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CSU BUS 260 - BUS 260 STUDY GUIDE

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Exam IIBUS 260 STUDY GUIDE- Agency:o Principal/agent relationship: Power to create contracts  Creates vicarious liability  Principal  employer & corporation Agent  human & acts on behalf of the principal o Master/servant relationship: No power to create contracts  Creates vicarious liability - Vicarious liability:o Based on respondeat superior The superior may have to respond by paying for damaged based on employees’ behalf (for negligence)o “On the job” If the employee was on the job when the negligence happened then the employer is also held liable o “Frolic” If the employee was doing something personal when the negligence happened then the employer is NOT held liable o “Apparent authority” If someone is in a position where they have apparent authority to the customer, then the customer is not at fault for any wrong doing- Ex. Someone pretending to be a bank teller & takes customer’s cash deposit for themselveso “Holding out” If you’re “holding” yourself out to be in a position of higher authority than what you truly are, then you will be held liable for the responsibilitythat falls under the position- Comparative Business Forms:o Sole Proprietorship: 1 owner  Simplest to form & simplest to calculate taxes  Business & the owner are the same entity o General partnership: Overview:- Two or more people engage in a business- Sharing the profits of a business This study source was downloaded by 100000845762540 from CourseHero.com on 09-06-2022 11:11:01 GMT -05:00https://www.coursehero.com/file/38013480/BUS-260-Study-Guide-Exam-IIdocx/- Written is not required but highly encouraged (basically a contract)o Can be verbal or based on conduct- No need for government Taxation:- Partnership draw: partners will take out certain amount of money out of account monthly, weekly, etc. used like a salary, but NOT a salary- Company and partners file the same tax form because they are considered the same entity- Pass through taxes Liability:- Partnership liability is unlimited because the partner and the company are the same entity o Partners’ personal wealth could be at stake in a liability suit against the company  Control:- Each general partner has equal control unless stated otherwise- Partner responsibilities will normally be outlined in partnership agreement (contract)- Partnership agreement can also specify allocations of profits & losses Continuity:- Partnership lasts as long as the partners are alive because the partners and the partnership are the same entityo Regular Corporation: Overview:- Secretary of state of 1 of the 50 stateso Government is necessary- State charter  like a birth certificate for corporations  Taxation:- Separate entity from the people who own it (stockholders)- Corporate income tax because the corporation is treated like a new tax payer2This study source was downloaded by 100000845762540 from CourseHero.com on 09-06-2022 11:11:01 GMT -05:00https://www.coursehero.com/file/38013480/BUS-260-Study-Guide-Exam-IIdocx/- End up paying more taxes because of corporate income tax- Corporations must pay their stockholders a salary Liability: - Corporate liability is limited because the stockholder is only limited to what they own in the company because the corporation is separate- Limited liability encourages businesses to be created o Public policy  for the greater good of society and the economy  Control:- Control lies with the stockholders- Every corporation by law must have a stockholders’ annual meeting  Continuity:- Can continue indefinitely because it is a separate entity - When a stockholder dies, someone inherits their stock- Inperpetuityo Limited Partnership: Overview:- Middle ground between general partnership & regular corporation - Must have at least 1 general partner with unlimited liability  assuming the risk and therefore has more benefits - All other investors/partners have limited personal liability to what they own in the company- Limited partners can NOT participate in management (purely there to invest capitol)- Ex. Drilling for oil/natural gas Taxation: - All partners are able to have pass through taxes Liability:- Some of the partners are able to have limited liability3This study source was downloaded by 100000845762540 from CourseHero.com on 09-06-2022 11:11:01 GMT -05:00https://www.coursehero.com/file/38013480/BUS-260-Study-Guide-Exam-IIdocx/ Control:- General partner(s) hold all of the control because assume unlimited liability Continuity:- Partnership lasts as long as the partners are alive because the partners and the partnership are the same entityo “S” Corporation: Overview:- Can’t bring in more than 100 stockholders  limits how much money you can raise Taxation:- Don’t have to pay corporate income tax by sending in an exemption form to the IRS within 75 days of forming  Liability:- Limited liability like a regular corporation Control:- Control lies with the stockholders because S corporations operate the same as a regular corporation Continuity:- Can continue indefinitely because it is a separate entity - When a stockholder dies, someone inherits their stock- Inperpetuityo Limited Liability Corporation (LLC): Overview: - Able to bring in as many people as you want (investors) Taxation:- Pass through tax Liability:- All partners have limited liability Control:- Board of Directors is called a Board of Managers- Stockholders are called Members Continuity:- Can continue indefinitely because it is a separate entity - When a stockholder dies, someone inherits their stock- Inperpetuity- Securities Regulation:o SEC: Securities Exchange Commission (Federal)o What is a security? Anything considered an investment contract4This study source was downloaded by 100000845762540 from CourseHero.com on 09-06-2022 11:11:01 GMT -05:00https://www.coursehero.com/file/38013480/BUS-260-Study-Guide-Exam-IIdocx/ Ex. Howey Case  Selling orange trees, which were ruled to be a security not a commodity because people were investing without taking part in any of the physical labor of growing the orange treeso 1933 Securities Act (Full Disclosure Act) States all of the regulations that must be followed in order to legally sell securities “Going” public  Initial Public Offering (IPO) Prospectus:- Issuer company must provide investors with a booklet that has all of the information


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