Corporate & Commercial Law

*_______ of the ______ of _________" meeting should indicate that the stock being issued to the shareholders is being issued pursuant to IRC 1244.

Minutes of the Board of Directors

Drafted by the Committee on Corporate Law if the Business Law Section of the ABA. Most recent version 2016(first complete revisions since 1984).

Model Business Corporation Act

What Act discusses Professional Corporations?

Model Business Corporation Act (3rd edition 2002), with Model Professional Corporation Supplement

*"________ _________"* LLC is taxed as a partnership for federal tax purposes, unless Corporate status elected

Multiple member LLC

What is the default tax rule under the check-the-box regulations for a multi-member limited liability company?

Multiple member LLC is taxed as a partnership

These Agreements can be used to dispense with some of the corporate formalities.

Shareholder Agreement

If a *___________* transfers real or personal property to the corporation in exchange for their stock, then the *____________* is said to have made a tax-free transfer under IRC 351.

Shareholder; Shareholder

Owners in a corporation are called *"______"*.

Shareholders

The Hart-Scott-Rodino Act is:

a set of amendments to the Clayton Antitrust Act

When two or more companies who produce compatible products or services for a specific finished product merge with each other.

a vertical merger

If a court pierces the corporate veil, then shareholders:

are personally liable for debts of the corporation

Uniform Commercial Code Article 9

Secured Transactions

Who manages an LLC?

By either managers (appointed by the members) or by the members

Made up of one of more licensed professionals. It gives licensed professionals the benefits of an LLC while not altering the law regarding the liability of a licensed professional.

"PLLC" Professional Limited Liability Companies

In an *(_ _ _)*, the corporation will bring in an underwriting firm or investment bank to help decide how the sale of shares will be handled.

(IPO) Initial Public Offering

The *(_ _ _)* provides investment capital for the corporation by the offering shares of stock for sale to the public for the first time.

(IPO) Initial Public Offering

The *(_ _ _)* *____ ____ and ____ ____* is an independent federal government agency whose mission is to "protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.

(SEC) U.S. Securities and Exchange Commission

The *(_ _ _)* oversees the securities exchanges, security brokers and dealers, investment advisors, and mutual funds.

(SEC) U.S. Securities and Exchange Commission

Duty of Disclosure

- Act with complete candor - may need to disclose "all facts and circumstances to shareholders"

Duty of Good Faith

- Advance interests of the corporation

Duty of Loyalty (primary)

- Affirmatively protect interests of the corporation - Refrain from doing anything that would injure the corporation - Not further their private interests

Duty of Care (primary)

- Be prepared and informed - Assess information with a "critical eye"

Duty of Confidentiality

- Do not disclose corporate information

What are the advantages of a Limited Liability Company?

- Minimal amount of paperwork required to form - Minimum annual requirements. An annual report is usually required to be filed with the state (domestic and foreign jurisdictions) -Limited liability for all members -State of statutes and the IRS allow for extreme flexibility regarding areas such as management, voting, and transferability. These items can be either very broad or restricted. -LLC income and/or loss are reported on a separate Schedule K-1 attached to each member's tax return. The LLC itself is not taxed (IRS form 1065 required to be filed annually)

Advantages of forming an LLC:

- Minimal paperwork required to form the entity - Minimum annual requirements - No statutory requirement for meetings to be held by the members or managers - All members of the LLC have very limited liability for the actions of the LLC - It is extremely flexibile - The income and/or losses of the LLC are reported on a separate Schedule K-1 attached to each member's tax return. The LLC itself is not taxed, but like the partnership, it must file IRS form 1065 annually.

Articles of Organization typically include the following:

- Name of the LLC - Name of the registered agent and the address of the registered office - Purpose of business -The term of the LLC - How the LLC is to be managed

Articles of Organization may include the following:

- Name of the LLC -Name of the Registered Agent and the address of the Registered Office -Purpose of business -The term LLC -If the LLC is to be managed by managers or members,

Disadvantages of forming an LLC:

- Not all countries across the globe recognize the LLC form of entity -LLC acts do not allow for right of withdrawal of a member unless the Operating Agreement allows for membership withdrawal - LLCs do not protect an individual from their own negligence in acting on behalf of the LLC - A member in an LLC will be given a Schedule K-1 at the end of the year which allocates the member's share of revenue and losses- therefore, the member may have to pay taxes on LLC gain that was not actually distributed to them.

What are reasons that the court would use to pierce the corporate veil of a business:

- Not following corporate formalities (i.e. holding annual shareholder and director meetings) - Owners commingling corporate funds with personal funds - Entity inadequately capitalized

Shareholder Agreements allow a corporation to dispense with:

- The Board of Directors - Discretion or power of the Directors - Annual meetings of the directors

How do you form a Limited Liability Partnership?

- The partnership must file a statement, notice, or application with the Secretary of State - Partners should enter into a written partnership agreement -RUPA requires that the LLP file an annual report in the office of the Secretary of State where the statement was filed -The partnership obtains a federal employer identification number from the IRS

What are 3 types of mergers?

- Vertical - Horizontal - Consolidation

What are the advantages of a Limited Liability Partnership LLP?

- partners can provide additional capital when needed - for tax purposes, the LLP is treated the same as a general partnership -income and/or loss are reported on a separate schedule K-1 attached to each partner's tax return -the partnership itself is not taxed but must file an annual information return with the IRS on form 1065 -protects partners from vicarious personal liability for all partnership obligations arising from negligence, wrongful acts, or misconduct, whether a tort, contract, or otherwise -the primary effect of the LLP filing it to sever a partner's personal liability to contribute to the partnership when assets are insufficient to cover its indemnification obligation to a partner who incurs a partnership obligation in the ordinary course of business

What are the two types of nonprofit organizations that may be exempt from taxes?

-501(c)(3): religious, charitable, scientific, literary, educational organizations, etc. -501(c)(6): chambers of commerce, business leagues, real estate boards, boards of trade, etc (NALA is one)

To qualify as a Subchapter S Corporation, the corporation:

-Can't have more than 100 shareholders -Can have only "natural persons" as shareholders -Must be a domestic corporation -Can issue only one class of stock -Can not have nonresident aliens as shareholders -To obtain S status, a corporation must file IRS form 2553 with the IRD

To qualify as a Subchapter S, the corporation must:

-Cannot have more than 100 shareholders (family members from as many as 6 generations count as one shareholder) -The corporation may have only "natural persons" as shareholders -Must be a domestic corporation -Can only issue one class of stock -Nonresident aliens cannot be shareholders -Must timely file IRS Form 2553 (one time filing)

What are 2 problems in US business that the Uniform Commercial Code addresses?

