B LAW 210 Houser Exam 4 Study Guide Lectures 12 13 Lecture 12 November 5 Sole Proprietor o Starts doing a business alone o No writing required to form business o Has SOLE control of business o Termination Sells business Stops doing the business Death o Fully liable for all losses and liabilities o Owner pays business s taxes on personal return General Partnership o Oral or written agreement between 2 or more parties to carry on a business for profit Technically no writing is required o A general partnership can be assumed when two or more people carry on a business o Partners have a fiduciary duty to one another meaning they must disclose all financial aspects of the business and not co opt a financial advantage that is properly the partnerships The duty ends after a partner leaves o Each partner has an equal voice unless otherwise stated o Majority rules except decisions to sell or add a partner requiring an unanimous vote o Termination Changes in partners dissolves old partnership and forms a new one Death withdrawal or bankruptcy will terminate partnership Many written partnership agreements provide that these events will not terminate a partnership A partnership for a specific purpose will dissolve automatically upon specified event o General partners all jointly and severally liable for all losses and liabilities o Partners pay business s taxes on personal return Limited Partnership o Must have a written agreement between 2 or more parties must have one general partner who makes business decisions limited partners do not have a vote o o o o o o o Agreement must include name of business type of business address of agent names of addresses of each partner contribution of each partner duration of partnership rights of personnel changes and share of profit to be paid to each partner May be required to register with the state certificate of partnership Limited partners may not participate in management they are merely investors but may see finances and participate in dissolution of partnership General partners owe a fiduciary duty while limited partners generally do not Only General partners can vote Termination With respect to the general partner same rules Death withdrawal or bankruptcy of limited partner does not trigger a dissolution Limited partners receive their share of profits and their capital contributions before general partners receive anything A limited partnership may dissolve per the agreement or at the completion of a project Certificate of limited partnership may set out dissolution date Limited partners are not liable for anything other than their capital contribution General partners are jointly and severally liable for all losses and liabilities If a limited partner participates in the management of the business they will lose their limited liability protection Partners pay taxes on their personal returns Lecture 13 November 7 Corporations o Articles of Incorporation are filed with the State Articles of Incorporation usually include name and address of business address of agent names and addresses of the organizer purpose of business and classes and par value of stock to be issued o Must hold an annual meeting and keep up corporate formalities o A corporation is a legal entity separate from the shareholders o Shareholders have no fiduciary duty unless a close corporation Board of directors has a fiduciary duty of loyalty must place interest of corporation above their own Officers have a fiduciary duty to the corporation o Shareholder own the corporation and elect the Board of Directors and vote on matters that change corporate structure or dissolve the corporation Board of Directors sets corporate policy and decides on corporate matters such as sale of assets or financing Officers manage the corporation and are elected by the Board of Directors the book calls them Managers o Termination Voluntary dissolution occurs when the corporation files Articles of Dissolution with the State Involuntary dissolution occurs because of bankruptcy or piercing of the corporate veil Creditors receive proceeds from the liquidation of a corporation prior to the shareholders o Shareholders Directors and Officers generally have no liability for a corporations debts absent fraud or piercing the corporate veil o Double Taxation Limited Liability Corporations o File Articles of Organization with the State Articles usually include name and address of business address of agent whether member or manager managed names and addresses of members date LLC to be dissolved and classes and whether any members are liable for the LLC s debts o Operating Agreement and annual meeting are not required in most states Annual Report is required in most states o Managed by Members or by a Manager appointed by the Members o Each Member has an equal vote but if a Manager is appointed the Member must defer to them o Termination An LLC may be terminated after a certain number of years set by statute or in the Operating Agreement The death bankruptcy or withdrawal of a member does not terminate the LLC o Members have no personal liability Can choose to be treated like a partnership and avoid double taxation Lecture 14 November 12 Other Forms of Entities o Joint Ventures A general partnership for a limited time and purpose build a building rent it out and sell it o Cooperatives Association of individuals organized to provide an economic service to its members buy bulk products to sell cheaper to members o Syndicates A group that finances a project financing the building of a shopping center o Franchises A franchise exists when a franchisee pays a franchisor a franchise fee for the right to sell goods or services according to the franchisor s marketing plan Franchises must be registered under federal and in many cases state law Franchisees 1 Must follow the exact specifications of the franchisor 2 May not legally bind the franchisor Three types of franchises Product distributorships Trademark licensing Business 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