BLAW Chapter 12- Business Organizations

Creating Corporation

- Articles of Incorporation - Incorporators hold first org meeting (BOD, Bylaws, Rules and issue corp stock)

Corporation

- Can sue and be sued - Have liability - It has constitutional rights (except self-incrimination) - Liable for agents actions and contracts - Shareholders (hire), BOD (hire), Managers (hire), Employees

How to terminate partnership

- Change in composition of the partners - Death, bankruptcy, withdrawal of partnership - If terminated, partnership must be reformed

General Partners

- Day to Day operations - Liable for the remaining amount

Limited Partners

- Do not manage business - Not liable beyond their contributions - Become general when they start to manage day-to-day activities - Right to profit, accounting, dissolve - Dissolve the same way you would for Partnership

Professional Corporations

- Doctors - Individuals prown to law suites - Limited Liability, allows them to pool assets/liability

Dissolution of Franchises

- Explicit events - Expiration time - Franchisor's right to terminate - Dunkin Donuts (pulled franchise)

Piercing the Corporate Veil

- Fraud, undercapitalization, or failure to follow corporate formalities "Shell corporations" - Prove Legal form is sham - Once you pierce the vail, the owners are personally liable for all corporate liability

Business Judgement Rule

- Honest mistakes in judgement - Directors and Managers are immune from liability - If they are acting in good faith and if there is a reasonable basis for their decisions

Close Corporation

- Limited number of shareholders - Family Farms - Shares not openly sold

Limited Liability Company

- Members not partners - Members will pick either a member or an outside manager to run business - Provides limited liability and extended period time ( LLC will continue if members are terminated

Sole Proprietorship

- Owns all business - Responsible for control, management, liabilities, profits, hiring - Capital comes from owner's resources or borrowed - Business profits are taxed personally - Record keeping is owners discretion

Transferability of Ownership Interest

- Sole Proprietorship: Selling assets not business -

Limited Partnership

- State created to legalize entity - Limited Liability (Only liable for the amount invested in the company) - Limited partners and general Partners - Must have written agreement (Certificate of Limited Partnership)

S Corporation

- Tax Vehicle that is used for limited corporations - One class of stock

FTC Franchise Rule

- They have to provide a disclosure statement - When violations occur, they can be criminally and civilly penalized

Partnership

- Two or more persons - Both control profits, operations - May be sued as an entity - Any entity (corporation) can form partnerships - Not required to have in writing - Fiduciary Duty - Everything is divided equally, unless stated otherwise - Dissolution (determined at the start) (when partnership dissolves)

Franchises (Three Types)

1. Product Distributorships (ford Dealership) 2. Trademark. Trade-name Licensing (Coca-Cola) 3. Business Format Franchising (McDonalds) *** Needs to be in writing (Quality needs to be maintained)

Major forms of Business Organizations

1. Sole Proprietorship 2. Partnership 3. Limited Partnership 4. Corporation ( Close Corporation, S Corporation, Professional Corporations) 5. Limited Liability Company

Process of reformation of partnership

1. Termination 2. Winding up (sell capital, complete unfinished business 3. Dissolution (count for everything, paying off debts, dividing profits) - Both are responsible for entire amount (all could be collected from one partner)

Franchisor

Grants right to sell goods or services

Franchisee

Sells the goods and services for a franchise fee

Joint Venture

Temporary Partnership (Agreement to do something over a period of time)

UPA and RUPA

Uniform Partnership Act and Revised Uniform Partnership Act... - Courts look for guidance when partnership agreement silent - fill in gaps/missing terms in an agreement

Statute of Frauds

What type of contracts that have to be in writing

Fiduciary duty

Work for the benefit of the partnership (Latta v Kilbroun)

Certificate of Limited Partnership

Written agreement identifying who is liable (General and Limited Partners)