-Complex legal and contractual requirements of doing business deriving from some states -Differences in state laws that make it difficult for people from different states to do business with each other

The first Board of Directors will:

-Confirm the actions of the incorporators -Elect officers of the corporation as prescribed by the Bylaws and/or the respective state statute -Issue stock -Authorize a corporate bank account - Grant various officers authority to execute documents and entire into contracts -Authorize any other necessary actions

Section 1244 is defined as being common stock in a domestic corporation if the following conditions apply:

-Corporation was a small business corporation when the stock was issued -Stock was issued by the corporation for money or other property -The corporation derived more than 50% of its aggregate gross receipts from sources other than royalties, rents, dividends, interests, annuities, and the sales or exchanges of stock or securities

What are some of the items considered that may need to be evaluated in order to determine if an entity will need to qualify to do business in a foreign location:

-Does the entity have a retail or store front presence in the foreign location? -Does the entity have employees in the foreign location? -Does the entity pay state sales taxes in the foreign location? -Does the entity own real property in the foreign location? -Does the entity have many contracts with in-state entities in the foreign location? -Is the management of the entity located in the foreign location?

Why would a corporation file for a 501(c)(3)?

-Donors can take a charitable contribution deduction

What are the disadvantages of a corporation?

-Double taxation: unless the corporation is an S Corporation, the corporation is taxed on its income as corporate income tax and a shareholder must include any dividend declared and paid to the shareholder on the shareholder's individual tax return.... Thus income is taxed twice -Compared to a sole proprietorship, can be more costly to organize and requires more extensive record keeping

What are the disadvantages of a Limited Liability Partnership?

-Each partner has personal risk and some liability for partnership debts and general liability for own actions - Divides authority among partners -In some states, the partnership is considered dissolved upon the death or withdrawal of a partner -Requires annual renewal of registration and renewal fees typically are the same as the registration fees -If the annual renewal is not filed, then the state may revoke the LLP status of the partnership. A revocation only terminates the partnership's status as an LLP and is not an event of dissolution,

Disadvantages of a Limited Liability Partnership LLP?

-Each partner has personal risk and some liability for the debts of the partnership and general liability for their own actions -authority of the LLP is divided among the partners -in some states the partnership dissolves upon the death or withdrawal of a partner

What are the disadvantages of a General Partnership or Co-Partnership?

-Each partner in the partnership has personal risk and unlimited liability for all actions of the partnership -The authority of the management of the partnership is divided amongst the partners -If the partnership business fails, and the partnership has no assets, each partner can be held personally responsible for all debts of the partnership and the personal assets of each partner can be subject to judgment in a lawsuit

What is found in a general partnership?

-General partner, -Federal EIN, -Written Partnership agreement

What are the advantaged of a Limited Partnership LP?

-General partners do not have to obtain consensus or permission from limited partners on how the LP is going to be managed -LP needs to obtain additional capital to further its business -Additional limited partners can provide the needed capital, while not dividing up management authority -Limited partners have limited personal liability for the actions of the LP -Personal assets are not subject to payment of LP debts or a judgment in a lawsuit -Limited partner's potential loss is that their capital contribution to the LP -LP income and/or losses are reported on a separate Schedule K-1 which is attached to each partner's tax return (both general and limited partners) -The partnership itself is not taxed, but must file form 1065 with the IRS

Under the Business Judgment Rule, a court will presume that in making a business decision, directors and officers of a corporation acted:

-In an informed basis -In good faith -In the honest belief that the actions taken were in the best interest of the corporation

What are the advantages of a corporation?

-Limited liability for shareholders of the corporation -Ownership interests of the shareholders (shares of stock) are easily transferable -The existence of the corporation is separate from the shareholder and as such, a change in a shareholder does not affect the corporation's existence -There are some tax advantages: A corporation can deduct certain expenses from income prior to paying corporate tax income -Certain types of corporations can receive special tax income or capital gain on the sale of stock (subchapter S Corporations, subchapter C corporations, and corporations who elected Section 1244 stock)

Depending on the respective state statute, a PC (professional corporation):

-May render only one professional service, and each shareholder must be licensed in that profession -May render one or more professional services, and each shareholder must be licensed in one of the professional services of the corporation

Purpose of a Corporation

-Most state statutes allow for a general-purpose clause -Number of authorized shares and their par value (if applicable) and designation of classes of stock an a series of shares within a class (if applicable) -The term of the corporation (if other than perpetual)

What are some advantages of a sole proprietorship?

-No legal documentation is required to form it so the startup is very easy, and costs related to the startup are minimum. -Management of the entity is controlled by the sole owner who makes all the business decisions -The owner retains all profits made by the business -All income and/or losses are treated as individual income to the sole owner -Any business income and/or loss is reported on a separate Schedule C, which is attached to the sole owner's individual tax returns. A separate federal, state, or local tax return is not filed

What are the disadvantages of an LLC?

-Not all countries recognize the LLC form of business entity -Potential for payment of Self-Employment taxes -Most state LLC acts do not specify a right of withdrawal -No protection from personal tort liability or personal contract liability -Potential personal tax liability

Nonprofit corporations can make a profit IF:

-Profits are used by the business to further the mission and/or purpose -Profits cannot be distributed to any of its shareholders or members

The Sarbanes-Oxley Act of 2002 contains 11 sections. Some highlights:

-Public Accounting Oversight Board -Corporate and Criminal Fraud Accountability Act of 2002 -White-Collar Crime Penalty Enhancement Act of 2002 -Corporate Fraud Accountability Act of 2002

What are some benefits to obtaining a 501(c)(3) tax exemption status?

-Public recognition of tax exemption status -Advance assurance to donors of the deductibility of contributions -Exemption from certain state taxes or certain federal excise taxes -Nonprofit mailing privileges

Benefits to obtaining a 501(c)(4) Tax Exemption:

-Public recognition of tax exemption status -Advance assurance to donors of the deductibility of contributions -Exemption from certain state taxes or certain federal exise taxes -Nonprofit mailing privileges

Benefits to obtaining a 501(c)(6) tax exemption

-Public recognition of tax exemption status -Exemption from certain state taxes -Nonprofit mailing privileges

What are the advantages of a General Partnership or Co-Partnership?

-Relatively easy to form -All partners can participate in the management of the partnership -For tax purposes, it is a pass through tax entity -The partnership income and.or loss is reported on a separate Schedule K-1 that is prepared for each partner of the partnership and then attached to each partner's federal tax return -Each partner pays the taxes on any income produced by the partnership. -The partnership itself is not taxed, the filing is an informational filing only

Depending upon the specific state statute, a PC may:

-Render only 1 professional service and each shareholder of PC must be licenses in that profession -Render 1 or more professional services and each shareholder of the PC must be licensed in one of the professional services and each shareholder of the PC must be licensed in one of the processional services of the corporation

Most business entities formed in the United States fall under one of the following types of entities:

-Sole proprietorship -General partnership (or co-partnership) -Limited Liability Partnership -Limited Partnership -Corporation -Limited Liability Company

What are the disadvantages of a Limited Partnership?

