Business Law {15,17,18,19,20,21,22}
S corportation
- a closely held corporation that meets the qualifying requirements specified in subchapter s of the internal revenue code. -it can avoid the imposition of income taxes at the corporate level while retaining many of the advantages of a corporation, particularly limited liability qualifications: must be a domestic corp, must not be a member if an affiliated group of corporations, shareholders must be individuals, estates or certain trusts & tax-exempt organizations, must not have more than 100 shareholders, must have one class of stocks, no shareholder may be non-resident alien. -taxed like a partnership, so the corporate income passes through to its shareholders, who pay personal income tax on it.-eliminates double taxation -due to LLC and LLP offering similar tax advantages and greater flexibility, this has lost some of its appeal
Cram-Down provision
- even if only one class of creditors has accepted the plan, the court may still confirm the plan -Before the court can exercise this right, it must be demonstrated that the plan does not discriminate unfairly against any creditors and is fair and equitable -Employed to obtain a Ch 11 bankruptcy, reorganization plan, while there are still objections from one or more creditors. Allows bankruptcy courts modify loan terms subject to certain conditions to have all parties happy.
buy-sell agreement
-"buyout agreement" -provides for one or more parties to buyout the others or other, should the situation warrant. -agreeing beforehand on who buys what, under what circumstances , and if possible, at what price may eliminate costly negotiations or litigation later -if a partner's dissociation does not result in dissolution of the partnership, a buyout of the partner's interest is mandatory -a withdrawing partner receives the same amount through a buyout that they would receive if the business was unwinding.
holding comany
-"parent company" -a company whose business activity consists of holding shares in another company. -usually in a low tax or no tax offshore jurisdiction (hong kong, Dubai, etc.) -companies do this because these countries usually have low tax rates thus they transfer their cash, bonds, stocks, and other investments so that they will be taxed at these low rates
publicly held corporations
-"public company" -private corporation -any company whose shares are publicly traded in a securites marked, such as NASDAQ
Minimum wages
-$7.25 -Congress periodically revises this
bankruptcy law
-2 goals: protect debtor by giving them a fresh start, free from creditors claims & providing a fair means of distributing a debtor's assets to creditors -federal law -held in bankruptcy courts, which under the authority of US district courts -bankruptcy code in contained in Title 11 of the United States code [ch 7-liquidation proceedings, ch 11-governs reorganizations, ch 12 & 13- provide for adjustment of the debt of parties with regular incomes
flow-through entity
-A flow-through entity is a legal business entity that passes income on to the owners and/or investors. Flow-through entities are a common device used to limit taxation by avoiding double taxation. Only the investors/owners are taxed on revenues, not the entity itself. -dont pay income taxes at the corporate level Follow us: Investopedia on Facebook-partnership itself pays no taxes and only is responsible for filing an information return
Writ of attachment
-A form of prejudgment process in which a court orders the attachment or seizure of property specifically described in the writ. The property is seized and maintained in the custody of a designated official, who is usually a U.S. Marshal or law enforcement officer, under court supervision.
Guarantor
-A guarantor is a person who guarantees to pay for someone else's debt if he or she should default on a loan obligation. A guarantor acts as a co-signor of sorts, in that they pledge their own assets or services if a situation arises in which the original debtor cannot perform their obligations. -has to be written
Garnishment
-A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor. The third party in such a case is generally the individual's employer and is known as the garnishee. Garnishments are typically used for debts such as unpaid taxes, monetary fines and child support payments. -in possession of a third party -postjudgement remedy
Formation of the agency relationship
-Agency by agreement(express written contract or an oral agreement) -Agency by Ratification(if the principal affirms the contract by either word or action) -Agency by Estoppel(when a principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on this belief) -Agency by Operation of Law(when an agent is unable to contact the principal and the agent's failure to act outside the scope of her or his authority would cause the principal substantial loss)
Rights and Remedies of Agents and Principals
-Agent has the right to perform agency duties without interference by the principal -When one party to the agency relationship violates his or her duty to the other party, the remedies available to the non-breaching party arise out of contract and tort law -Remedies include monetary damages, termination of the agency relationship, an injunction, and required accountings
Implied Authority
-Agent has this to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency -can also be implied by custom or inferred from the position the agent occupies -ex. Guy manages grocery store, his contract never states that he has to have customer contact, its implied that he has to have customer contact
Reaffirmation agreement
-Agreement to pay a debt dischargeable in bankruptcy -n agreement made between a debtor and a creditor to repay some or all of a debt. Reaffirmations are made on a purely voluntary basis by the debtor. The bankruptcy code stipulates that the debtor's attorney must file a statement with the court affirming that he or she can repay the debt without incurring further personal financial harm. -Debt owed to a family member, physician bank, or some other creditor-even though the debt could be discharged in bankruptcy
Preferred Creditor
-An individual or organization that has priority in being paid the money it is owed if the debtor declares bankruptcy. Because bankrupt entities do not have enough money to fulfill all of their financial obligations, some investors that are owed money will get paid in part or not at all. A preferred creditor has a first claim to any funds that are available from the debtor. -Trustee cant recover property if the property is sold to an innocent third party, can force preferred creditor to pay the value of the property
Discrimination
-Based on Age(Age Discrimination in Employment Act of 1967) -Based on Disabilities(Americans with Disabilities Act of 1990)
Defenses to Employment Discrimination
-Business Necessity(ex. employer argues that a high school diploma is a necessity to be able to perform the job at a required level of competence -Bona Fide Occupational Qualification(courts have restricted the BFOQ defense to instances in which the employee's gender or religion is essential to the job. ex. a womens clothing store only hiring women if part of the salesperson's job involves assisting women in the dressing rooms) -Seniority systems(workers with more years of service are promoted first or laid off last.)
