BUSA 2106 - LEGAL ENVIRONMENT Edwin K. PalmerWHO SHOULD I SUE?Business Organizations Sole Proprietorshipso Common Lawo It’s all about youo Easy to formo Low costo Control rests with youo Profits/Losses flow to youo Single taxation…buto Liabilityo CapitalizationBusiness Organizations – Partnerships General PartnershipA joint undertaking that arises from an agreement, express or implied, between two or more persons to carry on a business for profit.o Common Lawo Flow through taxationo Easy to formo Joint controlo Joint liability for contractso Joint and several liability for tortso Dissolution + Winding Up = TerminationThe whys and wherefores for the need of a written partnership agreement in “real life.”Business Organizations – Partnerships Limited Partnershipo Statutory – Certificate of Limited Partnership o Limited Partner and General Partner – the duties and obligations of botho 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 taxationBusiness Organizations – Partnerships Limited Liability Partnershipo Statutoryo Partners o Limitation on liability of Partnerso Joint operational control among Partnerso Flow through taxationBusiness Organizations – Partnerships Limited Liability Limited Partnershipo Statutoryo Limited Partner and General Partnero Limitation on Liability of General Partnero Limitation on Liability of Limit Partner if [see Limited Partnership above …same rules]o Flow through taxationBusiness Organizations Limited Liability Companyo Combines aspects of limited partnerships and corporationso Creature of Statuteo Is a “new” business entity … not a new form of corporationo Composed of members generally with an operating agreemento Flow through taxation;o Limited liabilityo Full participation of all memberso Seen as great new business entity but … Statutes are state to state and far from uniform.Business Organizations Joint Ventureo Two or more persons/entities combining efforts for a single business undertaking.Business Organizations Franchiseso Distributorshipso Chain- Styleo ManufacturingAnd it’s all about the Contracto Paymento Premiseso Locationo Quality Controlo … and moreBusiness Organizations - Corporation Corporationo Statutory – Federal and Stateo Shareholders/Board of Directors/Officerso Domestic/Foreign/Alien Corporationso Limitation on Liabilityo Double Taxationo Private vs. Public Corporationso For Profit vs. Not For Profit Corporationso Close Corporations (watch it, cover yourself with a Buy-Sell Agreement)o Subchapter S Corporation – 1982Business Organizations - Corporation Formation of a Corporation – 2-step process1. Preliminary Organization – watch out for promoter’s liability – can bite you badly2. Legal Process of Incorporating Articles of Incorporation Annual Registration and the Importance of Same By LawsBusiness Organizations - Corporation Disregarding the Corporate Entity/Piercing the Corporate Veil1. Alter ego theory2. Undercapitalization3. Parent/subsidiary – ControlBusiness Organizations - Corporation Directors and Dutieso Business Judgment Rule o Corporate Opportunity Rule…and where are we today?Business Organizations - Corporation Officers Shareholderso Preemptive rightso Cumulative voting Mergers vs. Acquisitions vs. Consolidations Asset