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Business Law > Sole, Partners, and LLC > Flashcards

Sole, Partners, and LLC Flashcards

1
Q

Paralegals are bound to the rules of ethics just as attorneys; Paralegals shouldn’t advise clients on ______ of a particular ________ ________.

A

paralegals shouldn’t advise clients on tax consequences of a particular business organization

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2
Q

taxes are paid based on the ________ _________.

A

allocated amount (“pass through taxation”)

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3
Q

Partnerships can purchase insurance to cover _________ ______.

A

personal liability

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4
Q

Sole proprietor’s business is an _______ _____ of him/herself. **enhance this explanation

A

alter ego;

**in this situation the owner and the business are indistinguishable

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5
Q

the minim number of people required for a

  1. sole proprietorship
  2. general partnership
  3. limited partnership
  4. limited liability partnership
  5. limited liability company
A
  1. sole: one (only)
  2. general P: two or more
  3. LP: must have at least one general partner and one limited partner
  4. LLP: two or more
  5. LLC: must have the company and its members
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6
Q

Duties owed by an AGENT (4)

A
  1. performance
  2. notification
  3. loyalty
  4. accounting of profits
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7
Q

Duties owed by Principal (3)

A
  1. compensation
  2. reimbursement and indemnification
  3. cooperation
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8
Q

Formation of agency occurs through _____, _____, or _____.

A
  1. express agreement
  2. implied agreement
  3. estoppel
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9
Q

Agents can have 1._______ authority or 2._____ authority to act for their principle. **enhance on each authority

A
  1. actual authority (which is express or implied)

2. apparent authority (where a reasonable third party would understand that an agent had authority to act)

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10
Q

UPA (uniform Partnership Act) and RUPA (revised uniform partnership act) in relations to dissolution; which one does AR have?

A
  1. under the UPA, dissolution of the partnership triggers a winding up, namely, a wrapping up of the business affairs of a partnership
  2. RUPA provides that a partnership may buy out the interest of a partner who leaves the partnership, and the partnership will continue its business
  3. AR has RUPA
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11
Q

When is an EIN necessary for a sole proprietor

A

when one wants to:

  1. hire employees
  2. have a solo 401k
  3. file for bankruptcy
  4. form a partnership or LLC
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12
Q

different business organizations have to use certain things to identify themselves as the organization, what are they:

A
  1. LLCs must have the words “limited liability company” or letters “LLC” or “PLLC” in their name
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13
Q

Full shield and Partial shield, what are they and which one does AR have

A
  1. Full shield states: states in which partners in an LLP are fully protected form personal liability, whether arising in tort or contract
  2. Partial shield states: states in which partners in an LLP retain liability for contractual obligations but have no personal liability for obligations arising in tort
  3. AR is a partial shield state
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14
Q

partnerships are 1.______ entities for some purposes, but are 2._________ of its partner for other purposes.

A
  1. separate entities

2. aggregates (combinations)

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15
Q

generally actions done in the ORDINARY COURSE of business do not require anything more than a 1._____ vote; if there are actions to amend articles or dissolve a Business Organization, the requirement, unless specified, must be 2._______.

A
  1. majority

2. unanimous

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16
Q

In AR, generally everything required to be filed is filed with the 1. ________, with the exception of the assumed name certificate which is filed with the 2. ________.

A
  1. Secretary of State

2. County’s Clerk

17
Q

limited partnerships have allocations based on 1. _______.
Whereas in general partnerships, it is 2. _______.
*** however, both are allowed to do what?

A
  1. the amount invested (allocations is determined on the basis of the value of the contributions made that have not been returned)
  2. equal allocations (regardless of investment)
    * ** Both can make agreements to modify this statutory standard.
18
Q

LLPs are generally governed by and found within the partnership statutes ***enhance this statement

A

4-46-1001, a partnership can agree to become a LLP if it is approved pursuant to the partnership agreement;
after the approval required by subsection (b), a partnership may become a LLP by filing a statement of qualifications

19
Q

A partnership agreement does not have to be in writing, however if a partnership chooses to become a LLP, that election has to be made and filed with ________.

A

the Secretary of State

20
Q

LLC is a separate entity, it is, however, taxed like a partnership, which means it is treated as a _______ or _______.

A

pass through or aggregate organization

21
Q

A sole proprietor is an _______ for all purposes.

A

aggregate

22
Q

when a claimant pierces the LLC’s veil, that person is essentially arguing that:

A

the LLC is not operating pursuant to statutory provisions and it allows the claimant to execute against the LLC members personal assets

23
Q

personal guaranty

A

the signing of a personal guaranty results in a partner’s or member’s personal liability for a debt or obligation for whatever that particular personal guaranty covers
** a partner can become liable for a limited partnerships debts if he executes a personal guaranty

24
Q

When is a principal liable for the torts of his agents? (3)

A
  1. principals are liable for an agent’s torts and acts committed in the COURSE AND SCOPE of the agency
  2. a principal cannot ratify a portion of an unauthorized transaction, and not ratify the whole of it
  3. one who recognizes another as his agent cannot excape liability for the agent’s acts unless he notifies the 3rd person of the termination of the relationship
25
Q

EIN comes from the _____.

A

IRS

26
Q

Limited partners

  1. role in the business
  2. their liability
  3. do they have to be named for state purpose
A
  1. Do NOT participate in managing the business
  2. liability is limited to the amount in which they invested in the business
  3. don’t have to be named in the secretary of state filing
27
Q

NEW general partners may usually be admitted to a LP with the ________ _______ ______ of all partners

A

unanimous written consent

28
Q

does a partner have a right to be compensated for all the time he spent on behalf of the partnership

A

NO

29
Q

What a partnership agreement CANNOT do (5 most important ones)

A
  1. vary the rights and duties
  2. restrict the right of access to books and records
  3. eliminate the duty of loyalty
  4. reduce the duty of care
  5. eliminate the obligation of good faith and fair dealing
30
Q

differences of an LP and an LLC

A
  • LP has limited partners that are usually just investors who are not involved in the day-to-day running of the business; also, the General partners who manages and control the business has unlimited personal liability
  • where as, a LLC allows ALL members to manage a company themselves (or to elect managers) without risk of losing their limited liability status
31
Q

Limited Liability Partnership are most often used by who and why?

A
  • groups of professionals such as doctors, accountants or architects (must provide LLP in their business name);
  • the LLP allows ALL the partners to take an active role in the management of the business while offering members some liability protection from actions of the other partners and the partnership an the partnership employees
32
Q

when does the protection of an LLP not exist (3)

A
  1. if a partner supervised or directed the partner who committed the act at the time the act was committed
  2. if the partner was directly involved in the act
  3. if the partner had knowledge of the act and failed to prevent or stop it
33
Q

a LLC is formed only when the 1. _________ are DELIVERED to the 2. ___________ for filing.

A
  1. articles of organization

2. secretary of state

34
Q

EVERY member in a LLC is consider an 1. ______ of the LLC, and the act of any member 2. _____ the LLC, unless the member acting so has no authority to act for the LLC in that particular manner.

A
  1. agent

2. binds

35
Q

LLC profit sharing rules:

A

unless otherwise provided in a written operating agreement, each member shall be repaid their contributions to capital and share equally in the profits and assets remaining; Interest is assignable

36
Q

LLC dissociation

A
  1. voluntary withdrawal
  2. assigns his membership interest
  3. voted out
37
Q

LLC dissolution (a LLC is dissolved when):

A
  1. there are no more members
  2. it is time for dissolution pursuant to the operating agreement
  3. written consent of all members

Business Law (2 decks)

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