Principal's Duties to the Agent
-Compensation -Reimbursement and Indemnification -Cooperation -Safe Working Conditions
Creditors Composition Agreement
-Contract between a debtor and the creditors by which the debtors debts are discharged by payment of a sum less than the amount that is actually owed
Defenses of the surety and guarantor
-Contract has to be modified without consent to be discharged -If the creditor fraudulently induces surety or guarantor, then they can assert fraud
Business Judgement Rule
-Corporations director will not be held liable to the corporation or to its shareholders for honest mistakes of judgement and generally bad business decision -Director takes reasonable steps to become informed about the matter, He or she has a rational basis for the decision, there has to be no conflict of interest between the director's personal interest and that of the corporation
Workouts
-Creditors may prefer private, negotiated adjustments of creditor-debtor relations -Much more flexible and much more conducive to a speedy settlement
Debtor in Possession
-DIP's role is similar to that of a trustee in liquidation -Entitled to avoid preferential payments made to creditors and fraudulent transfers of assets -Debtor who filed for Ch 11 bankruptcy, remains in control of their business -Seek court approval for some business activity
Artisans Lien
-Device created at common law through which a creditor can recover payment from a debtor for labor and materials furnished in the repair of personal property -possesory -I'm fixing your guitar, you dont pay, I keep guitar -lienholder have express or implied to provide services on a cash, not a credit, basis -Lien is terminated once the item is voluntarily surrendered -Usually take priority
Dividend
-Distribution of corporate profits or income ordered by the directors and paid to the shareholders in proportion to their respective shares in the corporation -Retained earnings(all states allow dividends to be paid from the undistributed net profits earned by the corporation -Net Profits(some states allow dividends to be paid from current net profits without regard to deficit in prior years -Surplus(a number of states allow dividends be issued by any kind of surplus)
Types of franchises
-Distributorship: (franchisor licenses a dealer to sell its product (car dealership) -Chain-Style Business Operation: (franchise operates under a franchisor's trade name) (fast food) -Manufacturing Arrangement or processing plant arrangement: (franchisor transmits to the franchisee the essential ingredients or formula to make a particular product)
Employee Privacy Rights
-Electronic Monitoring(more than two-thirds of employers monitor their employees, this monitoring includes e-mails, blogs, instant messages, tweets, internet use, and computer files) -Electronic Communications Privacy Act of 1986 -Stored Communications(prohibits intentional and unauthorized access to stored electronic communications and sets forth criminal and civil sanctions for violators, has to prove that employer didnt have access to the stored communication to be a violation) -Lie-Detector test -Drug Testing(meant to get you for weed because most hard drugs actually get out of your system before you sober up. stay woke fam) -Genetic testing(few cases have ever come before the courts but companies have performed genetic testing for future health problems)
Stock Certificates
-Evidence of ownership of a specified number of shares in the corporation -Physical copy -Not typically done anymore
Committees of Board of Directors
-Executive Committee(handle interim management decision between board meetings. Limited to making decision about ordinary business matter and conducting preliminary investigations into proposals) -Audit Committee(responsible for the selection, compensation, and oversight of the independent public accountants who audit the corporations financial records. Sarbanes-Oxley Act of 2002 requires all publicly held corporations to have an audit committee) -Nominating Committee(chooses the candidates for the board of directors that management wishes to submit to the shareholders in the next election -Compensation Committee(reviews and decides the salaries, bonuses, stock options, and other benefits given to the corporations top executives) -Litigation Committee(decides whether the corporation should prsue requests by shareholders to file a lawsuit against some party that has allegedly harmed the corporation
Laws Governing Franchising
-Federal Regulation by industry specific standard -FTC's Franchise Rule- requires franchisors to disclose certain material facts that a prospective franchisee needs in order to make an informed decision concerning the purchase of a franchise
Articles of Organization
-Form LLC's -must be filed with a central state agency -name of business, principal address, name and address of a registered agent, the names of owners, and information on how the LLC will be managed
Liability of Partners in an LP
-General partners, unlike limited partners, are personally liable to the partnerships creditors -At least one general partner is required in an LP so that someone has personal liability -Some states allow corporations to be the general partner in a partnership -General partner has the power to voluntarily dissociate, or withdraw, from a limited partnership
Criteria used by courts to decide whether a worker is an independent contractor or an employee
-How much control does the employer exercise over the details of the work? -Is the worker engaged in an occupation or business distinct from that of the employer? -Is the work usually done under the employer's direction or by a specialist without supervision? -Does the employer supply the tools at the place of work? -For how long is the person employed? -What is the method of payment-by time period or at the completion of the job? -What degree of skill is required of the worker?
