Mod 25 Key Terms Business Structure Flashcards
0
Q
Articles of incorporation (corporate charter) are filed with the state contain…6
A
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
1
Q
Short form merger 3
A
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
2
Q
Incorporator said may be…
A
Promoters
3
Q
To be a partnership parties must be co-owners of…
A
A business, not co-owners of property
4
Q
A partnership must be operated for…
A
Profit
5
Q
Partnerships impossible to perform…
A
In one year must be in writing
6
Q
If a partner breaches the partnership agreement he is…
A
Liable to the other partners
7
Q
General partners are jointly and severally liable for…3
A
1 all partnership debts
2 contract obligations
3 all partnership torts
8
Q
General partners are agents…
A
Agents of the partnership and agents of each other
9
Q
A general partner upon termination must give…2
A
1 actual notice to old customers and
2 published notice to new customers
10
Q
Limited partnership consists of 2 or more parties formed by filing with…
A
A state
11
Q
A general partner may also be a…
A
Limited partner in the same partnership
12
Q
Limited and general partners may be either…
A
Secured or unsecured creditors of the partnership
13
Q
Limited partners have the right to inspect and copy…
A
Partnership books and records to specifically include the right to receive copies of any partnership tax returns
14
Q
Limited partners have no liability beyond…
A
Their capital contribution
15
Q
If limited partners participate in daily management they are…
A
Personally liable to any party reasonably believing they were a
general partner
16
Q
Limited partners may vote on the following 5 areas without losing limited liability
A
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
Q
Partner’s rights: most decisions require only…
A
A majority vote
18
Q
Partner’s rights:
Unless otherwise agreed, the following 5 require unanimous consent of all partners
A
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
Q
Partnership rights:
If division of profits is specified, but not losses…
A
Losses will follow profits
20
Q
In limited partnership, if it doesn’t state how to divide up profits and losses, then they are divided up based on…
A
Their capital allocations
21
Q
Each partner has the right to be…
A
Reimbursed for loans and advances made to partnership
22
Q
A partner is entitled to repayment for loans only…
A
After all other creditors are paid
23
Q
All partners and limited partners have a right to full information of partnership, which is…
A
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)
