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Definition of a partnership
- An association of two or more co-owners of a business profit
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Requirements of a partnership
- - Must be co owners
- - Must be for profit
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Partners might be formed orally, except when:
- Partnership cannot perform in one year must be in writing
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General partnerships liability is:
- - Unlimited for partners
- - Jointly and severally liable for all partnership debts, obligations, and torts
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According to the doctrine of Respondeat Superior, if a partner commits a tort while acting on partnership business, liability is imposed on:
- Himself, the partnerships, and fellow partners
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Agency in partnership?
- Partners are agents of the partnership and of each other
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What must be done when a partnership is terminated?
- Each partner must give actual notice to old customers and a published notice to new customers upon the termination of the partnership.
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Limited partnerships consist of:
- At least one general partner, and other limited partners
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The liability of limited partners extends to:
- No liability beyond their capital contribution
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If a limited partner takes an active role in management, their liability:
- Is increased to that of a general partner due to appearance
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The following votes are not considered "active role in management" for limited partners:
- - Dissolution of partnership
- - Changes in the limited partnership
- - Admission or removal of a general partner
- - Amending the certificate of limited partnership
- - Act as agent
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The following require unanimous consent of all partners:
- - Admit new partners of all sorts
- - to transfer partnership property
- - to change partnership agreement
- - to admit liability in a lawsuit or submit claim to arbitrator
- - make changes in partnership business such as selling the goodwill
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Partnership loses, if not stated in the agreement, are divided as such:
- - General partnership: same as the gains
- - Limited partnerships: based on their capital contributions
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If a general partner makes a loan to the partnership, in the event of liquidation:
- Outside creditors are paid first, then the partner.
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When dealing with partnership property, each partner:
- is NOT a co owner of the property
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A sale of partnership interest does not:
- - dissolve partnership
- - dissolve the partner's liability to debts
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Three steps are required to dissolve a partnership:
- - Dissolution (any general partner ceasing to be involved)
- - Winding up/liquidation (settlement of partnership affairs)
- - Termination
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Under the Revised Uniform Partnership Act, If a partnership is ended by withdrawal of a general partnerships, the partnership can be continued by:
- Electing to do so within 90 days of the event by the general partners
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The departing of a joint venturer has what effect on the joint venture?
- Nothing, it is not dissolved.
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An LLC differs from other business models in three key areas:
- - Limited liability of their investment
- - LLC owner may fully participate in management
- - LLC has the same tax advantages of partnerships and S-Corps
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To form an LLC, it is necessary to:
- - File articles of organization with the state
- - Have a name that clearly indicates LLC
- - Have an operating agreement between the members
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Two main methods to manage an LLC:
- - Member managed
- - Managed by a hired manager
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An LLC is dissolved by:
- Same as partnership
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An LLC can be binder to contracts by:
- - Members, if member managed
- - Manager only, if manager managed
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Laws for LLCs usually follow what act?
- Revised Uniform Limited Liability Company Act (RULLCA)
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When determining a partner's rights and other aspect of the partnership, refer to:
- - Partnership agreement
- - RUPA, for any item not mentioned
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An LLP differs from other partnerships because:
- - Partners have no personal liability for the contractual obligations of the firm
- - Also no liability for torts of the LLP, unless they committed the tort
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A Corporation is formed:
- By a promoter, who is liable for pre-incorporation contracts
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Promoters remain liable for pre-incorporation contracts until:
- Until there is a novation
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Articles of Incorporation include:
- - Stock Provisions
- - Amount of authorized shares
- - Voting stock
- - Capital structure
- - Name of corporation
- - Registered agent (who will answer for the corporation)
- - Name of all incorporators
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To amend code Article of Incorporation:
- A resolution has to be drawn up and approved by the majority of the stockholders
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Debentures are also known as
- Unsecured bonds
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Watered stock is:
- Selling par value stock at less than par in original issue
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Foreign corporation is a corp that is doing business:
- In a state other than the state of incorporation
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Approval steps for merger or consolidation of corporations:
- - Submit a formal plan of merger to both boards and get majority approval
- - Submit to stockholders and obtain majority approval
- - Submit plan to secretary of state
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Facts of a short form merger:
- - Parent merges with a 90%+ owned sub
- - only necessary approval is from BOD of parent
- - Only stockholders of the subsidiary get appraisal rights
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Right of appraisal means:
- A dissenting shareholder can be bought out of a corporation at FMV
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Piercing the corporate veil happens by (FUC):
- - Fraud by the stockholder
- - Undercapitalized at the form of formation
- - Commingling business and personal funds
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Stockholders have two management rights:
- - Elect BOD
- - Vote on fundamental changes to the corporation
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Pre-emptive rights mean that a stockholder can:
- Purchase newly issued shares in order to maintain their original % of ownership
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Facts about dividends:
- - No inherent right to stockholders for dividends
- - Directors liable for wrongfully declaring dividends
- - Dividends become a corporate debt after declaration and public notice
- - Cannot be revoked after declaration unless for fraud
- - Once declared, shareholders become unsecured creditors
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Duties of Officers and Directors:
- - Directors handle overall management and set policy
- - Officers handle day to day affairs
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Officers and directors may make a personal profit on a deal with the corporation in two cases:
- - They make a full disclosure and do not participate in the approval process
- - If no voting involved, the deal must be fair and reasonable to the corporation
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A corporation may be voluntarily dissolved by:
- Passage of a resolution by majority of board and stockholders
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A corporation may be involuntarily dissolved by:
- - Required by state for fraud, illegality or no business activity
- - Stockholders can request a court-ordered dissolution if the corp is deadlock and wasting all the corporate assets
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Majority stockholders responsibility to minority stockholders:
- They owe a fiduciary duty to minority stockholders
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A professional corporation means that all of the shareholders are:
- Members of the profession the business dabbles in
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