Buisness Law Only Flashcards
What is Agency Law?
Agency Law deals with someone’s ability to bind you to a contract with a third party
What are the basic actions that occur in a bankruptcy?
Bankruptcy gives creditors protection from their creditors and stops them from either permanently (Chapter 7) or temporarily (Chapter 11 or 13) collecting a debt Filing halts collection activity; grants “automatic stay” (with certain exceptions) Stops creditors from suing debtor
What are the key elements of a valid Partnership?
Must have two or more partners. Must intend to engage in business for profit. Life of partnership is of limited duration in most cases. Agency/fiduciary relationship is created. Partnership interest is always considered personal property.
What is a promissory note?
A promise to pay a specific amount Two parties involved - maker and a payee Can reference other transactions without harming the instrument’s negotiability Example: Bank Certificate of Deposit (CD)
What must a contract contain?
Offer Acceptance Consideration (something of value) Proper form (oral or written) Legal subject matter Two or more competent parties
What is considered the biggest change to financial regulation since the Great Depression of the 1930s?
The Dodd-Frank Wall Street Reform Act of 2010
Describe the Federal Unemployment Tax Act
An employer-paid tax Must file return and pay even if only one employee works there Deductible to company - Not deductible by the employee Allows employers to credit the FUTA liability by the amount of State Unemployment Tax (SUTA) they pay
What are the key points of the 1933 Securities Act?
Governs Initial Public Offerings (not subsequent sales). Covers registration statements and accompanying information filed with SEC Information must include audited financial statements & a prospectus Note: Even if a company is exempt from registering under the 1934 Act; they still must adhere to the anti-fraud provisions of the Act
What is the purpose of a Consulting Engagement?
This engagement helps the client be more efficient with personnel and resources in order to accomplish their goals.
What does Real Property include?
Land; buildings fixed to the land; property under the land and above the land
What sales are covered under the Uniform Commercial Code (UCC)?
Only sales of goods are covered under the UCC.
When does a security interest attach; or become legally enforceable?
Secured interest must be supported by consideration given Debtor must actually own the rights to the collateral or have possession Secured interest much be recorded
What is required for Agency to exist?
Both parties must consent to the relationship and intend for an Agency relationship to exist Agent owes Principal fiduciary duty Principal doesn’t owe Agent fiduciary duty A contract is NOT required and an Agency agreement is not based on Contract Law; Exception – If duties cannot be performed within a year; a signed writing is required
For what debts does bankruptcy NOT stop collections?
Student Loans Income taxes from previous 3 years Alimony & Child Support Debts/judgements resulting from drunk driving Pension obligations Debts relating to SOX violations Debts arising from illegal activities Debts not listed in the bankruptcy filing
Can corporations and other partnerships become partners in a partnership?
Yes; corporations and other partnerships can become partners of a partnership
What is a draft?
A commercial paper involving three parties- a drawer; a payee and a drawee A drawer orders a sum to be paid to a payee by the drawee May be payable on demand or in the future
What forms may acceptance of a contract take?
Can be written or oral Must be in the form/method required by offeror Must be mirror image - i.e. no changes in terms
What is the goal of the Volcker Rule?
Banking Institutions maintain healthy capitalization ratios
What are the major aspects of FICA and Social Security taxes?
Paid by Employer AND Employee - Employer withholds from employee’s paycheck and must pay tax matching employee’s withholding If employer under-withholds; they are required to make up the difference Self-employed individuals must pay both the employer and the employee share; which is “Self Employment Tax” People drawing Social Security may have their benefits reduced if they go back to work and earn an income
What entities are exempt from filing registration statements under the 1933 Securities Act?
Banks; Commercial Paper; Farmers; Co-ops; Charities; Governments Also exempt: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can’t occur within 9 months to interstate parties.
What is required by the Statements on Standards for Consulting Services (SSCS)?
Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity NOT REQUIRED: Independence
What are the characteristics of a deed?
Must be in writing Signed Description of Property Delivered Recorded
What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?
Offer - You offer to sell something at a price Acceptance - the other party accepts Consideration - Something of value has been exchanged for the goods Note: The UCC only covers sales of goods.
What are the characteristics of perfection of interest in a secured transaction?
Gets higher priority over others claiming rights to collateral after the perfection takes place Attachment must take place BEFORE perfection
What is Actual Authority in an agency?
Actual Authority is what is expressly granted or is implied by the duties you expect the Agent to perform and is necessary to carry them out
How does bankruptcy of a corporation affect the owner’s ability to file bankruptcy?
It doesn’t; because the corporation is a separate legal entity. Under bankruptcy; corporations are dissolved Under bankruptcy; individuals are discharged
Name the Basics of Partnership Formation - Form of agreement and intent
Agreement can be very informal - either ORAL; IMPLIED or WRITTEN Intent is to make a profit
What is a check?