-The general partners have unlimited personal liability -The limited partners do not have a voice in the management of limited partnership -ULPA requires Annual Report filings (check your local State statute for this requirement) -Depending upon the state, the Certificate of Limited Partnerships may require detailed information that will become public

What are some disadvantages of a Sole Proprietorship?

-The individual owner takes all the risk for the business and has unlimited personal liability -If the business fails, the owner is personally responsible for all debts of the business -Personal assets of the individual owner can be subject to judgment in a lawsuit -If it needs additional capital to continue the business, the owner can be limited financially by their personal assets -The business terminates upon the death of the owner

The Articles of Incorporation will typically need to include:

-The name of the corporation -The name and address of each incorporator -The name of the registered agent -Purpose of the corporation -Number or authorized shares, the par value of the shares, and designation of classes of stock -The term of the corporation

*Articles* will typically include at least these things:

-The name of the corporation -The name and address of each incorporator. In most states, only one person is required to incorporate. An incorporator does not need to be a future shareholder, officer, or director of the corporation. -The name of the registered agent and the address of the registered office

Uniform Commercial Code Article 6

Bulk Transfers

What are the disadvantages of Limited Partnership LP?

-limited partners have no management powers -the general partners have unlimited personal liability -Uniform Limited Partnership Act ULPA requires annual report filings -Some partners may not want their personal information made public

The incorporators of the corporation shall approve Bylaws of the corporation and appoint the first Board of Directors. The Board shall consist of *#* or more individuals.

1 or more

What are the 3 most common tax exemptions that a nonprofit organization may obtain from the IRS?

1. 501(c)(3) 2. 501(c)(4) 3. 501(c)(6)

What are the two primary fiduciary duties?

1. Duty of Care 2. Duty of Loyalty

What are the three major Federal antitrust laws in the United States?

1. The Sherman Antitrust Act 2. The Clayton Act 3. The Federal Trade Commission Act

When a business is being sold, there are two methods that can be used to accomplish the sale:

1. The seller will sell the assets of the business or 2. the ownership interest in the business shares of stock of a corporation, the membership interest of an LLC, or the partnership interest in a partnership

When sold, *#* stock can be offset against ordinary income without having to carry it forward. Therefore a shareholder can deduct the entire capital loss in the same tax year against ordinary income.

1244 stock

Revised Model Nonprofit Corporation Act of 19*##*

1987. Nonprofit Corporation

When stock is being issues to shareholders, it is possible for a shareholder to elect Internal Revenue Code (IRC) *#* stock

351 stock

Shareholders who hold qualified business stock for at least *#* years can exclude up to half of any gain from the sale or exchange of the stock.

5 years

Corporation which is organized and operated exclusively for: religious, charitable, scientific, literary, educational purposes, testing for public safety, to foster national or international amateur sports competition, or prevention of cruelty to children or animals.

501(c)(3) Corporation

No parts of this corporation's net earnings insures to benefit any private shareholder or individual

501(c)(3) Corporation

No substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation (i.e. lobbying)

501(c)(3) Corporation

In order to obtain and maintain its exemption, this type of organization cannot have any part of its net earnings benefit any private shareholder or individual.

501(c)(4) Organization

This type of organization can engage in some political activity if such activity is not its primary purpose

501(c)(4) organization

Under this organization, a social welfare organization may further its purposes through lobbying as a primary activity without jeopardizing its exempt status.

501(c)(4) organization

Donors to this type of entity will not be able to take a charitable contribution deduction on their taxes

501(c)(6)

No substantial part of this corporation's activities consists of carrying on propaganda or otherwise attempting to influence legislation (lobbying)

501(c)(6) Corporation

This type of corporation is organized as chambers of commerce, business leagues, real estate boards, boards of trade, etc.

501(c)(6) Corporation

With this type of corporation, no part of its net earnings insures to benefits any private shareholders or individual

501(c)(6) Corporation

In order to obtain and maintain its exemption, this type of organization cannot have any part of its net earnings insure to benefits any private shareholder or individual, and no substantial part of its activities can consist of carrying on propoganda or otherwise attempting to influence legistlation, i.e. lobbying

501(c)(6) organization

Existence of the corporation does not begin until the Articles of Incorporation or the Application for Certificate of Authority is filed with the appropriate State authority (or upon a future date specified in the document, usually not more than *#* days)

90 days

An entity formed under the laws of the State in which the corporation organizes, and whose existence is separate from its owners

A Domestic Corporation

A partnership formed by two or more persons under the laws of the State in which the limited partnership forms, and which has at leash one general partner and at least one limited partner.

A Domestic Limited Partnership

An entity which qualifies to do business under the laws of a state jurisdiction other than the initial state of organization.

A Foreign Corporation

A limited partnership organized under the laws of a jurisdiction (state) other than the initial state of organization.

A Foreign Limited Partnership

This is an LLC formed under the laws of the State of which it is being organized and whose existence is separate from its owners.

A domestic LLC

This is an LLC formed under the laws of any other State in which it is going to do business.

A foreign LLC

Occurs when two or more businesses that offer similar or compatible products or services in the same market combine under a single entity.

A horizontal merger

A *_____ ______* gives the licensed professional the benefits of a corporation, while not altering the law regarding the liability of a licensed professional.

A professional company (PC)

This rule is designed to protect directos and officers of a corporation from making a decision that turns out badly.

Business Judgment Rule

Duty of Disclosure

Act with complete candor: may need to disclose all facts and circumstances to shareholders

Duty of Good Faith

Advance interests of Corporation

Duty of Loyalty (Primary)

Affirmatively protect interests of corporation; refrain from doing anything that would injure corporation; not further their private interests

A cross between a corporation and a limited partnership.

An LLC

To go public, a corporation must offer shares through:

An initial public offering (IPO)

How is a Domestic Corporation formed?

Articles of Incorporation or Certificate of Incorporation must be filed with the States where the corporation is forming

Uniform Commercial Code Article 4

Bank Deposits

Duty of Care (Primary)

Be prepared and informed; assess information with a critical eye

A document which outlines the method and manner for governing the corporation (i.e. prescribes how to elect officers and directors, how to issue stock, what kind of notice is required to hold meetings, etc.).

Bylaws of the Corporation

The IRS implemented this to simplify the task of classifying entities as either an association (taxable as a corporation) or a patnership.

Check the Box Rule Under Decision 8697 of 12/18/96.

This act is an amendment to the Sherman Act. It was enacted to address certain issues that were either not clear or were not addressed in the Sherman Act. It focuses on topics such as price discrimination, price fixing, and unfair business practices such as anti-competitive mergers. It is enforced by the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ).

Clayton Antitrust Act of 1914 - In 1976, The Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) was enacted as a set of amendments to the Clayton Act. -Under the HSR Act, parties are not able to enter into certain types of mergers, acquisitions, or transfer of securities or assets until a detailed filing is made with the FTC and DOJ prior to the transactions, and approval is obtained from both agencies to proceed with the transaction.