Vicarious Liability
-Indirect Liability -liability without regard to the personal fault of the employer for torts committed by an employee in the course or scope of employment
Discharge under chapter 7
-Keldric Mosley had student loan debt, got injured training for the Army Reserve, couldnt pay back the loans and lost his job, court ruled that his student loan debt was discharged because he was highly unlikely to be able to pay it back
Equal Employment Opportunity Commission
-Monitors compliance with Title VII -A victim of discrimination must file with the EEOC before a lawsuit can be brought against an employer -Tries for voluntary agreement for an out-of-court settlement, if voluntary settlement can not be reached, the EEOC will file a lawsuit against the employer on behalf of the employee -the EEOc does not investigate every claim, typically only "priority cases" -If the EEOC does not investigate a claim, the employee can bring his or her own lawsuit against the employer
Ratification
-Occurs when the principal affirms, or accepts responsibility for, an agents unauthorized act -Can be either express or implied -Agent must act on behalf of an identity principal who subsequently ratifies the actions -Principal must know all of the material facts involved in the transaction -Principal must have the legal capacity to authorize the transaction at the time the agent engages -Principal's ratification must occur before the third party withdraws from the transaction -Principal must observe the same formalities when ratifying the act
Members
-Owners of an LLC -if LLC is sued for wrongful discharge, its members, managers, and agents can not be held liable based solely on their status in the LLC
Agent's Duties to the principal
-Performance(reasonable diligence and skill in performing the work) -Notification(Requires agent to notify the principal of all matters that come to his or her attention regarding the subject matter of the agency) -Loyalty -Obedience -Accounting(agent has a duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal)
Unidentified Principal
-Principal who identity is not known by the third party but the third party knows that the agent is or may be acting for a principal at the time the contract is made
Disclosed Principal
-Principal who's identity is known by the third party at the time the contract is made by the agent
Suretyship
-Promise made by a third person to be responsible for a debtors obligation -Express contract between surety and the creditor -Surety is third party, primarily liable -Creditor can demand payment, immediately after the credit is due -Parent co-signing a loan
Stock Warrants
-Rights to buy stock for a specified price one a specified date that are both given by the company -Often publicly traded on securities exchange
E-Agent
-Semiautonomous computer program that is capable of executing specific tasks -If you purchase 3 copies of 3 different books and they send you 33 copies of one book and dont show you an on-screen verification of the order, you can send the product back for a refund
Voting Trust
-Shareholders assign the right to vote his or her shares to a trustee, usually for a specified amount of time -Trustee is responsible for voting the shares on behalf of all the shareholders in the trust
Income Security
-Social Security(an old-age, survivors and disabilities insurance. Both employer and employee contribute to this) -Medicare(federal government health-insurance program, administered by the Social Security Administration for people 65 years of age and older and for some under the age of 65, but disabled) -Private Pension Plans(major federal statute regulating employee retirement plans set up by employers is the Employee Retirement Income Security Act of 1970. Vesting is a key provision of ERISA. Vesting gives an employee a legal right to receive pension benefits at some future date when he or she stops working) -Unemployment Compensation(Barack Obama announced that people who are continuing their education or seeking training for a new job qualify for unemployment compensation) -Consolidated Omnibus Budget Reconciliation Act of 1985(prohibits an employer from eliminating workers medical, optical, or dental insurance on the voluntary or involuntary termination of the worker's employment)
Wrongful Discharge
-When an employer discharges an employee in violation of an employment contract or a statutory law protecting employees,the employee may bring an action for wrongful discharge
alien corporation
-a corporation formed in one country but doing business in another country
Preference
-a debtor is not permitted to transfer property or to make a payment that favors one creditor over others -trustee is allowed to recover payments made both voluntarily and involuntarily to one creditor in preference over another
articles of partnership
-a partnership agreement can include any terms that the parties wish, unless they are illegal or contrary to public policy or statute
Notary Public
-a public official authorized to attest to the authenticity of signatures -signs and dates the document and imprints it with his or her official seal of authority
Lien
-a right to keep possession of a property belonging to another person until a debt owed by that person is discharged -important to creditors bc they take priority over other claims against the same property -(collateral)
joint and several liability
-a third party has the option of suing all of the partners together (jointly) or one or more of the partners separately (severally) -in most states under UPA partners are jointly or severally liable for all partnership obligations, including: contracts, torts, and breaches of trust -this can happen even if a partner did not participate in, ratify, or know about whatever gave ride to the cause of action
buyout price
-after a partner's dissociation, their interest in the partnership must be purchased -based on the amount that would've been distributed to the partner if the partnership had been wound up on the date of dissociation.