A check is a type of draft that is payable ON DEMAND; payable to order of drawer or bearer Drawer - person writing the check Payee - person being paid Drawee - the bank
Who can accept an offer?
Must be accepted by intended party (offeree) Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds They must intend to accept
How does the Volcker Rule limit banking institutions?
Limits banking institutions from owning more than 3% of a hedge fund’s total ownership interest Limits banking institutions from owning interests in hedge funds that exceed 3% of their Tier 1 capital (Common Stock + Retained Earnings + non-redeemable; non-cumulative Preferred Stock)
When is an employee covered by Workman’s Compensation?
Employees injured on the job get protection; even if they messed up and caused the injury themselves Exception: If the employee intentionally harmed themselves; there is no Workman’s Compensation
What are the key points of the 1933 Securities Act; Regulation A?
Issuer can issue $5M of securities per year and be exempt if they file a notice with the SEC Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt
What is the difference between Express versus Implied duties of an accountant under contract?
Express: Contract specifies what accountant will do Implied: Accountant performs without negligence
What are the characteristics of a Mortgage?
Must be in writing Signed Description of property Delivered
What are the elements of a Firm Offer?
You offer to sell something at a price and keep that offer open for a set period of time 3 months max Only merchants can make firm offers Must be in writing and signed
How does perfection occur in a secured transaction?
By filing a financing statement By possessing the collateral
What is Implied Authority in an agency?
When authority is expressly granted; it is implied that the agent has the authority to carry out the duties Does not include authority to sell or alter a business
What key action will cause a bankruptcy discharge to be denied?
If a debtor fails to keep good records or falsifies documents; a discharge will be denied
When must a partnership agreement be in writing?
Must be WRITTEN if partnership activity falls within Statute of Frauds: A. Can’t be completed in 1 year B. Even if partners reside in different states; not necessary unless within Statute of Frauds C. Neither dollar amount of transactions nor purchasing of real estate has bearing on whether partnership agreement must be in writing
What is the difference between a post-dated check and a negotiable time draft?
A check is payable on demand; even if post-dated. A negotiable time draft is not payable until the date designated for payment.
What happens if an offeree accepts a contract but puts added stipulations?
It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree
What does the Volcker Rule require banking institutions to disclose?
Relationships with hedge funds must be fully disclosed to regulators
What age group is protected under Age Discrimination Laws?
They protect people ages 40 and above at companies where at least 20 people are employed
Under the 1933 Securities Act; Regulation D; what are Rules 504; 505 and 506?
Rule 504- Max Amount per year: $1M; Max Investors: Unlimited Rule 505 - Max Amount per year: $5M; Max Investors: 35 Unaccredited or Unlimited Accredited Rule 506 - Max Amount per year: Unlimited; Same as 505; but Unaccredited investors must be “sophisticated”
Accountant’s liability for negligence - What are the requirements?
DUTY - DAMAGES - RESULT Duty - Accountant must have had duty to perform with due care exercised by an average accountant. Damages - The client experienced actual damages. Result/Causation - The damages were as a result of the negligence.
What are the characteristics of a lease?
No writing required if < 1 year Warranty of habitability is implied Death does not terminate a lease Sale of property does not terminate a lease
Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?
If value of goods sold is >$500; sales contract must be in writing Exceptions: Merchants can enter into oral contracts for > $500 items. Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)
When does automatic perfection occur in a secured transaction?
Store sells a consumer good on credit - Store retains security interest A bank finances the purchase of a consumer good - Bank retains security interest
What is Apparent (Ostensible) Authority in an agency?
Apparent Authority is based on the third party’s perspective – they believe that the Agent has the authority to enter into a contract based on: *Prior dealings with agent *Agent’s title leads the third party to believe they can enter into a contract *The Principal hires the Agent to carry out duties that normally carry with them the rights to enter into contracts
What are the basic characteristics of a Chapter 7 bankruptcy (liquidation)?
Discharges all non-exempt debt Can only be filed every 8 years from previous Chapter 7 filing Voluntary or involuntary filing Certain businesses are disallowed from Chapter 7 bankruptcies - Railroads; Banks; Insurance companies; Savings & loans (think: 7th inning RBIs)
How are profits shared in a partnership?
Profit sharing is equal by default A. Unless partnership agreement says otherwise B. Unless specified; sharing of losses follows same pattern as sharing of profits
What is a trade acceptance?
Seller extends credit to Buyer Buyer agrees to pay Seller - Buyer has primary liability Seller is both Drawer and Payee - Seller has Secondary Liability
When is an offeror bound by a contract?
When they RECEIVE the acceptance. If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.
What are the tenets of the Occupational Safety and Health Act (OSHA)?