Although a state may not have a statute for this corporation, many states have provisions in their Acts authorizing Shareholder Agreements,

Close Corporation

Corporation owned by a small number of shareholders (i.e. family business)

Close Corporation

This corporation can dispense with some of the corporate formalities such as formal shareholder meeting and Board of Directors, and the shareholders are given management control.

Close Corporation

Interaction between 2 or more parties in which goods, services or something of value is exchanged for some type of remuneration: - mergers and acquisition of sale of business - joint ventures - consolidation

Commercial Transactions

Why would companies enter into a Conglomerate merger?

Companies could enter this type of merger to diversify funds, start new revenue lines, increase branding, etc.

Occur when entities merge who have unrelated business activities.

Conglomerate mergers

The merger and acquisition of many smaller companies into a few much larger ones.

Consolidation (or amalgamation)

A corporation or association organized for the purpose of rendering economic services, without gain to itself, to its shareholders or members who own and control it. Participants may combine their resources and efforts in a consolidated facility to enable the sale of their products.

Cooperative

A *"______"* is managed by a Board of Directors (elected by the Shareholders).

Corporation

This will be prepared and it will outline information on the corporation, including financial information and expected future operations.

Corporation prospectus

The name of a corporation must include one of the following:

Corporation; Incorporated; Company or Limited; the abbreviation corp., inc., co., or ltd (w/ or w/out periods)

TRUE/FALSE: A corporation must be adequately capitalized, and the funds of the corporation do not have to be kept separate from the funds of the owners.

FALSE: A corporation must be adequately capitalized, and the funds of the corporation MUST BE KEPT SEPARATE from the funds of its owners.

Can allow enterprises to grow or downsize and change the nature of their business or competitive position.

Mergers and acquisitions (M&A)

They breached one or more of their fiduciary duties

Did not act within the Business Judgment Rule

*"________"* must meet annually to elect officers and they should approve year end financials, and if applicable, authorize bonuses, contributions to pension plans and any other relevant actions.

Directors

*________* in a directorship corporation are the only individuals authorized to vote.

Directors

Duty of Confidentiality

Do not disclose corporate information

Uniform Commercial Code Article 7

Documents of Title covering goods

When a corporation is taxed on its income as corporate income tax and a shareholder must include any dividend declared and paid to the shareholder on the shareholder's individual income tax return.

Double Taxation

Uniform Limited Partnership Act

Drafted by NCCUSL. Most recent version 2013. Previously know as Revised Uniform Limited Partnership Act "RULPA"

Uniform Partnership Act

Drafted by the National Conference of Commissioners on Uniform State Laws "NCCUSL". Previously referred to "RUPA" Revised Uniform Partnership Act. Most recent version 1997

Listings of publicly traded companies can be found on *"________"*.

EDGAR

The Corporation must obtain an *"___"* from the IRS ad file any other relevant governmental documents.

EIN

What are the disadvantages of a General Partnership/Co-Partnership?

Each partner has personal risk and unlimited liability. Meaning: -If a business fails, the partners can be personally responsible for all debts - Personal assets of the partners can be subject to judgment in a lawsuit -In some states, the partnership is considered dissolved upon the death or withdrawal of a partner - Many believe that forming a general partnership could be considered malpractice because there are much better ways to set this up for a client benefit now

What are the advantages of a sole proprietorship?

Ease of formation and small start-up costs Complete management control by owner; Owner retains all profits of business; Income and/or loss of business is treated as individual income or loss and is taxed as such. Business income and/or loss are reported in a separate Schedule C attached to the owner's tax return. No separate tax return is filed for the entity.

Under the Model Business Corporation Act, what is the responsibility of the shareholders of a coporation?

Elect the Directors of the Corporation

Why file for a 501(c)(6) status?

Even if exemption is granted, in most cases, donors can not take a charitable contribution deduction

TRUE/FALSE: Once formed, all nonprofit corporations are tax exempt.

FALSE

TRUE/FALSE: The Business Judgment Rule is designed to protect directors and officers from making decisions for the corporation when they were ill-informed.

FALSE

TRUE/FALSE: The sale of assets of a business always results in the change of owners of a business.

FALSE

TRUE/FALSE: Subchapter S Corporation: Can have nonresident aliens as shareholders

FALSE. Can NOT have nonresident aliens as shareholders

TRUE/FALSE: The Limited Partnership does not need an EIN from the IRS.

FALSE. The LP must obtain an EIN from the IRS

TRUE/FALSE: CORPORATIONS: The Directors must meet annually to elect Shareholders.

FALSE. The SHAREHOLDERS must meet annually to elect DIRECTORS.

TRUE/FALSE: The general and limited partners will NOT enter into a written partnership agreement.

FALSE: The general and limited partners will enter into a written partnership agreement

Formed as a result of the Clayton Antitrust Act. Its mission is to enforce the rules of competitive marketplace- to protect consumers and promote competition. Enforces the various antitrust laws so that consumers will be protected from anticompetitive mergers and business practices.

Federal Trade Commission Act of 1914 (FTC)

A person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons)

Fiduciary

Considered the highest standard of care that a *_______* has to a principal or beneficiary.

Fiduciary duty - "fiduciary"

How is a Foreign Corporation formed?

Files an Application for Certificate of Authority or similar type document

Used by US Exporters to reduce federal income tax on export related income. THE US Exporter sets it up in certain foreign countries or US possessions to obtain a corporate tax exemption on a portion of its earnings generated by the sale or lease of export property.

Foreign Sales Corporation (FSC)

To request exemption under 501(c)(6), the nonprofit corporation will need to file IRS Form *#* with the IRS in order to receive a tax determination letter from the IRS.

Form 1024

To request exemption under 501(c)(4), the entity will be required to file Form *#* and Form *#__* in order to receive a tax determination from the IRS.

Form 8976 (Notice of Intent to Operate) + Form 1024-A

Commerce in the United States is based on the belief that:

Free trade and open markets will provide consumers with better products, services, and prices.

Uniform Commercial Code Article 4A

Funds transfers

An unincorporated legal entity formed between two or more persons to carry on as co-owners a business for profit, whether or not the persons intended to form a partnership.

General Partnership or Co-Partnership

An unincorporated legal entity formed between two or more persons to carry on a business for profit, whether or not the persons intended to form a partnership.

General Partnership/Co-Partnership

What are the advantages of a Limited Partnership?

General partner(s) control the management of the limited partnership, while the limited partners have no management powers. - Limited liability for limited partners -Limited partners can provide means of obtaining additional capital -Partnership income and/or loss are reported on a separate Schedule K-1 attached to each partner's (general and limited) tax return. The partnership itself is not taxed (IRS form 1065 required to be filed annually)

An unincorporated entity with two or more persons is called:

General partnership

Uniform Commercial Code Article 1

General, provisions

A shareholder may make an IRC *#* stock election.