management (Partnership)
-all partners have equal rights in managing the partnership unless the partners agree otherwise. Each partner has one vote in management matters regardless of the proportional size of his or her interest in the firm. -require unanimous consent of the partners: list on Pg 391
partnership
-an agreement expressed or implied, between two or more persons to carry on a business for profit -partnership agreements dealing with real property must be in writing -partners are co-owners -governed by common and statutory law -agent concept bc each partner is deemed to be the agent of the other partners and of the partnership -partners agree to commit some or all of their funds or other assets, labor, and skills to a business -Uniform Partnership Act: governs the operations of partnerships in the absence of express agreement -elements of a partnership: 1) sharing of profits or losses 2) a joint ownership of the businesses 3) an equal right to be involved in the management of the business -partnership is viewed as an entity rather than an aggregate -partnership is viewed as an aggregate when dealing with federal income tax purposes -if no fixed duration is specified, the partnership is a partnership at will and can be dissolved anytime -the rights of partners follow into these areas: 1)management, 2) interest in the partnership 3)compensation 4) inspection of books 4)accounting of partnership assets or profits 5)property rights (Pg 392)
Franchise
-an arrangement in which the owner of a trademark, a trade name, or copyright in the selling of goods or services
Exemptions for Bankruptcy
-an individual debtor is entitled to exempt certain property from the bankruptcy -Up to $21,625 in equity in debtors residence and burial plot -Interest in a motor vehicle up to $3,450 -Interest for up to $550 for a particular item in household goods and furnishings, wearing apparel appliances, books, animals, crops, and musical instruments -Interest in jewelry up to $1,450 -Interest in any other property up to $1,150 plus any unused part of the $21,625 homestead exemption up to $10,825 -Interest in any tools of the debtors trade up to $2,175 -A life insurance contract -Certain interest in accrued dividends and interest not to exceed $11,525 -Professionally prescribed health aids -Right to receive Social Security and certain welfare benefits -Right to receive certain personal-injury and other awards up to $21,625
Insider
-an individual, a partner, a partnership, a corporation, an officer, or a director of a corporation who has a close relationship with the debtor -Avoidance of power of the trustee is extended to one year before filing -Sometimes it is the creditor receiving the preference
Right of Subrogation
-any right that the creditor had against the debtor now becomes the right of the surety or guarantor -Creditor rights in bankruptcy, rights to collateral possessed by the creditor, judgments obtained by the creditor -Surety or guarantor steps in the shoes of the creditor -Only happens when the surety or guarantor pays the debt to the creditor
Independent Contractor
-are not employees because, by definition, those who hire them have no control over the details of their work performance -Contracted out by companies or individuals needing work done -When an employer hires an independent contractor, the independent contractor normally owns the copyright -Employers can own the contract if both parties agree in writing that the work is a "work-for-hire"
General Partner
-assumes management responsibilities for the partnership and has full responsibility for the partnership and all of its debts
Express Authority
-authority declared in clear, direct, and definite terms. -can be given orally or in writing
shareholder agreement
-can provide that when one of the original shareholders dies, his or hers shares of stock in the corporation will divided in such a way that the proportionate holdings in the survivors will be maintained.
Power of attorney
-confers express authority -written document, usually notarized -can be special or general -should be used with great caution and usually only in exceptional circumstances -terminates on the death or incapacity of the person giving power
Limited Partner
-contributes cash or other property and owns an interest in the firm but does not undertake any management responsibilities and is not personally liable for partnership debts beyond the amount of his or her investments
foreign corporation
-corporation formed in one state but doing business in another is referred as this in the second state -if it does business in a state without obtaining a certificate then then the state can impose substantial fine and sanctions
private corporations
-created wholly or in part for private benefit (for profit) -owned by private persons rather than by the government
Termination by operation of law
-death or insanity -Impossibility -Changed circumstances -Bankruptcy -War
de facto corporations
-describe circumstances in which a business organization that has failed to become a de jure corporation (a corporation by law) will nonetheless be treated as a corporation, thereby shielding shareholders from liability. -3 characteristics must be met: a statute exists under which the corporation can be validly incorporated, the parties have made a good faith attempt to comply with the statute, the parties have already undertaken to do business as a corp. -not every state accepts this.
