BLaw 300 Ch. 14

1. Distributorship (automobile dealership or Beer distributorship) 2. Chain-Style Business Operation (McDonald's or fast food chains) 3. Manufacturing or Processing-Plant Arrangement (Coca-Cola or other soft-drink bottling companies)

3 types of Franchises

Pass-Through Entity

A business entity that has no tax liability. The entity's income is passed through to the owners, and the owners pay taxes on the income

Limited Liability Company (LLC)

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership

Limited Liability Partnership (LLP)

A hybrid form of business organization that is used mainly by professionals who normally do business in a partnership. Like a partnership, it has a pass-through entity for tax purposes, but the personal liability of the partners is limited.

Distributorship

A manufacturer licenses a dealer to sell its product Automobile Dealership or Beer Distributorship

Limited Partner

A partner who contributes capital to the partnership but has no right to participate in the management and operation of the business. The limited partner assumes no liability for partnership debts beyond the capital contributed.

Limited Partnership (LP)

A partnership consisting of one or more general partners (who manages the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable only up to the extent of their contributions)

Member

A person who has an ownership interest in a limited liability company

Information Return

A tax return submitted by a partnership that only reports the income and losses earned by the business. The partnership as an entity does not pay taxes on the income received by the partnership

Articles of Partnership

A written agreement that sets forth each partner's rights and obligations with respect to the partnership

Partnership

An agreement by two or more persons to carry on, as co-workers, a business for profit Three essential elements: 1. A sharing of profits and lossses 2. A joint ownership of business 3. An equal right to be involved in the management of the business

Franchise

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services

1. Dissolution 2. Winding Up 3. Termination

Dissociation and Dissolution of an LLC

Winding Up

Ending business after the dissolution

Operating Agreement

In a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated

General Partner

In a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts

Joint and Several Liability

In partnership law, a doctrine under which a plaintiff can file a lawsuit against all of the partners together (jointly) or one or more of the partners separately (severally, or individually). All partners in a partnership can be held liable regardless of whether the partner participated in, knew about, or ratified the conduct that gave rise to the lawsuit.

Joint Liability

In partnership law, partners share liability for partnership obligations and debts. Thus, if a third party sues a partner on a partnership debt, the partner has the right to insist that the other partners be sued with him or her.

LO: 1 Advantages - Right to receive all profits - Easier and less costly to start a sole proprietorship - One does not need to file any documents with the government to start a sole proprietorship Disadvantages - Proprietor alone bears the burden of any losses or liabilities incurred by the business enterprise - Any lawsuit against the business or its employees can lead to unlimited personal liability for the owner of a sole proprietorship - Creditors can go after owner's personal assets to satisfy any business debts

LO: 1 What Advantages and Disadvantages are associated with the Sole Proprietorship?

LO: 2 A partner who commits a tort may be required to indemnify (reimburse) the partnership for any damages it pays - Unless, the tort was committed in the ordinary course of the partnership's business

LO: 2 What is meant by joint and Several Liability? Why is this often considered to be a disadvantage of doing business as a General Partnership?

LO: 3 The major advantage of the LLP is that it allows a partnership to continue as a pass-through entity for tax purposes, but limits the personal liability for the partners Ex: "Family limited liability partnership" (FLLP)

LO: 3 What advantages do Limited Liability Partnerships offer to entrepreneurs that are not offered by General Partnerships?

LO: 4 General partners, unlike limited partners, are personally liable to the partnership's creditors. - A limited partner who participates in management will be just as liable as a general partner to any creditor who transacts business with the limited partnership and believes, based on the limited partner's conduct, that he or she is a general partner.

LO: 4 What are the key differences between the rights and liabilities of General Partners and those of Limited Partners?

LO: 5 Limited Liability Companies are formed because entrepreneurs and investors like the idea of combining the tax advantages of a partnership form of business with the limited liability of the corporate enterprise. - Limited liability exists only so long as the limited partner does NOT participate in management.

LO: 5 How are Limited Liability Companies formed, and who decides how they will be managed and operated?

Franchisor

One licensing another (franchisee) to use the owner's trademark, trade name, or copy right in the selling of goods or services

Franchisee

One receiving a license to use another's (franchisor's) trademark, trade name, or copyright in the sale of goods or services

Entrepreneur

One who initiates and assumes the financial risks of a new business enterprise and undertakes to provide or control its management

Fiduciary Duty

Owes the other partners the duty of cary and loyalty - Partner must act in good faith for the benefit of the partnership

Statute of Frauds

Requires writing of partnership

Buyout Price

The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation

Articles of Organization

The document filed with a designed state official by which a limited liability company is formed.

Dissolution

The formal disbanding of a partnership or a corpoeration

Chain-Style Business Operation

The franchisee follows certain standards of operation McDonald's

Manufacturing or Processing-Plant Arrangement

The franchisor tells the franchisee how to make a particular product Coca-Cola / Soft-drink bottling companies

Winding UP

The second of two stages in the termination of a partnership or corporation, in which the firm's assets are collected, liquidated, and distributed, and liabilities are discharged

Dissociation

The severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business

Sole Proprietorship

The simplest form of business, in which the owner is the business. The owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business

Partnership by Estoppel

When personals who are not partners held themselves out to be so, the court may decide to impose liability as if partnership did exist