IRC 1244 stock election

Section 1244 stock is defined in

IRC 1244(c)(3)

Every taxpayer who participates in the IRC *#* exchange must keep permanent records in substantial form which include all the information required (Treasury Regulation 1.351-3(c)

IRC 351 exchange

Property is defined how under IRC

IRC 3511

Incorporation into a business can be partly or wholly tax-free if technical rules are satisfied. No gain or loss is recognized if property is transfered to a corporation solely in exchange for stock of that corporation, if immediately after the transfer, the shareholders are in control of the Corporation.

IRC Section 351 Stock

A nonprofit corporation that is tax exempt must annually file with the IRS this particular tax form:

IRS Form 990

How do you obtain an EIN?

IRS Form SS-4 Application

To request exemption under 501(c)(3), the nonprofit corporation will need to file IRS FORM *#* with the IRS in order to receive a tax determination letter from the IRS.

IRS form 1023

To obtain S Status, a Corporation must file IRS Form *"####"*

IRS form 2553

How can you change the classification of an LLC?

IRS form 8832

How do you form a General Partnership/Co-Partnership?

In most states- a statement, notice or certificate of partnership may be filed with the Secretary of State or County Clerk in each county in which the partnership is doing business. These statements are optional, voluntary and unless cancelled earlier, typically expire 5 years from the date of filing.; Partners should enter into a written partnership agreement; The Partnership obtains a federal employer identification number from the IRS (IRS FORM SS-4)

For a private company to go public, they most offer their shares for sale through *"an ___ ____ ____"*.

Initial public offering (IPO)

Specifically formed to sell insurance policies to individuals, whether directly or indirectly through insurance agencies or employers.

Insurance Company

Uniform Commercial Code Article 8

Investment Securities

Failure to file an annual report may result in the state:

Involuntarily dissolving the corporation.

What does a partnership agreement outline?

Issues such as who manages, how a partner's withdraw is handled, how a new partner is added to the partnership. To the extent that the partnership agreement does not otherwise provide, RUPA or the applicable state statute will govern the partnership.

Public Traded: Compliance and Regulation Costs/Filings: Additional record keeping requirements under what act?

Sarbanes-Oxley Act of 2002

A form of temporary partnership organized to carry out a particular business enterprise for profit. Often, it is terminated as of the conclusion of the specific project.

Joint Venture

Business agreements in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity.

Joint ventures

Entity Classification under IRS "check the box" Rules (TD 8697, 12/18/96)

LLC

Owners of a properly structured *"_ _ _"* can obtain both a corporate styled liability shield and the pass-through tax benefits of a partnership.

LLC

Transactions in which the ownership of companies, other business organizations, or their operating units are transferred or consolidated with other entities.

Mergers and acquisitions (M & A)

The name must contain the phrase "Limited Partnership" or WHAT abbreviations?

LP or L.P.

Uniform Commercial Code Article 2A

Leases

Uniform Commercial Code Article 5

Letters of Credit

Provides traditional limited liability to the limited partners and limited liability to the general partners to the same extent permitted to a partner in a Limited Liability Partnership (LLP):

Limited Liability Limited Partnership (LLLP)

Formed by two or more persons in which that partners have less than full liability for the action of other partners but have full liability for their own actions.

Limited Liability Partnership

Newest form of general partnership (1996 amendments to RUPA)

Limited Liability Partnership

This partnership is a business entity.

Limited Liability Partnership

General partnership formed by two or more persons in which the partners have less than full liability for the action of other partners but have full liability for their own actions.

Limited Liability Partnership (LLP)

What is not found in a general partnership?

Limited Partner

Formed by two or more persons under the laws of the state in which they are formed. They have at least one general partner and at least one limited partner.

Limited Partnership (LP)

Owners in an LLC are called *"_______"*

Members

Ownership interests in an LLC are called *"_______ ______"*

Membership Interests

(M & A)

Mergers and acquisitions

How do you form a domestic LLC?

Must file Articles of Organization with the appropriate State authority. Depending on the specific state statute, the Articles or Application must be signed by an organizer or member or agent of the LLC if allowed

How do you form a Domestic Limited Partnership?

Must file a Certificate of Limited Partnership with the State in which it is forming.

How do you form a foreign LLC?

Must file an Application for Certificate of Authority to Transact Business. Depending on the specific state statute, the Articles or Application must be signed by an organizer or member or agent of the LLC if allowed

How do you obtain a 501(c)(3) status?

Must file form 1023 or 1023-EZ with IRS in order to receive a determination letter from the IRS that recognizes the 501(c)(3). Include form 2848 Power of Attorney

How do you obtain a 501(c)(6) Corporation status?

Must file form 1024 with IRS in order to receive a determination letter from the IRS that recognizes 501(c)(6) Corporation status

Are nonprofit corporations automatically tax exempt?

NO. Nonprofit corporations are not automatically tax exempt.

Uniform Commercial Code Article 3

Negotiable Instruments

A corporation formed under state law in which the owners (if any) are not permitted to receive any profits of the corporation.

Nonprofit Corporation

Depending on the state law, this type of corporation may need to file an annual report with the respective state governmental authority

Nonprofit Corporation

If a tax exemption has been granted for this type of corporation, they will file annual tax return with the IRS on applicable form (990,990-EZ, or 990-PF), otherwise use form 1120

Nonprofit Corporation

Many states do not require the use of words such as "Inc." or "Ltd.", etc, in the name of this type of corporation

Nonprofit Corporation

These type of corporations are commonly formed for education, charitable and religious purposes.

Nonprofit Corporation

This type of corporation can be organized on a stock or nonstock basis. If the corporation does not issue stock, then it typically is organized either on a directorship basis or a membership basis

Nonprofit Corporation

These corporations are not automatically tax exempt unless they file the necessary documentation with the IRS to obtain tax exemption.

Nonprofit Corporations

This type of corporation is commonly formed for education, charitable and religious purposes.

Nonprofit Corporations

501(c)(6) tax exemption

Organized and operated by chambers of commerce, business leagues, real estate boards, and broads of trade. NALA is one of these

501(c)(3) tax emption

Organized and operated exclusively for religious, charitable, literary, or educational purposes, or for testing for public safety, to foster national or international amateur sports competitions, or prevention of cruelty to children or animals

501(c)(4) tax exemption

Organized and operated primarily to further the common good and general welfare of the people of the community, such as by bringing about civic betterment and social improvements

What are the disadvantages of a sole proprietorship?

Owner takes all the risk and has unlimited liability: if the business fails, the owner is personally responsible for all debits, personal assets of owner can be subject to judgment in a lawsuit; Owner can be limited financially by her personal assets and by what she can acquire as an individual; can be limited availability of alternative sources of capital; termination of business upon death of owner

Ownership interests of the shareholders (shares of stock) *ARE/ARE NOT* transferrable to others.