Employers should promote a safe workplace and environment for their employees to work in Injury records must be kept Penalties can be both o Civil - $1;000 fine per day o Criminal - Could include imprisonment Employer can require a search warrant for OSHA to investigate their facilities
What are the registration form options under the 1933 Securities Act?
S-1 – Long Form or S-2 and S-3 – Less Detailed and preferred by issuers
What is an Accountant’s Liability for Detecting Fraud (Under Normal Circumstances)?
It is not the accountant’s job to find fraud and they are not normally liable for not detecting it
What is personal property?
Tangible property; such as cars; equipment; etc. Intangible property such as patents; trademarks; copyrights; etc.
When does title and risk of loss transfer on a sale of goods?
If terms are: FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck) FOB destination: Title and risk transfers once item is delivered
What are the priority rules for payment in a secured transaction?
If two parties are perfected; then the first one to file wins If neither party is perfected; then the first one to attach wins
How is an Agency terminated?
*Both Agent and Principal agree to terminate *Principal fires Agent *Agent fires Principal *Agent breaches their contract by doing something like violating their obligation to act as a fiduciary to Principal
What are the requirements for a voluntary bankruptcy filing under Chapter 7?
Must pass means test Your income must be below the median income for your state (Note – median; i.e. middle; not mean; i.e. average) Credit card companies made it harder for people to declare Chapter 7 when they lobbied Congress in 2005
What is the Liability of General Partners in a partnership?
Joint Liability - Partners are collectively liable for debts/torts Several Liability - Partners are individually liable for debts/torts
What is the purpose of the negotiation of commercial paper?
Transfers ownership to another party
What will void an offer?
If offeror dies or becomes insane before acceptance; offer is void. Contract is binding if acceptance occurs before death/insanity.
What types of discrimination are prohibited for employers based on civil rights laws?
Sex Race Religion National Origin
Name the securities registered under the Securities Act of 1933.
Stocks Stock Options Stock Warrants Limited Partnership Interests - General Partnerships not allowed Bonds
When can a client be sued for failing to detect fraud?
When a normal audit following GAAS would have detected the fraud. When an accountant agrees to take on more responsibility than what is required under a normal audit. When accountant words the audit report to indicate this greater responsibility.
What are the three requirements for a gift?
Intent for it to be a gift Delivery of the gift Acceptance of the gift
What is a Warranty of Title?
The seller has the right to sell the good and no one else can stake claim to that good All items sold must have Warranty of Title Can NOT be disclaimed
What are the advantages of a creditor holding a lien in a secured transaction?
Creditor holds priority over claims to collateral vs. unperfected security interests Beats perfected security interests filed after lien attachment Exceptions: Purchase money security interest; which has a 10 day grace period to be filed Buyers purchasing in the ordinary course of business are immune from security interests held by merchants
How do you terminate Apparent Authority?
*Let the public know *Let the people or entities that the Agent previously interacted with know *In cases of death; or Principal is otherwise not competent to contract; ALL authority is revoked
What are the requirements for an involuntary bankruptcy filing under Chapter 7?
In some cases; your creditors can force you into Chapter 7 or Chapter 11 BK Creditors must be able to prove that they are not being paid on time (i.e. debtor is insolvent) or that within the past 120 days the debtor assigned a custodian of the secured property If 12+ unsecured creditors - at least 3 must file; claims must be in excess of $14;425 If less than 12 unsecured creditors - only 1 must file; claim(s) must be in excess of $14;425 Upon filing; a judge will declare an order for relief unless the debtor protests
Which assets may creditors of a partnership go after; and in which order?
Creditors must go after partnership assets first before suing partners individually
What is required to maintain the negotiability of a commercial paper?
Must be in writing Signed by drawer/maker Be without conditions for payment (other than limitations on payment sources) Amount of money must be stated Payable to order or bearer
What actions or circumstances will revoke a contract?
Offeror revokes and offeree receives revocation Offeree finds out prior to acceptance that offeror has sold the item In the case of an Option; offeror cannot revoke until the time of the option has elapsed Initial rejection by offeree doesn’t void the option.
What are the powers granted under the Environmental Protection Act?
EPA has the power to assess civil penalties for violating environmental laws like the Clean Air Act The EPA can sue violators Citizens can sue violators States can sue violators Citizens can even sue the EPA to force enforcement For hazardous waste sites: owners; operators; transporters; and lenders associated with the site can be held liable
Who can sue under the Securities Act of 1933?
Purchasers of securities only
When has an accountant committed fraud?
Misrepresentation - Accountant misrepresents MATERIAL fact(s) Scienter - Accountant commits scienter Damages - Client has actual damages. Reasonable Reliance - Client reasonably relied on the misinformation.
What are the rights of found property?
Lost property - Finder’s rights to property are less than Owner’s Abandoned property - Finder’s rights to property are greater than Owner’s
What is Warranty of Merchantibility?
This good will do its intended purpose Can be disclaimed
