BUSA 2106 LEGAL ENVIRONMENT Edwin K Palmer WHO SHOULD I SUE Business Organizations Sole Proprietorships o o o o o o o o o Common Law It s all about you Easy to form Low cost Control rests with you Profits Losses flow to you Single taxation but Liability Capitalization Business Organizations Partnerships General Partnership A joint undertaking that arises from an agreement express or implied between two or more persons to carry on a business for profit o o o o o o o Common Law Flow through taxation Easy to form Joint control Joint liability for contracts Joint and several liability for torts Dissolution Winding Up Termination The whys and wherefores for the need of a written partnership agreement in real life Business Organizations Partnerships Limited Partnership Statutory Certificate of Limited Partnership o Limited Partner and General Partner the duties and obligations of both o Limitation on Limited Partner s Liability if Limited Partner does not participate in management and keeps his her name out of the partnership name unless o Flow through taxation o Business Organizations Partnerships Limited Liability Partnership o o o o o Statutory Partners Limitation on liability of Partners Joint operational control among Partners Flow through taxation Business Organizations Partnerships Limited Liability Limited Partnership o o o o o Statutory Limited Partner and General Partner Limitation on Liability of General Partner Limitation on Liability of Limit Partner if see Limited Partnership above same rules Flow through taxation Business Organizations Limited Liability Company o o o o o o o o Combines aspects of limited partnerships and corporations Creature of Statute Is a new business entity not a new form of corporation Composed of members generally with an operating agreement Flow through taxation Limited liability Full participation of all members Seen as great new business entity but Statutes are state to state and far from uniform Business Organizations Joint Venture o Two or more persons entities combining efforts for a single business undertaking Business Organizations Franchises o o o Distributorships Chain Style Manufacturing And it s all about the Contract o o o o o Payment Premises Location Quality Control and more Business Organizations Corporation Corporation o o o o o o o o o Statutory Federal and State Shareholders Board of Directors Officers Domestic Foreign Alien Corporations Limitation on Liability Double Taxation Private vs Public Corporations For Profit vs Not For Profit Corporations Close Corporations watch it cover yourself with a Buy Sell Agreement Subchapter S Corporation 1982 Business Organizations Corporation Formation of a Corporation 2 step process 1 2 Preliminary Organization watch out for promoter s liability can bite you badly Legal Process of Incorporating Articles of Incorporation Annual Registration and the Importance of Same By Laws Business Organizations Corporation Disregarding the Corporate Entity Piercing the Corporate Veil Alter ego theory 2 Undercapitalization 3 Parent subsidiary Control 1 Business Organizations Corporation Directors and Duties o o Business Judgment Rule Corporate Opportunity Rule and where are we today Business Organizations Corporation Officers Shareholders o Preemptive rights o Cumulative voting Mergers vs Acquisitions vs Consolidations Asset Sales