BLAW EXAM 3 Legal Form of Organization of Small Business o 78 5 non employer o 21 5 employer business Intro to Business Organizations o Major factors in selection of business form Personal liability of owner for business debts including judgments Taxation of business profits paid by owner entity or both Management rights restrictions Organizational requirements cost of formation documents Ability to raise capital o Non Corporate forms of doing business o Sole Proprietorship and general Partnership Owners have unlimited liability for business debts o Limited Liability Company Limited Liability Partnership Limited Partnership Formation documents Owners shielded from some or all personal liability for business debts Taxed like partnership but owners have limited liability o Corporations legal entity State corporation statute Legal structure and governance Shareholders Directors Officers Shareholder limited liability Exceptions personal guaranteed Piercity corporate veil Taxation of earnings Pays income tax on earnings and shareholders pay tax on dividends Who is responsible for making decisions on dividends o Directors Exception is S Corp taxes treated like a partnership Criminal and tort liability o Classification of corporation Domestic one state considers corp domestic foreign 49 states see corp as foreign alien foreign country Certificate of authority wanting to do business in another state this has to be filled out so they can tax you Doing business in another state Public and private Public formed by a corp for some purpose Private privately owned by government or shareholders 2 Nonprofit Provide services no shareholders Potential liability limits Close closely held Few shareholders not publicly traded Restrictions on transfers of stock Shareholder agreements S corporation federal income tax classification Restrictions on stock and shareholders Taxed like partnership o Incorporation procedures Selection of state of incorporation Name of selection Articles of incorporation o First organization meeting bylaws o Improper incorporation Corporate financing Bonds Stock Venture capital Private Equity o Corporate Powers Express and implied Ultra vires doctrine 3 o Piercing the corporate veil In certain circumstances a creditor can bring a lawsuit against the shareholders of a corporation asking the court to pierce the corporate veil and thereby hold shareholders personally liable for amounts the corporaton owes the creditor Circumstances o Non recognition of formalities o Commingling of assets o Undercapitalized corporation o Directors and officers governs sets policy Bylaws length of term Election rights and responsibilities of directors Protections o Insurance o Business judgment rule Inside directors officers Outside directors not officers Meetings with info Minutes Voting on policies and issues Fiduciary duties of officers and directors Duty of care o Business judgment rule Duty of loyalty 4 To learn more and get OneNote visit www onenote com 5