petition in bankruptcy
-document that is filed with a bankruptcy court to initiate bankruptcy proceedings -if debtor filed petition then its voluntary -if the creditor file a petition to force the debtor into bankruptcy, then the bankruptcy is involuntary
fiduciary duties
-duty of care and loyalty that a partner owes to a partnership -duty of care: limited to refraining from "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law" -partner is not liable to the partnership for simple negligence or honest errors in judgement in conducting partnership business. -duty of loyalty: requires a partner to account to the partnership for :any property, profit, or benefit". also, must refrain from competing with the partnership in business or dealing with the firm as an adverse party (opposing party)
homestead exemption
-each state permits the debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy -Laws designed to protect the value of a home from property taxes and creditors following the death of a homeowner spouse. A homestead exemption can be found in state statutes and constitutional provisions across the U.S. and is an automatic benefit in some states. In states where the homestead protection is not automatic, homeowners must file a claim which must be re-filed when moving primary residences. -ex: on page 337
Employment at will
-either party may terminate the employment at any time for any reason, unless doing so would violate the provisions of an employment contract or a statute -still in widespread use, and only Montana does not apply the doctrine -contract is an implied covenant of good faith, meaning that both sides promise to follow the contract in good faith
automatic stay
-either voluntary or involuntary -once petition has been filed, creditors cannot contact the debtor by phone or mail or start any legal proceedings to recover debt or to repose property -if creditor knowingly violates this then debtor can recover damages, costs, and attorney fee;s and may be awarded punitive damages
Worker's Compensation laws
-establish an administrative procedure for compensating workers injured on the job -Most statutes are the same. -No state covers all employees -There has to be the existence of an employment relationship, it has to be an accidental injury that occurred on the job or in the course of employment, regardless of fault
professional corporations
-ex: physicians, lawyers, dentists, and accountants can incorporate -usually identified by the letters P.C (professional corp) or SC (service corp) or PA (professional association) -each professional is liable for any malpractice committed within the scope of the business by others in the firm -generally shareholders cannot be held liable for torts committed by other professionals in the firm
public corporation
-formed by the government to meet some political or governmental purpose -EX: US postal service, Tennessee Valley Authority, and AMTRAK -not the same as publicly held corporations
nonprofit corporations
-formed for purposes other then making a profit -private hospitals, educational institutions, charities, religious organizations -very limited liability
Affirmative Action
-go further than discrimination laws in attempt to "make up" for past discrimination by giving members of protected classes preferential treatment in hiring or promotion -in the 60's, all federal and state government agencies, private companies that contracted to do business with the federal government, and institutions that received federal funding were required to implement affirmative action policies
US trustee
-government official who preforms administrative tasks that a bankruptcy judge would otherwise have to preform Ex: supervising the work of the bankruptcy trustee
examples of exempted property
-household furniture -clothing and certain personal possessions,such as family pics & bibles -a vehicle.vehicles (up to a specific $ amount) -certain classified animals usually livestock but including pets -equipment used in a business or trade, such as tools or professional instruments
Limited Liability Partnership(LLP)
-hybrid form of business designed mostly for professionals who normally do business as a partner in a partnership -Major advantage is that it allows a partnership to continue as a pass-through entity for tax purposes but limits the personal liability of the partners -Attractive for two types of business: professional service firms and family business -Allows professionals such as accountants and attorneys to avoid personal liability for the malpractice of another partner
Limited Liability Company(LLC)
-hybrid form that combines the limited liability aspects of the corporation and the tax advantages of a partnership -A LLC has to be dissolved upon the death or bankruptcy of a member, -laws differ from state to state -Tried to make more uniform by the Uniform LLC Act. Less than one-fifth of the states adopted it -Any unincorporated business with more than one owner is automatically taxed as a partnership -legal entities apart from their owners -liability of members is limited to the amount of their investments -members themselves are not typically held personally liable
corporation by estoppel
-if a business holds itself out to others as being a corp but hasn't incorporated, the firm may be prevented from denying corp statues in a lawsuit by a 3rd party. -most commonly applied when a 3rd party contracts with an entity that claims to be a corporation but hasn't filed articles of incorporation. -some courts will treat the alleged corp as it were an actual corp for the purpose of determining rights and liabilities
de jure corporations
-if corp has substantially complied with all conditions precedent to incorporation. (rightful and lawful existence)
Shareholders Derivative suit
-if corporate directors fail to bring a lawsuit, shareholders can bring it. -Before they can bring suit, they must submit a written demand to the corporation, and the board of directors has 90 days to act on it, if they dont, shareholders can go forth with the lawsuit
involuntary bankruptcy
-if debtor has 12 or more creditors then -> 3 or more of them have to have unsecured claims totaling at least $14,425 -if debtor has fewer than 12 creditors then -> 1 or more of the creditors have to have a claim totaling $14,425 -if petition is filed in bad faith, the debtor can be awarded damages
disposable income
-if debtor's income is above the median income -calculated by subtracting living expenses and secured debt payments, such as mortgage payments, from monthly income.
