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29 Cards in this Set
- Front
- Back
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Most basic and easiest form of business organization b/c it doesn't require any formal application/filing/qualification to be considered
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Sole Proprietorship
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Disadvantages of Sole Proprietorship
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Unlimited Liability
Limited ability to raise capital |
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Advantage of Sole Proprietorship
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Simplicity
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____ is when two or more persons act together for the purpose of making a profit
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Partnership
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____ is when all partners must be general partners
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General Partnership
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Key attributes of a general partnership
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Unlimited personal liability
Right to manage the partnerhsip |
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____ is one in which there is at least one general and at least one limited partner
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Limited Partnership
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____ is one who has limited personal liability for the partnership's debts (the most they lose is their investment)
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Limited Parnter
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All partners are considered general partners b/c they all have management ability but if one partner causes debt, the others are not liable
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LLP
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____ is formed when individuals/entities transfer property to an entity in exchange for stock
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Corporation
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Advantages of Corporation
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Provides limited liability to investors
Easier to raise capital |
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____ offer limited personal liability to its shareholders as a partnership for tax purposes (limited liability w/o double taxation)
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S-Corporations
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LLC Benefits
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Each member is granted limited personal liability but is still able to make decisions
The number of potential members is not limited |
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Scenarios under which a business incorporates
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The business is already in existence and the owners want to incorporate
When a person has an idea for a business but doesn't want to actually run it |
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The person with an idea for a business is the ____
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Promoter
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Promoter's primary role
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To generate the idea for the business
Solicit initial financing Negotiate and enter into the first contracts for the business |
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Steps to Incorporation
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Prepare the Articles of Incorporation
Incorporater must sign and authenticate the Articles of Incorporation File the articles with the secretary in the state desired Certificate of incorporation is issued |
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____ Serves as the primary governing document that sets forth generalized rules regarding the business
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Articles of Incorporation
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Purpose of bylaws
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To address day-to-day issues
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By right, complying with the law in all respects
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De Jure Corporation
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In fact
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De Facto
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When a creditor reaches into a shareholder's person pocket
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Piercing the Corporate Veil
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____ is when the shareholder commingles his personal assets with the corporations and visa versa
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Alter Ego
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___ is a corporation that is owned by private individuals and stock is not open to the general public
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Close Corporation
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In a ____, shareholders are obligated to sell the stock either to 3rd parties or back to the corporation at a set price
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Buy-Sell Agreement
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Provisions that allow a shareholder to sell stock at whatever price, to whomever, subject to the corporation's approval of the buyer
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Consent Restraint
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____ says that the majority shareholders cannot do things (like freeze out minority shareholders) from their investment returns (cannot create deadlock on major issues)
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Fiduciary Duty
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Ways to terminate a corporation
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Petition of creditors
If the attorney general petitions the court Involuntary termination if taxes are not paid, reports aren't filed, etc. |
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Process of termination
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Corporation stops doing business and ends contractual relationships
Corporation liquidates assets If there is anything left, shareholders are paid Corporation's legal existence is terminated |