Ownership interests of the shareholders ARE EASILY transferrable to others

Owners in the LLP are called:

Partners, and all partners participate in management of the partnership

An S corporation is federally taxed as a/an:

Partnership

Ownership interests in a limited partnership are called

Partnership interests

If a court finds that the corporation has not acted as a separate and distinct entity, the court can *"______ the ______ _____"*, and the shareholders can be deemed to be personally liable.

Pierce the corporate veil

Under the Model Business Corporation Act, the officers elected must include:

President; Secretary; Treasurer

Who does the fiduciary owe a duty to?

Principal or beneficiary is the person to whom a duty is owed

An LLC made up of one or more licensed professionals.

Professional Limited Liability Company ("PLLC")

Depending on state law, this LLC may 1. render one professional service. 2. two or more professional services, and each member and manager must be licensed in one of the professional services offered

Professional Limited Liability Company ("PLLC")

Gives the licensed professional the benefits of an LLC, while not altering the law and regarding the liability of a licensed professional.

Professional Limited Liability Company ("PLLC")

This is formed the same way as an LLC

Professional Limited Liability Company ("PLLC")

A *"_______ _______"* gives the licensed professional the benefits of a corporation, while not altering the law regarding the liability of a licensed professional

Professional Service Corporation "PC"

A *"_______ _______"* is formed the same way as a corporation.

Professional Service Corporation "PC"

Corporation made up of one or more licensed professionals.

Professional Service Corporation "PC"

*______ _______* corporations are formed by those licensed in certain professions.

Professional service corporations (PC)

The type of *________* transferred tax free includes cash, tangible property, and intangible personal property.

Property. Property as defined by IRC 3511

*"_______ __________" Company shares are traded to the general public on a stock market exchange (i.e. New York Stock Exchange, NASDAQ, Euronext).

Publicly Traded Company

A partnership in which ownership interests are regularly traded on an established securities market and are treated for federal tax purposes as corporations.

Publicly Traded Partnerships Trust (PTP Trusts)

A financial device in which investors purchase shares in a trust that invests in real estate ventures.

Real Estate Investment Trust (REIT)

A mutual fund or REIT that is eligible to pass the taxes on capital gains, dividends, and interest payments onto the clients or individual investors.

Regulated Investment Company (RIC)

What are the advantages of a limited liability partnership?

Relatively easy to form; -Some limited liability to partners -All partners participate in the management of the partnership - Partners can provide additional capital when needed -Partnership income and/or loss are reported on a separate Schedule K-1 attached to each partner's tax return. The partnership itself is not taxed (IRS form 1065 required to be filed annually)

What are the advantages of a General Partnership/Co-Partnership?

Relatively easy to form; All partners participate in the management of the partnership; Partners can provide additional capital when needed; "Pass through tax entity" - Partnership income and/or loss are reported on separate Schedule K-1 attached to each partner's tax return. The partnership entity is not taxed (IRS form 1065 required to be filed annually)

Drafted by the Model Nonprofit Corporation Act Subcommittee of the Business Law Section of the ABA. Most recent version 2008 (3rd edition). Currently in process of revision (4th edition).

Revised Model Nonprofit Corporation Act

Drafted by NCCUSL. Most recent revision 2013.

Revised Uniform Limited Liability Company Act

(RUPA)

Revised Uniform Partnership Act

Uniform Commercial Code Article 2

Sales

For *________* to shield themselves from personal liability, the corporation must maintain itself as a separate and distinct entity from that of its *_______*.

Shareholders; shareholders

The first Federal antitrust act enacted in the U.S. is called the:

Sherman Antitrust Act

This was the first federal antitrust act passed into legislation in the U.S. This Act was an attempt by Congress to regulate competition among businesses in the U.S. It outlaws the restraint of trade and prohibits monopolies in business. Penalties under this act can be severe and costly. Civil as well as criminal penalties can be imposed and are prosecuted through the U.S. Department of Justice (DOJ).

Sherman Antitrust Act of 1890

*"_________ _________"* LLC is considered a disregarded tax entity for federal tax purposes (in which case it is treated as a pass-through conduit such as a sole proprietorship) unless it elects to be classified as an association (taxed as corporation)

Single Member LLC

What is the default tax rule under the check-the-box regulations for a single member limited liability company?

Single member LLC is taxed as a sole proprietorship

An unincorporated business conducted in a single owner's individual capacity, and without the organization of a separate legal entity for holding and conducting the business. Usually started by individuals to run their own small business.

Sole Proprietorship

An unincorporated business that is owned by one individual.

Sole Proprietorship

Types of Corporations:

Sole proprietorship; Co-Partnership or General Patnership; Limited Liability Parntership; Limited Partnership; Corporation; Limited Liability Company

Regular private corporation that pays income taxes and distributes taxable dividends to shareholders because it has not chosen to be a subchapter S Corporation

Subchapter C Corporation

The corporation can issue "qualified small business stock". Shareholder who hold this stock for at least 5 years can exclude up to one half of any gain from the sale or exchange of the stock.

Subchapter C Corporation

A "small business" corporation that has chosen a tax status that allows it to be taxed as a partnership to avoid the corporate income tax,

Subchapter S Corporation

A *_________ __* corporation is a small business corporation that has chosen a tax status that allows it to be taxed as a partnership to avoid corporate income tax.

Subchapter S corporation

TRUE/FALSE: A corporation can deduct certain expenses from income prior to paying corporate income tax. Certain types of corporations can receive special tax treatment for income or capital gain on the sale of stock (Subchapter S corporations, Subchapter C corporations, and corporations that make a 1244 stock election)

TRUE

TRUE/FALSE: A foreign LLC files an application for Certificate of Authority to Transact Business within the state where the LLC is going to do business.

TRUE

TRUE/FALSE: A revocation only terminates the general partnership's status as an LLP and is not an event of dissolution of the partnership.

TRUE

TRUE/FALSE: A revocation only terminates the partnership's status as an LLP and is not an event of dissolution

TRUE

TRUE/FALSE: A single member LLC will be considered a disregarded tax entity for federal tax purposes unless it elects to be classified as an association (also known as a corporation).

TRUE

TRUE/FALSE: All 50 states have enacted LLC acts

TRUE

TRUE/FALSE: An LLC is a cross between a corporation and a limited partnership.

TRUE

TRUE/FALSE: An acquisition of an ownership interest (by a buyer) or the sale of an ownership interest (of the seller) occurs when one business entity purchases the ownership interest of another business. The buyer can either be an individual or another business entity.

TRUE

TRUE/FALSE: An acquisition of assets (by a buyer) or the sale of assets (of the seller) occurs when one business entity purchases all or substantially all the assets of another business. In this type of transaction, the buyer is purchasing just the assets and is not purchasing an ownership interest in the business.

TRUE

TRUE/FALSE: An incorporator does not need to be a future shareholder, officer or director of the corporation

TRUE

TRUE/FALSE: Annual state, federal and local tax returns must be filed on behalf of the corporation.

