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REGULATION > Chapter 8 Section 3: Business Structures > Flashcards

Chapter 8 Section 3: Business Structures Flashcards

1
Q

What goes into the formation of a general partnership?

A

Nothing. It can be formed by verbal or written agreement, or mere conduct

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2
Q

What liability does a general partnership have?

A

Unlimited personal liability for all partnership obligations

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3
Q

Who can manage a general partnership?

A

Owners manage directly or can appoint a managing partner

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4
Q

Is there transferability in a general partnership?

A

Not without unanimous consent

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5
Q

How does taxation work in a general partnership?

A

Flow through taxation

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6
Q

How is a limited partnership formed?

A

File certificate of limited partnership with state

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7
Q

What liability happens with a limited partnership?

A

General partner: unlimited personal liability

Limited partner: only investment is at risk

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8
Q

What does management look like under a limited partnership?

A

General partner: exclusive manager(s)

Limited: ordinarily does not manage

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9
Q

Is there transferability in a limited partnership?

A

Not without unanimous consent

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10
Q

How does taxation work for a limited partnership?

A

Flow through (but limited partners have passive loss restrictions)

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11
Q

How is a corporation form?

A

File articles of incorporation or corporate charter with the state

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12
Q

What liability comes with a corporation?

A

Shareholders are generally not personally liable beyond their investment

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13
Q

Who manages a corporation?

A

The Board of Directors, who appoints officers to run day-to-day operations

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14
Q

Is there transferability with a corporation?

A

Yes, unless they agree otherwise

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15
Q

How does taxation work with a corporation?

A

Income taxed at corpoate level and then again to shareholders when dividends are distributed

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16
Q

How are S Corps formed?

A

File Articles of Incorporation or Corporate Charter with the state, plus S Election

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17
Q

What does the liability look like in an S Corp?

A

Usually nothing beyond your investment

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18
Q

Who manages an S Corp?

A

The Board of Directors, who appoints the officers to run day to day operations

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19
Q

Is there transferability in an S Corp?

A

Yes, unless they agree otherwise. They can’t transfer to a foreign or entity shareholder.

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20
Q

What does taxation look like for an S Corp?

A

Flow through, but shareholders that aren’t managing have passive loss restrictions

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21
Q

How is an LLC formed?

A

File Articles of Organization with the state

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22
Q

What liability is there with an LLC?

A

Generally not liable beyond the investment

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23
Q

Who manages an LLC?

A

Members can manage directly or appoint a manager

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24
Q

Is there transferability in an LLC?

A

Unless stated otherwise, you can’t transfer without unanimous consent

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25
What does taxation look like for an LLC?
Flow through, but non-managing partners have passive loss restrictions
26
How is an LLP formed?
File Statement of Qualification with state
27
What liability is there in an LLP?
Generally not liable for partnership obligations, unless caused by their own negligence
28
Who manages an LLP?
Partners manage directly or can appoint a managing partner
29
Is there transferability in an LLP?
Not without unanimous consent
30
What does taxation look like in an LLP?
Flow through, but non-managing partners have passive loss restrictions
31
What are the advantages of a sole proprietorship?
Flow through taxation and transferability
32
What are the disadvantages of a sole proprietorship?
Personal liability and life ends with death of owner
33
How do you form a sole proprietorship?
You don't need to do anything.
34
What is the difference between a general partnership and a joint venture?
A joint venture is formed for a single transaction or project or related series of transactions or projects
35
What actions require approval by a unanimous vote under a general partnership?
Admitting new partners Confessing a judgment/admitting liability Making a fundamental change in the partnership business Changing the partnership agreement Assigning partnership property to others
36
What are management rights and voting power split in a general partnership?
Equally unless they agree otherwise
37
Is unanimous approval required for dissolution?
No, just one
38
What is a charging order?
Creditors attaching a partner's interest
39
Upon a partner's death, what are heirs entitled to?
The deceased partner's share of profits (not voting rights)
40
In a general partnership, how are losses allocated?
The same way profits are - usually equally
41
In a general partnership, are partners entitled to remuneration for services rendered?
No
42
Define dissociation
A change in the relationship of partners caused by any partner ceasing to be associated in the carrying on of the business. It doesn't necessarily end the business..
43
What are the dissociated partner's liabilities to the other partners?
They are still liable for debts incurred prior to dissociation, and may be held liable for new debts for two years, unless there is novation.
44
What is dissolution?
Winding up of the partnership
45
What is the order of the distribution of assets when a general partnership dissolves?
1. Creditors (including partners) 2. Return partner contributions 3. Distribute any remaining profit or loss
46
Does an LP have perpetual life?
Usually not
47
How are profits and losses allocated in an LP?
Usually according to capital contributions
48
Does the LP end when the LP dies? | How about the GP?
No | Yes
49
What is an LLC a hybrid between?
A corporation and partnership
50
How are voting rights and distribution of profit and loss determined in an LLC?
According to capital contributions
51
Does an LLC have a perpetual life?
No
52
What are the conditions to be an S Corp?
``` No more than 100 shareholders Shareholders are individuals, estates, or trusts Corp must be domestic One class of stock Foreign shareholders are prohibited ```
53
Does a corp have perpetual life?
Yes
54
What do promoters do?
Procure capital contributions for corporations
55
What items are to be included in the articles of incorporation?
name of corp name and address of registered agent names and addresses of incorporators number of shares authorized
56
What is the Ultra Vires Act?
If you decide to state our business purpose in your articles, and do something outside of that purpose, you are acting ultra vires. Whoever authorizes that action is liable to the corporation for damages caused by the act.
57
What does piercing the corporate veil mean?
Shareholders are personally liable if: They commingle funds Corp was inadequately capitalized at formation Committing fraud on existing creditors
58
Are bondholders owners?
No. They are creditors
59
What is cumulative voting?
If voting on directors, you can have one vote per director to do whatever you want with (you could use all of them to vote for one person)
60
What are the fundamental changes that require unanimous approval or dissenting shareholders are given appraisal rights for?
Dissolution Amendment Merger/Consolidation Sale of assets
61
What are appraisal rights for a dissenting shareholder?
You can demand to be bought out at fair value
62
What do directors do?
Appoint or remove officers, handle bylaws, set management compensation, and initiate fundamental changes
63
Who declares distributions?
Directors
64
Are directors individual agents? | Officers?
No | Yes
65
What do officers do?
Run the day-to-day
66
Can officers be directors?
Yes
67
Do officers need to be shareholders?
No
68
How are fundamental changes made in a C Corp?
Majority approval by board Corp notifies shareholders Shareholders give majority approval Articles are filed
69
Who has to approve mergers and consolidations and share exchanges? Who has to follow the fundamental change procedure?
Both parties approve mergers, consolidations, and share exchanges Both follow procedure, except in share exchanges, when only the one being acquired does

REGULATION (35 decks)

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