Business Structures Flashcards
What is the simplest form of business organization?
What is the biggest risk?
Sole proprietorship
Unlimited personal liability
Can a sole proprietorship have employees?
YES
Does the Federal government typically require a formal filing for a sole proprietorship?
NO
What are partnerships governed by?
The Uniform Partnership Act (UPA)
How many people does it take to form a partnership?
2 or more
Does a partnership have to be a formal agreement?
No, can be no agreement at all
How much tax does a partnership pay?
Zero.
Files return and all income and loss flows through to partners.
What is the disadvantage of a partnership?
unlimited personal liability for all partners in GP
Does the Partnership Agreement have to be in writing?
Only if its impossible to complete within one year.
What is a PARTNERSHIP AT WILL?
When two or more parties carry on as co-owners of a business without any agreement.
Does a partnership have PERPETUAL EXISTENCE?
NO, unlike a corporation.
If no written partnership agreement exists, how are debts distributed?
All partners deemed equal.
Can a union or a charity be a partnership?
NO, must have a FOR-PROFIT motive.
If a partnership’s purpose is impossible to complete within 12 months, what must be done?
Must have explicit agreement in writing.
What is some “evidence” of a partnership?
- Sharing of profits
- Common business ownership
- Management rights
Partnership’s authority to bind the partnership to contracts stems from what law?
AGENCY LAW
What is TORT LIABILITY in a partnership?
Joint and several (SEPARATE) liability.
A partner who commits a tort in the ordinary course of business creates a liability for HIMSELF AND FOR OTHER PARTNERS.
The right to manage the partnership cannot be assigned without
unanimous consent of ALL partners
Can partnership property assets be assigned or inherited?
NO, because they belong to the partnership.
May the ownership by general partners be unequal?
YES
Is a general partnership a separate legal entity?
YES
If Partner A originally contributed partnership property, can they take the property from the partnership?
Once property is deemed partnership property, no partner can take that property from the partnership, even if that partner originally owned and contributed it.
Also, a partner may not assign partnership property.
Who can assign partnership property to creditors?
The partnership itself
What is the definition of “partnership interest”?
The percentage of partnership capital and surplus owned by an individual partner.
The interest is assignable, attachable, and inheritable.