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Flashcards in Mod 25 Key Terms Business Structure Deck (153):
0

Short form merger 3

1 Parent mergers with a 90%+ owned sub

2 only approval needed is from board of parent

3 only stockholder's of sub get appraisal rights

1

Articles of incorporation (corporate charter) are filed with the state contain...6

1 proposed name of corp and initial address
2 purpose of corp
3 powers of corp
4 name of registered agent of corp
5 name and address of each incorporator
6 number of shares authorized

2

Incorporator said may be...

Promoters

3

To be a partnership parties must be co-owners of...

A business, not co-owners of property

4

A partnership must be operated for...

Profit

5

Partnerships impossible to perform...

In one year must be in writing

6

If a partner breaches the partnership agreement he is...

Liable to the other partners

7

General partners are jointly and severally liable for...3

1 all partnership debts
2 contract obligations
3 all partnership torts

8

General partners are agents...

Agents of the partnership and agents of each other

9

A general partner upon termination must give...2

1 actual notice to old customers and

2 published notice to new customers

10

Limited partnership consists of 2 or more parties formed by filing with...

A state

11

A general partner may also be a...

Limited partner in the same partnership

12

Limited and general partners may be either...

Secured or unsecured creditors of the partnership

13

Limited partners have the right to inspect and copy...

Partnership books and records to specifically include the right to receive copies of any partnership tax returns

14

Limited partners have no liability beyond...

Their capital contribution

15

If limited partners participate in daily management they are...

Personally liable to any party reasonably believing they were a
general partner

16

Limited partners may vote on the following 5 areas without losing limited liability

1 dissolution of limited partnership
2 fundamental changes in limited partnership
3 admission or removal of general or limited partner
4 amending certificate of limited partnership
5 act as agent

17

Partner's rights: most decisions require only...

A majority vote

18

Partner's rights:

Unless otherwise agreed, the following 5 require unanimous consent of all partners

1 admit new general partners or new limited partners
2 transfer partnership property to others
3 change written partnership agreement
4 admit liability in law suit or submit claim to arbitrator
5 fundamental changes in partnership business to include selling goodwill

19

Partnership rights:

If division of profits is specified, but not losses...

Losses will follow profits

20

In limited partnership, if it doesn't state how to divide up profits and losses, then they are divided up based on...

Their capital allocations

21

Each partner has the right to be...

Reimbursed for loans and advances made to partnership

22

A partner is entitled to repayment for loans only...

After all other creditors are paid

23

All partners and limited partners have a right to full information of partnership, which is...

The right to inspect and copy books and records

24

Each partner is not a co-owner of...

Partnership property

25

Each partner has a right to use partnership property for...

2) But no other right to...

Partnership purposes

2) use property without consent of other partners

26

A partner cannot transfer or assign his individual interest in...

Partnership property to others

27

Partnership property may not be attached by...

An individual partner's creditors

28

An general or limited partner may assign or sell...

Their partnership interest

29

Assignor still remains partner and is still...

Liable for partnership debts

30

The partnership will not dissolve from...

Assignment of partnership interest

31

An assignee does not become a partner without...

The consent of all other partners

32

The only right an assignee has is the right to...

Receive the assignor's share of profits

33

The assigned is not liable for...

The assignor's share of losses

34

3 steps required for partnership to formally end

1 dissolution
2 winding up or liquidation
3 termination

35

Dissolution, what is it caused by?

Caused by any partner ceasing to be associated with business

36

What does dissolution terminate and not terminate?

Terminates actual authority

does not terminate apparent authority

37

Winding up or liquidation

Settlement of partnership affairs

38

Termination

Completion of winding up process

39

Changes in limited partners do not...

Dissolve partnership

40

Any partner can dissolve the partnership by simply withdrawing, even if...

Prohibited by partnership agreement

41

If partnership agreement is breached by partner...

Partner is liable

42

Dissolution may occur by operation of law. 3 examples

1 death of partner
2 bankruptcy of partner or
3 bankruptcy of partnership

43

Exception: under Revised Uniform Partnership Act. Partner's that own majority of partnership may choose to...

Continue general partnership within 90 days of partner's withdrawal, death or bankruptcy

44

Upon dissolution, non continuing partners are...2

1 credited with their profits or charged with losses

2 liable to creditors

45

Upon dissolution, non continuing partners are liable to creditors even if...

Continuing partners agree to hold them harmless

46

Upon dissolution, creditors of old business are...

Creditors of the new business

47

Upon dissolution, a new partner has...2 for liability

1 Liability limited to his share of partnership property

2 not liable to creditors of old partnership

48

Order of distribution in dissolution of general partnership 4

1 pay creditors
2 pay loans made by partners to partnership
3 distribute capital contributions made by partners
4 distribute profits

49

Partnership creditors have first claim on partnership assets, but they may only sue a partner personally after...

