Forms of Business

Question 1

Sole proprietorship wrt dissolution

Answer 1

Dissolved on death; can pass down assets and liabilities

Question 2

Agreement used to form partnership

Answer 2

Articles of partnership

Question 3

Partnership wrt liability

Answer 3

Liable by interest (i.e. share of profits and returns on capital)

Question 4

Partnership wrt legal entity

Answer 4

Considered own legal entity

Question 5

Partnership wrt agency

Answer 5

Partners are mutual fiduciaries and agents of the partnership

Question 6

Partnership by estoppel

Answer 6

Misrepresentation of partnership relied upon binds actions on partnership

Question 7

Joint and several liability

Answer 7

Partnership can be sued all together or individually.

Question 8

If one partner is responsible for a tort

Answer 8

Must repay partnership

Question 9

Limited partner

Answer 9

Only liable to degree of investment but has no management interest

Question 10

Dissociation of partnership wrt liability

Answer 10

2 years liability.

Question 11

Dissociation of partnership wrt existence

Answer 11

Continues to exist until all business affairs tied up

Question 12

Dissociation of partnership wrt agency

Answer 12

No duty of loyalty

Question 13

Dissociation of partnership logistics

Answer 13

Requires notification

Question 14

LLP

Answer 14

Limits liability for errors of partners; partnership is liable entity

Question 15

LLP typically used with

Answer 15

Professionals

Question 16

LLP rationale

Answer 16

Tax benefits of partnership with limited liability for partners

Question 17

LLC rationale

Answer 17

Tax advantage of partnership with the limited liability of corporation

Question 18

LLC wrt tax

Answer 18

Taxed individually on income (i.e. no double taxation)

Question 19

LLC agreement

Answer 19

Operating agreement

Question 20

LLC partners

Answer 20

Members

Question 21

Manager of LLC must be

Answer 21

Member

Question 22

Who can be a member of LLC?

Answer 22

Corps, partnerships (i e. not just humans but also legal entities)

Question 23

Tax relevance of entity

Answer 23

Entity pays taxes as a person

Question 24

Close corporation

Answer 24

Restrictions on transfer of shares

Question 25

Typically closely held corporation is

Answer 25

Family business

Question 26

S-Corp

Answer 26

Taxed as partnership with special requirements

Question 27

First S-Corp requirement

Answer 27

Domestic

Question 28

Second S-Corp requirement

Answer 28

Not members of an affiliated group of corporations

Question 29

Third S-Corp requirement

Answer 29

Less than 100 shareholders

Question 30

Fourth S-Corp requirement

Answer 30

One class of stock

Question 31

Fifth S-Corp requirement

Answer 31

Does not hire aliens

Question 32

S-Corp tax advantage

Answer 32

Losses can be used to offset income taxation

Question 33

Corporate powers can be classified as:

Answer 33

Express (laid out in articles of incorporation), implied (legal and necessary to carry out business), or ultra vires (outside scope of charter)

Question 34

Corporate organizing document

Answer 34

Articles of incorporation

Question 35

Financing of a corporation

Answer 35

Stock = equity interest; bond = no ownership interest.

Question 36

Caveat to public trading

Answer 36

More regulations; loss of control

Question 37

When do stockholders receive dividends

Answer 37

On vote from board of directors

Question 38

Stockholders wrt corp dissolution

Answer 38

Last to be paid

Question 39

Stockholder degree of control over corporation

Answer 39

Only vote on directors and major issues

Question 40

Common vs. preferred stock

Answer 40

Common stock takes lower priority for dividends and distribution of assets on dissolution

Question 41

Dissolution of corporation can occur via:

Answer 41

Act of state legislature, shareholder/board of directors vote, expiration of articles, unanimous action by shareholders, court decree,

Question 42

Winding up

Answer 42

Liquidation of assets.

Question 43

Receiver wrt winding up

Answer 43

Appointed when creditors force liquidation