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WVU BCOR 320 - Chapter 19 cont

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BCOR 320 1nd Edition Lecture 36 Chapter 19: Starting a business contGeneral Partnership  Management duties – Have a fiduciary duty◦ Partners are liable to the partnership for gross negligence◦ Partners cannot compete with the partnership◦ Partner may not take an opportunity away from the partnership unless the other partners consent◦ If a partner engages in conflict of interest: He must turn over to the partnership any profits he earned from that activity Transfer of ownership◦ Firm cannot sell shares◦ Partner has the right to transfer the value of partnership interest: Not the interest itself Formation – Easy to form◦ If two or more people do business together, sharing management, profits and losses: They have a partnership and subject to all rules of partnership law Partnership by estoppel exists if:◦ Participants tell other people that they are partners, or allow other people to say that they are partners◦ Third party relies on this assertion◦ Third party suffers harm Termination◦ Dissociation: When a partner quits a partnershipThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.◦ Partnership can either: Buy out the departing partner(s) and continue in business Wind up the business and terminate the partnershipLimited liability Partnership Partners are not liable for debts of the partnership  An LLP is not a taxable entity and it has the right to choose its duration Structure Limited partnerships must have at least: One limited partner and one general partner Liability Limited partners are not personally liable: General partners are liable Limited liability limited partnership: General partner is not personally liable for the debts of the partnership Taxes Limited partnerships are not taxable entities Formation General partners must file a certificate of limited partnership with their Secretary of State Management General partners have the right to manage a limited partnership Limited partners have few management rights Transfer of ownership Limited partners have the right to transfer the value of their partnership interest Can sell the interest itself if agreement permits Duration Limited partnerships have perpetual existenceProfessional Corporations  Most professionals are allowed to incorporate Provide more liability protection than a partnership Corporation may be liable for an individual member’s mistakes, but the innocent professionals are not at risk Limitations All shareholders of the corporation must be members of the same profession Required legal technicalities for forming and maintaining a professional corporation are: Expensive and time-consuming Tax issues can be complicatedJoint Venture  Partnership for a limited purpose Each organization retains its own identityFranchises  Are not actually a separate form of business ◦ They can take almost any one of the ones discussed already Franchising is a compromise between employment and starting your own business Franchisees have freedom to make many choices, but are limited in other ways Can be very costly to acquire Franchisors must comply with the Federal Trade Commission’s rule Franchisor must deliver to a potential purchaser a Franchise Disclosure Document (FDD)◦ Purpose is to ensure that the franchisor discloses all relevant


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