, excess to personal creditors
2 personal creditors ---> 1st to personal assets. excess to partnership creditors |
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Creation of Limited Partnership
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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) |
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Limited Partner CAN do this w/o the Risking Loss of Limited Liability:
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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 |
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Limited Partnership on Sharing of Profits (Losses)
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1 shared as agreed upon in agreement
2 if no agreement, then based on % of capital contributions |
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Termination of Limited Partnership Occurs When:
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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) |
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Characteristics of LLC's:
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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) |
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Liability Provisions of LLP Partners:
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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 |