All partnership assets are exhausted

50

Most states require 2 members to form a...

LLC

51

3 key areas of LLCs differing from other business forms

1 liability advantage

2 participate in management

3 federal tax advantage

52

All members in LLC have...

Limited liability and can participate in management

53

An LLC must file its articles of organization with...

The state

54

Operating agreement

2) is it filed with the state?

Agreement with LLC members (like a partnership agreement)

2) no

55

2 main methods of managing an LLC

1 member managed

2 manager managed

56

Member managed LLC 2

1 Each member has equal right unless otherwise agreed and

2 each member has actual and apparent authority to bind LLC

57

LLC may be managed by...

Managers elected by members

58

Manager managed LLC 2

1 members have no actual or apparent authority unless also a
manager

2 LLC managers have same limited liability as LLC members

59

LLC member rights:

3 rights determined by operating agreement

rights to profits, losses and distributions

60

LLC member rights:

Unless otherwise agreed, a member has the right to...

Assign his interest in the LLC

61

LLC member rights:

Unless otherwise agreed, a member has the right to assign his interest in the LLC 2

1 assignment doesn't dissolve LLC, assignee doesn't become
member

2 assignee only receives the right to receive assignor's share of distributions

62

An LLC is dissolved in much the same manner as...

A partnership

63

In most states remaining members may continue LLC by...

Unanimous consent

64

LLP is treated by law as...

A general partnership for most purposes

65

In an LLP, partners in LLP are...

general partners

66

In an LLP, partners are not jointly and severally liable for...3

1 partnership contracts

2 debts

3 torts

67

An LLP is taxed as...

A partnership

68

LLP must file with...

State

69

Joint venture

Business association of 2 or more owners acting together for profit
For limited purpose and limited duration

70

Joint ventures are usually for...

A single project

71

Joint ventures are treated as...

A Partnership in most cases by law

72

Death of joint venture does...

Not dissolve joint venture

73

Corporations are formed by...

Promoters who are primarily liable for preincorporation contracts

74

If a corporation accepts a promoter's contract...

Both corporation and promoter are liable

75

Corporation cannot...

Ratify promoters contracts

76

Promoters remain primarily liable unless there is...

Novation

77

Novation

Release

78

Corporations are formed by filing Articles of Incorporation which must contain 2

1 stock provisions

2 names

79

Stock provisions 3

1 Amount authorized shares

2 voting stock

3 capital structure

80

Articles of incorporation:

names 3

1 name of corporation

2 it's registered agent

3 names of all incorporators

81

Common shares characteristics 2

At least one class and have voting rights

82

Preferred stock has special rights over other stock usually as to...

Dividends

83

Cumulative dividends

Dividend carry overs to future years if not paid

84

Treasury stock 4 characteristics

1 no preemptive rights
2 no voting rights and no dividends
3 corporation can't buy if it will become insolvent
4 can be distributed as stock dividend or resold at less than par

85

Watered stock

Selling par value at less than par in original issue

86

Watered stock, initial purchaser and all others with notice are...

Liable for difference in price

87

Foreign corporation

Corporation doing business in state other than state of incorporation

88

Foreign corporations must obtain a...

Certificate of authority from any state where they are doing business

89

Merger of A&B

Combine and one survives

90

Consolidation of A&B

Combine and new company emerges

91

Approval steps for merger/consolidation 3

1 submit formal palm of merger to both boards and get majority approval
2 submit to all stockholder's and get majority approval
3 submit plan to Secretary of State

92

For a merger plan submitted to Secretary of State, the Secretary of State issues a...

Certificate of merger upon approval

93

When submitting merger plan to stockholder's and getting majority approval, notice must be given for...

Time, date and place

94

Right of appraisal

Dissenting shareholders can buy out of corporation at FMV

95

Piercing the corporate veil define

Disregarding corporate form and holding stockholder personally
liable

96

3 situations where stockholder's are liable under piercing the corporate veil

1 fraud

2 under capitalization

3 commingling of funds

97

2 management rights of stockholder's

1 elect board of directors

2 vote on fundamental changes to corporation

98

Stockholder's voting on fundamental changes to corporation 4

1 amending articles of incorporation
2 dissolution
3 selling substantially all of corp. assets
4 mergers unless short form merger

99

Investors can inspect books and records at reasonable times if...

They have proper motive

100

Pre emotive rights are only available if...

Corporation permits

101

Preemptive rights are not available for...2

1 treasury stock

2 if stock is traded for property or services

102

Derivative suit is brought by...

Large group of stockholder's in the name of the corporation

103

In derivative suit stockholder's must show...

2) If successful recovery goes to...

Harm to corporation

2) goes to corporation

104

Stockholder voting agreements are enforceable in most states if...

