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Flashcards in Chapter 12 Deck (29)
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1
Q

Forms of Business Entities

A
Sole Proprietorship
Partnership
Limited Partnership
Limited Liability Company
S Corp
C Corp
2
Q

Sole Proprietorship

A

Persons doing business for themselves.

  • Single Owner of company
  • Taxed at individual rates
  • No liability protection
  • owner must come up with capital to run the business
3
Q

General Partnership

A

Association of 2 or more persons (partners)

To carry on as co-owners of a business for a profit

4
Q

Person of General Partnership

A

Individual , another partnership corporation or some other business entity

5
Q

Legal Governance of a General Partnership

A

Governed by state law adoption of uniform partnership act (UPA) or revised uniform partnership act (RUPA)

6
Q

Formation of General Partnership

A

If parties agree that the legal relationship between them is the operation of a business for profit. A partnership is legally created even if there is nothing in writing and they don’t actually call their business a partnership .

7
Q

Duty of Partners

A

Partners owe a fiduciary duty to act in good faith for the benefit of partnership.

8
Q

Zhou v Bickley

A

There was no partnership , and Bickley will have to pay the loan back. Even if there was no agreement to go into partnership the courts will try to see if each case fits in the definition of a partnership.

9
Q

Control of a General Partnership

A

Each partner has equal control over the partnership unless otherwise specified in a partnership agreements.

  • Share equally in profits
  • Receive repayment of initial capital contributions
  • Share equally in management
  • Equal access to the partnership books and records
10
Q

Termination of a General Partnership

A

Dissolution- When any single partner ceases to be associated to the partnership
Partnership Agreement- Can offer alternatives no dissolution unless majority of remaining partners vote to dissolve within 90 days
Winding Up- Period between and termination when partnership liquidates its asses.
Bankruptcy- Of a partner dissolves the partnership. (Unless the agreement says otherwise)

11
Q

Limited Partnership

A

A partnership that has both limited and general partners

12
Q

Limited Partner

A

Investor only, they do not take part in management or control and they are not liable for debts or torts of the LP beyond their capital contribution

13
Q

General Partner

A

Manages the partnership and personally liable for the firm debts.

14
Q

Legal Governance

A

Governed by state law adoption of Uniform Partnership Act (UPA) or Revised Uniform Partnership Act (RUPA).
Termination: Same rules as a partnership (Note : Bankruptcy of an LP will not dissolve the LP but the bankruptcy of a GP will)

15
Q

Subchapter C Corporation

A

Corporation is its own separate taxable entity under state law . Double taxation at both corporate and shareholder levels.

  • Publically traded company
  • Liability protection for all shareholders
16
Q

Subchapter S Corporation

A

Separate legal entity from its shareholders, but not a separate taxable entity (Income/debts flow through to the shareholders)

17
Q

Franchise

A

Method of doing business- not a business form. Generally set up as an S corporation or LLC
-Arrangement where owner of a trademark , or trade name licenses others to use such trademark, trade name or copyright.
Ex) McDonalds, Five Guys

18
Q

Vicarious Liability

A

Generally, corporate franchisor is not liable to the 3rd person dealing with or affected by the franchise holder unless show to exercise actual control over the owner.

19
Q

Termination of a franchise

A

Is determined by the franchise agreement

20
Q

Dunkin Donuts vs Sandip, Inc.

A

They wanted to try to find a 3rd party buyer and then Dunkin Donuts denies the sale to the potential sales

21
Q

Formation of Corporations

A

File articles of incorporation with the secretary of state

22
Q

Legal Status of Corporations

A

Separate legal entity that can sue and be sued

23
Q

Termination of Corporations

A

Dissolution- voluntary of involuntary to dissolve the corp

Winding up- board of directors liquidate assets, pay creditors , with remainder to shareholders.

24
Q

How is an LLC treated by the government ?

A

Treated like a corp for liability purposes but like a partnership for tax purposes

25
Q

Formation of an LLC

A

File articles of organization , must have llc in name

any number of members allowed and can be people or other orgs

26
Q

Capital contributions and Liability of LLC

A

Members not personally liable for the debts and Cash/Property/Services are brought on by members

27
Q

Management of LLC

A

Vested in the members documented in the operating agreement

28
Q

Termination of an LLC

A

Death, Bankruptcy, withdrawal of member terminates the membership of the specific person but not the LLC itself if the others wise to continue.

29
Q

Profit sharing of an LLC

A

Profits and losses shared among the members per arrangement in the operating agreement.