TRUE

TRUE/FALSE: CORPORATIONS: Annual state, federal and local tax returns must be filed on behalf of the corporation.

TRUE

TRUE/FALSE: CORPORATIONS: Failure to file an Annual Report can result in an involuntary dissolution of a corporation.

TRUE

TRUE/FALSE: CORPORATIONS: Most states require the filing of an Annual Report, along with the relevant filing fee.

TRUE

TRUE/FALSE: CORPORATIONS: Ownership interests of shareholders (shares of stock) are easily transferable.

TRUE

TRUE/FALSE: CORPORATIONS: The existence of the corporation is separate from the shareholder

TRUE

TRUE/FALSE: CORPORATIONS: There are some tax advantages - a corporation can deduct certain expenses from income prior to paying corporate income tax

TRUE

TRUE/FALSE: Certificates usually must be renewed during a specific time period (i.e. every 5 years)

TRUE

TRUE/FALSE: Depending upon management duties, owners in the limited partnership are called general partners or limited partners.

TRUE

TRUE/FALSE: Directors in a corporation, in fulfilling their managerial responsibilities, are charged with certain fiduciary duties. Primary of those are the Duty of Care and Duty of Loyalty.

TRUE

TRUE/FALSE: Due to the importance of free trade in the United States, several antitrust acts have been put into place to protect the free trade and open markets that are vital to U.S. commerce.

TRUE

TRUE/FALSE: Existence of the LLC does not begin until the Articles or Application is filed.

TRUE

TRUE/FALSE: Existence of the limited partnership does not begin until the Certificate of Limited Partnership of the Certificate of Authority is filed with the appropriate government entity.

TRUE

TRUE/FALSE: Fiduciary duty is the highest standard of care

TRUE

TRUE/FALSE: Form 1204-A requires the nonprofit to provide a wealth of information on its financial and management structute.

TRUE

TRUE/FALSE: If a corporation solicits charitable contributions, it may need to obtain a license with the Charitable Trust Division of the respective State Attorney General's office (or similar bureau of the government)

TRUE

TRUE/FALSE: If a nonprofit is tax exempt, it must file IRS Form 990 (990-EZ or 990-PE) annually.

TRUE

TRUE/FALSE: If a tax-exempt nonprofit does not timely file its Form 990 with the IRS, the IRS may revoke the nonprofit's tax exempt status.

TRUE

TRUE/FALSE: If the LLC has multiple members, it must obtain an EIN from the IRS.

TRUE

TRUE/FALSE: If the LLC is a multiple member LLC, it shall obtain a federal employer identification number from the IRS (IRS form SS-4)

TRUE

TRUE/FALSE: If the LLC is a single member LLC and is not electing to be classified as an association, it does not need to obtain a federal EIN.

TRUE

TRUE/FALSE: In 1977, Wyoming initiated a national movement by enacting this country's first limited liability company act. The movement started slowly as the IRS took more than 10 years to announce finally that a Wyoming LLC would be taxed as a partnership.

TRUE

TRUE/FALSE: In a Limited partnership, ownership interests are called partnership interests.

TRUE

TRUE/FALSE: In an LLC, the managers, (or members), may elect or appoint officers to run the day-to-day operations of the business.

TRUE

TRUE/FALSE: In most states, only one person is required to incorporate.

TRUE

TRUE/FALSE: In order to obtain and maintain its exemption, a 501(c)(3) organization cannot have any part of its net earnings inure to benefit any private shareholder or individual, and no substantial part of its activities can consist of carrying on propaganda or otherwise attempting to influence legislation.

TRUE

TRUE/FALSE: In order to obtain tax exemption, a nonprofit corporation must file the necessary documentation with the IRS to obtain federal tax exemption.

TRUE

TRUE/FALSE: It is imperative that directors and officers always uphold their fiduciary duties to the corporation.

TRUE

TRUE/FALSE: LP: The partnership shall obtain a federal employer identification number from the irs.

TRUE

TRUE/FALSE: Managers need not be members of the LLC (unless operating agreement specifies otherwise)

TRUE

TRUE/FALSE: Most states require filing an annual report that typically will list the shareholders of the corporation and attest that they are all licensed in the profession or professions of the corporation.

TRUE

TRUE/FALSE: No gain or loss is recognized if property is transferred to a corporation solely in exchange for stock of that corporation and if the shareholders are in control of the corporation immediately after the transfer.

TRUE

TRUE/FALSE: Owners in partnerships are called partners

TRUE

TRUE/FALSE: Owners in the limited liability partnership are called partners.

TRUE

TRUE/FALSE: Professional Corporation: Most states require the filing of an annual report. The annual report typically must list the shareholders are all licensed in the profession or the professions of the corporation

TRUE

TRUE/FALSE: Public Traded: Compliance and Regulation Costs/Filings: - SEC: Filing a certain quarterly financials, annual reports, changes (company insiders) and future forecasts

TRUE

TRUE/FALSE: Public Traded: For a private company to go public, they must offer their shares through an initial Public Offering.

TRUE

TRUE/FALSE: Publicly Traded: The number of public companies has fallen by almost 50% in the last 25 years. For instance, in 1996 there were over 8,000 companies trading on NYSE & NASDAQ- by March 2022, the number had dropped to just above 6500.

TRUE

TRUE/FALSE: Publicly held companies must work toward growth for their public shareholders which can increase shareholder value.

TRUE

TRUE/FALSE: RUPA requires that the partnership also file the LLP forms annually with the state where the original statement was filed.

TRUE

TRUE/FALSE: Sole Proprietorship: If a business fails, the owner is personally responsible for all debts

TRUE

TRUE/FALSE: Sole Proprietorship: Personal assets of owner can be subject to judgment in a lawsuit

TRUE

TRUE/FALSE: Some state statutes have provisions for Emergency Bylaws.

TRUE

TRUE/FALSE: Subchapter S Corporation: Can issue only one class of stock

TRUE

TRUE/FALSE: Subchapter S Corporation: Can not have more than 100s shareholders, and family members from as many as 6 generations count as 1 shareholder

TRUE

TRUE/FALSE: Subchapter S Corporation: Can only have "natural persons" as shareholders. Certain trusts qualify as natural persons

TRUE

TRUE/FALSE: Subchapter S Corporation: Must be a domestic corporation

TRUE

TRUE/FALSE: The Articles will usually require a specific purpose clause that the name of the PC includes the words "Professional Corporation" or "PC"

TRUE

TRUE/FALSE: The LLC does not exist until the Articles of Organization are filed with the appropriate governmental agency.

TRUE

TRUE/FALSE: The bylaws outline the method and manner for governing the corporation.

TRUE

TRUE/FALSE: The corporation should not commingle its funds with that of its owners.

TRUE

TRUE/FALSE: The domestic LLC must file Articles of Organization with the appropriate state authority where the LLC is going to form.

