Unicorporated entities Flashcards
(18 cards)
What is a sole proprietor
A business that is run and owned by one natural person. There is no legal distinction between the owner and the company.There is no perpetual succession and all assets belong to the owner.
What is an unincorporated partnership
A legal relationship between at least two parties in which they both contribute towards the business with the aim to receive mutual material benefit.
What are the essential elements of a partnership
Each partner must make a contribution (can be a future one), business must be carried on for the joint benefit of the partners, objective must be to make a profit and there must be a legitimate contract.
What is a trust
A trust is a legal relationship created by a trust deed. The relationship is created by a founder/donor who places assets under the control of a trustee. This is done to benefit the founders beneficiaries.
What are the three different types of trusts
Testamentary trust, inter-vivo and bewind
What is a partnership fund
A partnership is not a juristic person so the assets of a partnership are jointly owned in a fund
What is an universal partnership
A partnership where are assets are evenly shared and profit is split
What is a silent partner
A partner that is not involved in managing the business and if therefore not liable to creditors as they are usually not known
What is a partnership en commendite
A silent partner who is liable to a predetermined amount
What are the rights of a partner
the right to share in profits, the right to participate in management, right to inspect the books, right to share in assets upon dissolution
What are the duties of a partner
Duty to make a contribution, duty to exercise the same care they would for their own affairs, duty to be liable, duty to disclose, duty to avoid conflict of interest, duty to acquire benefits for the partnership
Contracting on behalf of partnership
You have to contract with each partner as it is not a juristic person. There must be a valid agreement and authority.
Explain the outcome of mutual mandate in partnerships
It is similar to implied authority. If a partner contracts in the ordinary course of business the third party can enforce the contract as mutual mandate trumps agreements between partners.
Why do people use trusts
Allows for efficient distribution of assets upon founders death
Explain the different types of trusts
Testamentary: Founded in will
Inter vivos: Founded during ones lifetime
Bewind: beneficiary owns assets but does not have control over them
What are the requirements for a trust
Must be intention to create a trust, must be lawful, assets must be ascertainable, there must be certainty in the terms and there must be beneficiaries
What are the duties of a trustee
Must act with care, skill and diligence. Must act in good faith and exercise discretion and must open a separate trust account. Must not expose assets to undue risk
What is a business trust
Similar to that of an ordinary trust but trustee can carry on business and trade. Beneficiaries buy into trust and are able to sell/cede etc their interests.