order for relief
-if voluntary petition for bankruptcy is found to be proper, the filing of the petition is this -is a court's grant of assistance to a petitioner -trustee and creditors must be given notice of the order for relief by mail not more than 20 days after entry of order -if court grants this, then the debtor will be required to supple the same info in the bankruptcy schedules as in a voluntary bankruptcy
Disparate-treatment discrimination
-intentional discrimination by an employer against an employee
bylaws
-internal rules of management adopted by the corporation at its first organizational meeting -cannot conflict with with the incorporation statute or the articles of incorporation -typically describe such matters as voting requirements for shareholders election of the board of directors, & methods of replacing directors -usually the first thing that is created after incorporation
consumer-debtor
-is a debtor whose debts result primarily from the purchase of goods for personal, family, or household use.
corporation
-is a legal entity created and recognized by state law -one or more owners (shareholders) -conducting corporate business and incurring liability, its authority to act and the liability for its actions are separate and apart from the individuals who own it -Board of directors: elected by the shareholders -makes the policy decisions and hires corporate officers & other employees to run the daily business operations of the corporation -shareholder can sue corporation & vice versa -liability is limited -distributing corporation profits to shareholders through dividends. -corporate profits can be subject to double taxation (company pays tax on profits, then shareholders must pay income taxes on them) -liable for torts committed or criminal law committed -classification depends on: location, purpose, and ownership -does not have an automatic right to do business in a state other that its state of incorporation- in some circumstances, they must obtain a certificate of authority in any state in which it plans to do so -many businesses choose to incorporate bc they can obtain more business by issuing shares of stock -a newly formed corporation isn't liable for any pre-incorporation contract unless it has expressly agreed to its terms (or in the initial contract or novation)
confession of judgement
-is an act by a debtor that permits a judgement to be entered against him or her by a creditor, for an agreed sum, without the institution of legal proceedings. written agreement that accepts liability
Termination by Act of the parties
-lapse of time(when specified time period which the relationship exists expires) -Purpose achieved(if agent employed to accomplish a particular objective -Occurrence of a specific event(if you appoint someone to handle your business affairs while youre away, the contract terminates when you return) -Mutual Agreement(parties can rescind their contract by mutually agreeing to terminate the agency relationship) -Termination by one party(either party can terminate the agency relationship, considering that the relationship is consensual)
The Worker Adjustment and Retraining Notification Act
-large businesses are required to provide 60 days notice before implementing a mass layoff or closing a plant that employs more than 50 full time employees -applies to employers with at least 100 full time employees -State and local governments, affected workers or their representatives must be notified -employers that violate this can be fined up to $500 each day of the violation
Limited Partnership(LP)
-limits the liability of some of its owners -sometimes referred to as 'special partnerships' -at least one 'general partner' and one or more limited partners
Information Return
-made with the Internal Revenue Serive -partners profit from the partnership (whether distributed or not) is taxed as individual income to the individual partner
Ultra Vires Doctrine
-means "beyond the power.' -what holds a corporation accountable when there is mismanagement in the higher ups -4 men form a nonprofit corporation, one of them became president and started mismanaging the company for personal gain and the corporation brought a suit against him. Court rules that he has "exceeded his authority" and that the corporation could go forward with its suit
closely held corporations
-most US corporations fall into this category -shares aren't publicly traded -shares are often held by family members or by a relatively small group of persons -sometimes referred to as privately held corporations -often operated as a partnership -RMBCA gives these corporations flexibility in determining its rules of operations -if all the shareholders agree in writing, then the corp can operate without directors, bylaws, annual or special shareholders or directors meetings, stock certificates or formal records of shareholders or directors decisions. -management resembles that of a proprietorship or a partnership -transferring of one's shareholder's shares may be restricted from selling to a person outside the corporation
Shareholders Powers
-must approve fundamental changes within the corporation before they can be implemented -approval normally needed to amend bylaws or articles of the corporation -Selling of all or substantially all of the corporations assets
Whisteblowing
-occurs when an employee tells government authorities, upper-level managers, or the media that her or his employer is engaged in some unsafe or illegal activity -whistleblower protection act of 1989 -ex. Former NSA(National Security Agency) employee Edward Snowden told the American people about how the NSA is watching in on us -ex. 1984 by George Orwell
bankruptcy trustee
-person appointed by the court to manage the debtors funds. they sell the nonexempt assets a distribute the proceeds to the creditors -discharged: when the debtor is relieved from the obligation to pay the debt
Commingled
-personal and corporate interests are mixed together to the extent that the corporation has no separate identity
Undisclosed Principal
-principal who's identity is totally unknown by the third party
Respondeat superior
-principal-employer is liable for any harm caused to a third party by an agent-employer within the scope of employment -imposes vicarious liability on the employer
winding up
-process of collecting, liquidating, and distributing the partnership assets -and accounting to each partner for the value of his or her interest in the partnership
Title VII of the Civil Rights Act of 1964