TRUE

TRUE/FALSE: The goodwill value of the company is based on its reputation and corporate image

TRUE

TRUE/FALSE: The member of the LLC shall approve and execute an Operating Agreement of the LLC and elect managers, and officers, if applicable

TRUE

TRUE/FALSE: The name of the LP must contain the phrase "limited partnership" or the abbreviation LP or L.P.

TRUE

TRUE/FALSE: The partners of the LLP should enter into a written partnership agreement and obtain an EIN from the IRS.

TRUE

TRUE/FALSE: Under most state statutes, an LLC can be formed with only one member

TRUE

TRUE/FALSE: Under the MCBA and most state statutes, the officers must be at least a President, Secretary and Treasurer and then any other officers as specified in the Corporation Bylaws.

TRUE

The Sarbanes-Oxley Act was enacted as a result of various major corporate and accounting scandals of larger corporations in the 1990s.

TRUE

TRUE/FALSE: There is no specific legal documentation required to form a sole proprietorship.

TRUE. In most states, a notice filing or certificate should be filed with the county clerk in each county in which the owner is doing business or in the county in which the sole proprietor resides.

TRUE/FALSE: If the LLC has only one member and the LLC is not electing to be classified as an association, the LLC will not need to obtain an EIN.

TRUE. The exception to this rule is if the LLC is going to have employees.

The *"____ __ _____"* elects or appoints officers to run the day-to-day operations of a business.

The Board of Directors

A U.S. federal law that outlines expanded requirements for the management and Boards of Directors of U.S. public companies, along with public accounting firms.

The Sarbanes-Oxley Act of 2002

Enacted by the federal government to provide safeguards to try and eliminate these types of accounting scandals from happening in the future.

The Sarbanes-Oxley Act of 2002

SOX

The Sarbanes-Oxley Act of 2002

This was enacted as a result of various major corporate and accounting scandals of larger corporations in the 1990S.

The Sarbanes-Oxley Act of 2002

Shareholder Agreements do not allow a corporation to dispense with:

The election of officers

The person to whom a duty is owed.

The principal or beneficiary

What is the attraction of a Limited Liability Companies ("LLC")

The unique ability to bring together in a single business organization the best features of all other business forms.

Goodwill of a company is defined as:

The value of a company's brand name and the reputation of the company

How do you form a sole proprietorship?

There is no specific legal formation required. In most states, a Notice filing or Certificate, should be filled with the County Clerk in each county in which the owner is doing business. Certificates usually must be renewed during a specific time period (i.e. every 5 years)

What does timely timing refer to? (Subchapter S corporations)

Timely filing means it must be filed before the 16th day of the third months of the tax year that election is to take effect

What is the object of a vertical merger?

To create an entity that is more efficient in its operation

*______ _______ # (___)* requires any person who receives stock of a controlled corporation in a 351 exchange to include a "complete statement of all of the facts pertinent to such exchange" with the tax return for the year in which the exchange is consummated.

Treasury Regulation 1.351-3(a)

TRUE/FALSE: A multiple member LLC will be taxed as a partnership for federal tax purposes, and no election is required to be filed with the IRS.

True

TRUE/FALSE: The partnership must obtain a Federal Employer Identification Number (EIN) from the IRS

True

A horizontal merger occurs when:

Two businesses merge to offer similar or compatible products or services in the same market

A vertical merger occurs when:

Two businesses merge who produce compatible products or services for a specific finished product

A set of laws that provide legal rules and regulations governing commercial or business dealings and transactions

Uniform Commercial Code

Considered a statutory program under the law of administering, legalizing, and recording specified business contracts and lien instruments.

Uniform Commercial Code

Regulated by statutes and regulations that are far more streamlined than those typically applicable to consumer protection laws

Uniform Commercial Code

Regulates the transfer or sale of personal property. Does not address transactions or financial of real property

Uniform Commercial Code

Standardizes business laws in the US and seeks conformity across state lines- important as most merchants engage in interstate business

Uniform Commercial Code

This concept is that merchants are professionals in the buying and selling of goods and need far more efficient procedures and less protection-based laws to facilitate their transactions.

Uniform Commercial Code

The law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and partnership.

Uniform Partnership Act (UPA)

How do you form a Foreign Limited Partnership?

Will file a Certificate of Authority to Transact Business in a State other than the initial state of formation

A regular private corporation that pays income taxes and distributes taxable dividends to shareholders because is has chosen not to be treated as a Subchapter S corporation.

a Subchapter C corporation

A *________* corporation is owned by a small number of shareholders and is typically the form used by a family business. Shareholders are typically given management control.

a close corporation

What is the "Business Judgment Rule"?

a court presumes that in making a business decision, directors of a corporation acted:--> in an informed basis--> in good faith, and --> in the honest belief that the actions taken were in the best interest of the corporation

A person who holds a legal or ethical relationship of trust with one or more parties.

a fiduciary

Drafters of Operating Agreements had to have no more than two of the following corporate characteristics:

continuity of life, free transferability of interests, centralization of management, and limited liability

A *______* provides limited liability to its shareholders.

corporation

Once an entity no longer does business or no longer holds any assets, the entity will file the necessary documentation with the appropriate governmental agencies to *_________*>

dissolve

Definition: the income is taxed twice

double taxation

Owners in a limited partnership are called:

either general partners or limited partners

The location of the domestic jurisdiction of an entity is typically determined by:

looking at issues such as location of the business, state tax laws, and favorable business case law

Owners in an LLC are called:

members

The LLC is managed either by managers appointed by *________* or by the members of the LLC.

members

The owners in an LLC are called:

members

Ownership interests in an LLC are called:

membership interests

Transactions between those who make their living engaged in commercial buying and selling of goods

merchants

A *_______* will need to enter into Bylaws, obtain an EIN from the IRS, potentially file annual reports with the state, and will need to file annual tax returns.

nonprofit

A *______* corporation is only by which the owners- if any- are not permitted to receive any profits of the corporation. Commonly formed for education, charitable, and religious organizations.

nonprofit corporation

A *________* corporation can be organized on either a stock or nonstock basis.

nonprofit corporation

If a *______* corporation solicits charitable contributions, it may need to obtain a license with the Charitable Trust Division of the respective State Attorney General's office

nonprofit corporation

In a horizontal merger, *#* company(ies) usually acquire a competitor.

one company

An *"_____ ______ ______"* also promotes innovation and provides consumers with more choices

open market system

Owners in a partnership are called:

partners

Lawyers and doctors must for as:

professional service corporations

A corporation is *"______ ______"* if its shares of stock are traded to the general public on a public stock market exchange.

publicly traded

As a Subchapter C, the corporation can issue "______ ______ ______ _____"

qualified small business stock

In most states a statement, notice, or certificate of partnership may be filed with:

the secretary of state or county clerk in each county in which the partnership is doing business

All funds of the nonprofit corporation must be used:

to further the purposes for which the corporation is formed

The driving force for a horiztonal merger is:

typically not financial, but a desire to obtain a larger market share.