They are in writing

105

When are directors liable for dividends?

Wrongful declaration of dividends

106

Dividends become a corporate debt only after...2

1 after declaration and

2 public notice stockholders

107

One a dividend is duly declare it can't be revoked unless...2

For fraud or illegality

108

Once a dividend is duly declared, stockholder's become...

Unsecured creditors

109

Stock dividends don't reduce corporate assets or increase stockholder's percentage of ownership or wealth, therefore they have no effect on...

Earnings for tax puposes

110

Principal duties of directors

Handle overall management of corp and set policy

111

Principal duties of officers

Handle day to day affairs

112

Officers are selected by...

Board of directors

113

Business judgement rule

Officers and directors not liable if acted reasonable and in good faith

114

Directors can usually rely on reports of...

Officers and agents

115

Officers and directors are liable if...

Negligent

116

Officers and directors may make personal profit on deal with their own corporation in 2 cases

1 they make full disclosure and don't participate in approval process

2 absent pre approval, only if deal is fair and reasonable for corp

117

Indemnification of officers and directors

Reimbursement for losses in lawsuit if acting in their corporate
capacity

118

Directors and officers may be indemnified by corporation if...

They win lawsuit

119

If officers and directors lose the law suit indemnification may require...

Court approval

120

Voluntary dissolution of a corporation requires...2

1 resolution is drawn up by the board of directors and

2 approved by majority of stockholder's

121

Involuntary dissolution requires...

Court action

122

State can request court dissolution of corporation for...3

1 fraud

2 illegality or

3 no business activity

123

Stockholder's can request involuntary corporate dissolution if corporation is...3

1 hopelessly deadlocked

2 acting illegally or oppressively or

3 for waste of corporate assets

124

Upon dissolution first creditors are paid and then shareholders receive their...

Pro rata share

125

Silent partner...2

1 one who does not help manage

2 has personal unlimited liability

126

In a sole proprietorship, business is not a...

Separate legal entity apart from its owner

127

If business is operating under name other than that of sole proprietor, most states require that it...

File fictitious name statement with government

128

Upon partner's death, his/her estate is entitled to deceased partner's...

2) but the estate is not entitled to...

Charge of profits and capital

2) not entitled to any specific partnership property

129

Upon partners death, remaining partners have duty to...

2) Heirs do not automatically become...

Account to heirs for value of interest

2) partners

130

4 other activities limited partners are allowed to engage in without risk of losing unlimited liability

1 6 surety for limited partners
2 consulting with general or limited partner about partnership
3 bring derivative suit on behalf of limited partnership
4 voting on loans of limited partnership

131

Generally joint venture is not required to file a...

Document or certificate with the state

132

Laws for LLCs generally governed by

Revised Uniform Limited Liability Company Act (RULLCA 2006)

133

LLC must be formed according to...

LLC statue in the state in which formed

134

General partners that convert partnership to LLC...

Retain liabilities they had with partnership

Only have limited liability with future transactions

135

LLC is foreign LLC in other states in which it does business and laws of...

Laws of state in which it was formed typically govern LLC in those
Other states

136

LLC is a separate legal entity so it can...

Sue or be sued in its own name

137

Foreign LLC must register with the Secretary of State and obtain certificate of authority to...

transact business in state or it can't sue in state courts

138

To form an LLC 1 or more persons may act as organizers by...

Filing Certificate of Organization with Secretary of State

139

LLC may be amended by filing an...

Amendment with Secretary of State

140

There is no limit to...

The number of member in an LLC

141

When LLC is manager managed, only...

2) if LLC is member managed...

Managers have authority to bind LLC to contracts to LLC

2) all members have authority to bind LLC to contracts to LLC

142

LLC is bound to contracts that...2

1 LLC has authorized under agency law or

2 are made in ordinary course of business

143

In an LLC, a member who is not a manager has no right to compensation for...

2) What's the exception?

for services performed

2) entitled to compensation for services performed in winding up
The LLC

144

LLC is required to reimburse members and managers for...

Payments they made in name of LLC

145

Dissolution of LLC may require...

Filing dissolution document with state

146

Majority of states require majority of partner approval to...

Become LLP (not unanimous)

147

Most states allow LLP to be formed so the general partners have no personal liability for...

Contractual obligations of firm

148

Partners in LLP have no personal liability for debts arising from...

Torts of LLP

149

Partners have personal liability in LLP if...2

1 partner actually committed tort

2 those supervised under partner committed tort

150

In general most provisions for Subchapter C and Subchapter S corporations are similar such as...2

1 limited liability for shareholders

2 structure of corporate management

151

Main distinction between S corps and C corps is...

Tax treatment

152

In professional corporations, professionals retain liability for...

Professional acts (malpractice)

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