-prohibits job discrimination against employees, applicants, and union members on the basis of race, color, national origin, religion, and gender at any stage of the employment -prohibits discrimination in the hiring process
adequate protection doctrine
-protects secured creditors from losing their security as a result of the automatic stay -the bankruptcy court can provide this by requiring the debtor or trustee to make periodic cash payments or a one-time cash payment
Franchisee
-purchaser of a franchise -generally legally independent of the franchisor -franchise is economically dependent on the franchisor's integrated business system
Sexual Harassment
-quid pro quo(something in exchange for something else) -Hostile-Environment Harassment(the workplace is permeated with discriminatory intimidation, ridicule, and insult, that is sufficiently severe or persuasive to alter the conditions of of the victim's employment and create an abusive working environment) -Tangible employment action(significant change in employment status or benefits, such as when an employee is fired, refused a promotion, demoted, or reassigned to a position with significantly different responsibilities. Only a supervisor or another person acting with the authority of the employer, can cause this sort of harm)
domestic corporation
-referred as this by its home state (state in which it incorporates)
Attachment
-refers to court ordered seizure and taking into custody of property prior to the securing of a judgment of a past due debt -Pre-judgement remedy -Creditor must have enforceable right to payment under law, creditor must file with a court an affadavit stating the debtor has failed to pay, creditor must post a bond to cover at least the courts cost and the value of the property attached and the value of the loss of use of the property suffered by the debtor
Equal Dignity Rule
-requires that if the contract being executed is in writing, the agents authority must also be in writing -Failure to comply with the equal dignity rule deems the contract voidable at the option of the principal -If Healy negotiates a contract but is called out of town the day the contract is to be signed and orally authorizes Santini to sign, the oral authorization is sufficient
Certificate of Limited Partnership
-requires the name, mailing address, and capital contribution of each general and limited partner -For partners to sign
chapter 7 (bankruptcy)
-s a bankruptcy proceeding in which a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, the proceeds are used to pay off the debts, and then the remaining debt is discharged. Individuals may declare this bankruptcy as well. -means test: determines a debtor's eligibility for this chapter. reasoning: to keep upper-income people from abusing the bankruptcy process. -> forces more people to file for ch 13. -to be granted this chapter, the debtor's monthly income is compared to the monthly income of others in the geographic area of where they live & if their income is below that then the debtor is usually granted this chapter
Limited Liability Limited Partnership(LLLP)
-same liability as a limited partner in a limited partnership -Liability of all partners is limited to the amount of their investments in the firm
incorporation procedures
-select a state of incorporation -secure the corporate name & status (corp, co., ltd.) -prepare the articles of incorporation (basic info about the corp and serve as a primary source of authority for its future organization and business functions-signed by people named incorporators. (include:name of corp, # of shares the corp can issue, name & street address of corp, the name and address of each incorporator) -file the articles of incorporation with the secretary of state
Franchisor
-seller of the franchise -required to explain termination, cancellation
Preemptive Rights
-shareholder receives preference over all other purchasers to subscribe to or purchase a prorated share of a new issue of stock -Basically, a shareholder can purchase a percentage of new shares equal to his or her current percentage of ownership in the corporation
Disparate-impact discrimination
-some employers, who may have an educational requirement, may have an unintended discriminatory impact on a protected class -in such cases, the complaining party must first use one of two statistical methods to show that the employers practices, procedures, or tests are discriminatory in effect
Alter-Ego theory
-sometimes courts rule that the corporation was not a separate entity, but just another side of the corporation -Harvey and Barbara Jacobson owned aqua technology, constantly took out money for personal use and eventually declared bankruptcy. Harvey starts a new business doing the same services for the same costumers, even using the same phone number. Trustee appointed to Aqua's bankruptcy case sought to recover Aqua's assets on the ground that the new business was Aqua's alter ego.
Disadvantages of the LLC
-state LLC statutes are not uniform -most states apply the law of the state they are from to foreign LLC's(from a different state) -difficulties arise when states have to interpret and apply other states laws
Proxy
-stockholders can appoint another person as their agent to vote their shares at stockholders' meetings -to manage or take care of -management often solicits these but they can -Usually revocable unless otherwise specified -Valid for 11 months
dissolution
-termination of a partnership -can be brought up by acts of the partners, operation of law, or by judicial decree
Sole Proprietorship
-the owner is the business -simplest form of business -Proprietor owns the entire business and receives all of the profits -easier and less costly than starting any other kind of business -Disadvantage is that the sole proprietor takes all responsibility and is liable by the business enterprise
partnership for a term
-the partnership agreement can specify the duration of the partnership by stating that it will continue until a designated date or until the completion of a particular project
liquidation proceedings
-the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors -ch 7 of the bankruptcy code (discharge of debt) -"ordinary" or "straight" bankruptcy -turns all assets to a bankruptcy trustee
Right of Reimbursement
-the surety or guarantor is entitled to recieve from the debtor all outlays made on behalf of the arrangement -ex: expenses incurred as well as the actual amount of debt paid to the creditor
goodwill
-the valuable reputation of a business viewed as an intangible asset.
