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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