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80 Cards in this Set
- Front
- Back
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Entrepreneur
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One who initiates and assumes the financial risk of a new enterprise.
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They have unlimited liability, the company dies once the sole proprietor dies, and the only way to raise money is by borrowing money.
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Disadvantages of a sole proprietorship .
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They file a 10-40 form and a schedule C form.
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How sole proprietors report their taxes.
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Franchisee
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Purchaser of a franchise
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Franchisor
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The seller of the franchise.
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Partnership
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An agreement (express or implied) between two or more persons to carry on a business for a profit.
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Common law and statutory law
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Partnerships are governed by ___________ and ____________.
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Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA)
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Governs the operation of partnerships in the absence of express agreement.
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Joint Property Ownership
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You can own property together but not be engaged in a partnership.
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Partnership as an Entity
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When the partnership is treated as a whole.
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Partnership as an Aggregate
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When the partnership is treated as split up pieces, for example when they are taxed, it is taxed straight to the individual's income taxes.
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Partnership for a term
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The partnership agreement can specify the duration of the partnership by stating that it will continue until a designated date or until the completion of a particular project.
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Partnership by Estoppel
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This stops an individual from denying the existence of a partnership.
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Duty of partners
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Must act as both a principal and an agent in any business transaction within the scope of the partnership agreement.
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Duty of care
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Partner has a duty to refrain from "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law."
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Duty of loyalty
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Partner has a duty to account to the partnership for any property, profit, or benefit.
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Authorized actions
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ONe act of a partner will bind the partnership.
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Liability of Partners
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Partners are personally liable for the debts of the partnership
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Joint and Several Liability
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A third party has the option of suing all of the partners together or one or more of the partners separately.
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Liability of Incoming Partners
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A partner newly admitted to an existing partnership is not personally liable for any partnership obligation incurred before the person became a partner.
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Dissociation
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When a partner ceases to be associated in the carrying on of the partnership business.
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Dissolution
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Termination of a partnership.
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Winding up
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The actual process of collecting, liquidating, and distributing the partnership assets.
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Limited liability partnership
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A hybrid form of business designed mostly for professionals who normally do business as partners in a partnership.
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Family limited liability partnership (FLLP)
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A limited liability partnership in which the majority of the partners are persons related to each other.
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General partner
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Has unlimited liability in an LLP.
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Limited partner
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Has limited liability in an LLP.
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Limited liability limited partnership (LLLP)
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A partnership where ever partner has limited liability.
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Limited Liability Company (LLC)
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A hybrid form that combines the limited liability aspect of the corporation and the tax advantages of a partnership.
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Members
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The name of partners in an LLC
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Pass through entity. They are not taxed at the entity level but are taxed on their individual returns.
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The way an LLC is taxed
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Like a sole proprietorship. Disregarded entity and must file a schedule C.
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The way an LLC is taxed if there is only one member.
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Articles of Organization
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To form an LLC it must be filed with a central state agency.
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Operating agreement
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Provisions relating to management how profits will be divided, the transfer of membership interests, whether the LLC will be dissolved on the death or departure of a member, and other important issues.
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Either member-managed or manager-managed.
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How an LLC can be managed.
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Joint Venture
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A relationship in which two or more persons or business entities combine their efforts or their property for a single transaction or project or a related series of transactions or projects.
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Syndicate
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A group of individuals or firms that get together to finance a particular project, such as the building of a shopping center or the purchase of a professional basketball franchise.
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Cooperative
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Generally adopted by groups of individuals who wish to pool their resources to gain some advantage in the marketplace.
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Limited liability.
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Advantage of a corporation
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Retained earnings
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Profits that are not distributed.
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Torts and Criminal Acts
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A corporation is liable for torts committed by its agents or officers within the scope of their employment.
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Personal guarantee
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Signed by shareholders and it personally obligates the shareholder to pay corporate debt.
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Domestic Corporation
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The state in which the corporation incorporates.
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Alien Corporation
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A corporation formed in another country but doing business in the US
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Foreign Corporation
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A corporation formed in one state but doing business in another state.
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Public Corporation
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A corporation formed by the government to meet some political or governmental purpose.
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Private Corporation
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A corporation created wholly or in part for a private benefit.
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Nonprofit Corporation
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Corporations formed for purposed other than making a profit.
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Close Corporation
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A corporation where the shares are held by members of a family or by relatively few persons.
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1. Be a domestic corporation 2. Have no more than 100 shareholders 3. Only have one class of stock 4. No shareholder can be an alien resident
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Three requirements of an S corporation
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Securing the Corporation Name
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A new corporation's name cannot be the same as or similar to the name of an existing corporation doing business within the state.
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Corporation is taxed, then pays dividends, then they are taxed on individual taxes.
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The way a C corporation is taxed
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Constitutional Rights
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A corporation has rights as if it were a human.
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Like a pass through entity. Tax is not paid by the entity but by the individual shareholder.
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The way an S corporation is taxed
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Articles of incorporation
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Basic information about the corporation and serve as a primary source of authority for its future organization and business functions
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Incorporators
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The person/s who execute the articles
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Bylaws
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Internal rules of management adopted by the corporation at its first organizational meeting.
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Registered Office
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Every corporation must have a registered office.
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Pierce the Corporate vail
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Exposing shareholders of a corporation to personal liability.
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1. A party is misled into dealings with the corporation rather than an individual 2. Corporation never makes a profit 3. Statutory corporate formalities are not followed 4. Personal and corporate interests are commingled.
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Factors that cause the court to pierce the corporate vail
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Board of Directors
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The ultimate authority in every corporation.
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Inside Director
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A director who is also an officer of the corporation
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Outside Director
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A director who does not hold a management position.
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Quorum
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Minimum number of members of a body of officials or other group that must be present for business to be validly transacted.
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Right to Indemnification
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A director has a right to receive reimbursement for legal costs, fees and damaged incurred.
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Audit Committee
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Oversees accountants to make sure they aren't doing anything illegal
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Fiduciary duties of care and loyalty.
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Duties of corporate officers
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duty of care
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Directors and officers are required to act in good faith.
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Duty to make informed and reasonable decisions
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Directors and officers are expected to be informed on corporate matters and to conduct a reasonable investigation of the situation before making a decision
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Duty to exercise reasonable supervision
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Directors are also expected to exercise a reasonable amount of supervision when they delegate work to corporate officers and employees.
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Business Judgement Rule
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A corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgement and bad business decisions.
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1. They took reasonable steps to become informed about the matter 2. Has a rational basis for the decision 3. Did not have a conflict of interest.
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Business judgement rule will apply as long as ...
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Duty of Loyalty
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Requires directors and officers to subordinate their personal interests to the welfare of the corporation
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Disclosure Requirements
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A director must make a full disclosure of that interest and must abstain from voting on the proposed transaction
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Role of Shareholders
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Shareholders are not agents of the corporation, not do they have legal title to the corporations property. They only have equitable interest.
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Shareholder Proposals
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When a shareholders proposed to add something to the proxy statement.
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Cumulative Voting
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A voting method designed to allow minority shareholders to be represented on the board of directors.
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Stock Certificate
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Certificate of ownership of a stock.
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Preemptive Rights
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A shareholder received a preference over all other purchasers to subscribe to or purchase a prorated share of a new issue of stock.
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Duties of majority shareholders
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A majority shareholder is regarded as having a fiduciary duty to the corporation and to the minority shareholder.
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