joint liability
-third party must sue all of the partners as a group, but each partner can be held liable for the full amount. -when a partnership is being sued, then the partnership's assets must be exhausted before creditors can reach the partners individual assets
charging order
-to attach the individual partner's interest in the partnership to satisfy the partner's obligations. -a partner can also assign her or his right to a share of the partnership profits to another to satisfy the debt
co-sureties
-two or more sureties -when one surety pays a proportion share on a debtor's default, he/she is entitled to recover from the other co-sureties the amount paid about that surety's obligation -ex: on page 337
Operating Agreement
-typically contain provisions relating to management, how profits will be divided, the transfer of membership interests, whether the LLC will be dissolved on the death or departure of a member, and other important issues -Written copy is preferred -Not required for an LLC to exist -if the members have not specified how profits will be divided, profit will be divided equally between the members
Watered Stock
-when a corporation issues stock well below their fair market value -Usually the shareholder that receives it must pay the difference to the corporation
dissocation
-when a partner ceases to be associated in the carrying on of the partnership business. -partner may have the power to do so but may not have rights to dissociate -partner will have their interest purchased by the partnership -the partners duty of loyalty ends -events that cause dissociation: by the partner;s voluntarily giving notice of an "express will to withdraw", by an occurrence of an event specified in the partnership agreement, unanimous vote of the other partners under certain circumstances, by order of a court or arbitrator if the partner has engaged in wrongful acts, partner declaring bankruptcy.
Mechanics Lien
-when a person contracts for a labor, services, or materials to be furnished for the purpose of making improvements on real property but does not immediately pay for the improvements, the creditor can place this on the property -Security for the debt -Painter agrees to paint a house for a certain cost, both sides agree, homeowner refuses to pay, house is labeled as -Painter is creditor, debtor owes the debt
Emergency Powers
-when an unseen emergency demands action by the agent to protect or preserve the property and rights to the principal, but the agent is unable to communicate with the principal
partnership by estoppel
-when persons who aren't partners hold themselves out as partners and make representation that third parties rely on in dealing with them. -court can impose liability-but not partnership rights -whenever a third person has reasonably and detrimentally relied on the representation that a non partner was part of the partnership, this is deemed to exist. when this occurs the non partner is regarded as an agent whose acts are binding on the partnership
Pierce The Corporate Veil
-when the corporate privilege is abused for personal benefit, the courts will require the owners to assume personal liability to creditors for the corporations debt -Courts will also impose personal liability when the corporate business is treated so carelessly that the corporation and the controlling shareholders are no longer separate entities
Constructive discharge
-when the employer working conditions to be so intolerable that a reasonable person in the employee's position would feel compelled to quit. -Plaintiff must present objective proof of intolerable working conditions, which the employer knew about yet failed to correct within a reasonable time period -Courts require the employee to show causation, that the employers unlawful discrimination caused the working conditions t be intolerable
Apparent Authority
-when the principal, by either word or action, causes a third party to believe that the agent has authority to act, even though the agent has no express or implied authority -comes into existence through a principal's conduct over time -ex. Suzy is a traveling salesperson and does not carry merchandise with her. Since she doesnt carry the merch with her, she also does not collect payment. If Suzy collects payment and submits it,= and the principal doesnt do anything about it, this will start a pattern and Suzy will have authority
Fiduciary
-when used as a noun, refers to person having duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking -When used as an adjective, it means the relationship involves trust and confidence(real estate) -At the heart of agency law
Writ of Execution
A legal term that describes a court order that is granted in order to satisfy a judgment awarded to a plaintiff in a court of law. If a court issues a writ of execution, usually a local sheriff is charged with taking possession of property owned by the debtor. The property can then be sold in a sheriff's sale, with the money (or portion) from the sale given to the plaintiff to satisfy the terms of the judgment.
voluntary bankruptcy {chapter 7}
read requirements on page 339 -disposable income -substantial abuse and means test motion of release of ch 7: substantial abuse, means test, dispoable income, not turning in required documents, if debtor has been convicted of a violent crime/drug traffiking, if the debtor fails to pay post-petition domestic-support obligations (child/spousal support)
retained earnings
the portion of profit that is not distributed to the shareholders -if invested properly, will yield higher corporate profits and thus the price of the company's stock to rise
