last F*king bus law test EVER!!!!!

limited partnership

- usually have no personal liability once they have paid their capital contribution in the partnership (liability listed to what capital they paid into the the LP) -essentially have the same rights as general partners, including the right of access to partnership books and the right to other information regarding partnership business -however, they have no right to ***manage*** the business and if they do, they may lose their personal liability protection

example of an assignment of a partnership interest

-a partner in a partnership assigning his/her cut to any profits to his ex spouse as a part of a divorce settlement between them -the assignment of such proceeds do NOT make the ex-spouse a a partner or given him the right to participate in th management of the partnership -it only gives him the right to receive that share/cut of the profits

creator's lien on a partner's partnership interest

-a partner's interest is also subject to a judgement creditor's lien -a judgement editor who is chasing a partner for money owed can forcibly and unilaterally (court order) attach that partner;s interest in the partnership by petitioning the court that entered the judgement to grant the creditor a charging order

primary attributes of an LLP

-a partner's liability for his partners' professional malpractice is limited to the partnership's assets -BUT** a partner retains unlimited personal liability for his OWN negligence and for all NON professional obligations of the partnership

limited liability partnership

-a reaction to the large personal liability sometimes imposed on professionals (usually attorneys, accountants, and architects) for the professional malpractice of their partners

limited liability company (LLC)

-a relatively new business form intended to combine the non-tax advantages of corps with the favorable treatment of partnerships -essentially a hybrid between partnership and a corporation

actions which constitute a wrongful dissoltuion

-any dissolution that violates the partnership agreement -judicial dissolution due to a partner's conduct the prejudicially affects the business -judicial dissolution due to a partner's willful and persistent breach of the partnership agreement or fid. duties

assignment of a partner's partnership interest

-as a co-owner, a partner has an ownership interest in the partnership - part of his personal property -although a partner may not give his personal creditor any interest in separate items of partnership property, he may may sell or assign his partnership interest to a creditor (EX,. where a partner assigned his share of the partnership profits over to his ex-spouse as a part of a divorce settlement)

association of two or more persons

-association must be a voluntary and consensual relationship which can be express or implied

why do a limited partnership

-by using a corporate general partner, no individual will have unlimited liability for the debts of the business -losses of the business are deductible on the owner's individual federal income tax returns -investors may contribute capital to the business yet avoid unlimited liability and the obligation to manage the business. -the LP has the ability to attract large amounts of capital -for a business needing millions of dollars of capital and expecting to lose money in its early years, this is the way to go

why choose a sole proprietorship

-easily formed -inexpensive to form -few people consider their business for decision and it may occur by default

members of an LLC

-fiduciaries of the LLC -have limited liability for the obligations of the LLC (their liability tis listed to their capital contributions; they are not subject to personal liability for the debts of the LLC) -no limit on the number or types of them

part of starting a sole proprietorship

-filling out and submitting a fictitious business name statement for and posting the relevant notice in you local paper

dissolving a corp

-has a separate life from its owners and managers. for example, when a shareholder or manager dies/leaves it is not dissolved

uniform partnership act

-has been adopted in all states except louisiana

tax rules for limited partners

-must pay federal income tax on their share of the profits of the business -may deduct their share of losses only to the extent of their investment in the business

rule for torts

-neither a partnership or any of its partners are liable for the intentional tort of a partner *intentional torts are not normally within the course and scope of the partnership or within the ordinary authority of a partners

why do a c corp

-no human has unlimited liability for the debts of the business -thus, risky businesses incorporate -can attract a large amount of capital because investors can avoid unlimited liability, escape the responsibility of managing the business and easily liquidate their investments by selling their shares -with respect to S corporations, losses of the business are deductible on individual federal income tax returns -however, because S corps are also limited to 100 shareholders, the ability to raise capital is severely limited as it may be difficult to find investors willing to buy their shares, or they may be restricted from selling their shares pursuant to a previous agreement

attributes of a c corp

-no shareholder has the right to manage the corp -shareholders have limited liability for the obligations of the corp (their liability is normally limited to the amount they paid for their shares/the amount they bought into the corp) -directors and officers have no personal liability for the contracts they or the corp's employees negotiate in the name of the corp -while managers have personal liab. for their own misconduct, they generally have no personal liability for corporate torts committed by other corporate managers or employees -shareholder may sell his shares of the corp to other persons without limitation, unless there is a contract or agreement to the contrary -the purchaser then becomes a shareholder with all the rights of the selling shareholder

attributes of an LLC

-owned by members (not called shareholders), who may manage the LLC themselves or elect the managers who will operate the business -must have LLC in the name -transfer of membership is prohibited without the consent of all the members

corporation (regular c corp)

-owned by shareholders who elect a board of directors to manage the business. -the board then often selects officers to run the day to day affairs of the business. -Consequently, ownership and management of the corp may be completely separate

partnership

-partners liable for the torts committed in the course of the partnership business by their partners or by employees of the partnership

interest in the partnership: sharing of profits and losses

-profits: partners share equally according to the number of partners and not according to their capital contribution or the amount of time that each devote to the partnership -exception: partners agree otherwise -losses: same general rule and exception as with profits above -special note: and if the parties expressly agreed to say spilt profits one way but did not address/were silent on how to split the losses, then they would split losses based on the number of parties (and wise versa)

nonprofessional obligations

-rent the LLP owes to its landlord for its office space, fees owed on a repair bill for the spy machine the LLP uses in the course of its business

why would u choose a partnership

-requires no formalities -while it is normally formed by agreement, it may be formed by default (under UPA) it may be automatically created when two or more persons own a business together without selecting another form -each partners right to manage the business and the deductibility of the partnership losses on one's individual tax returns are also attractive

general partner

-rights and liabilities are similar to partners in a regular ordinary partnership -the liability is usually unlimited -however, often a corporation thereby protecting the human managers that make up the general partner from the unlimited personal liability --when a partner dies or withdraws, the limited partnership is dissolved in the absence of an agreement to the contrary - their rights may not be transferred to another person unless the other partners agree to admit the new person as a partner

S corporation

-shareholders can elect to have the corp and its shareholders taxed under subchapter S of the internal revenue code -here, the corporation its shareholders are taxed nearly entirely like a partnership -no more than 100 shareholders ****check requirements

taxes for a regular c corp continued

-shareholders do not deduct corporate losses on their individual tax returns -they may, however, deduct their investment losses after they have sold their shares of the corp -

liability of incoming partners

-such a person has personal unlimited liability for obligations incurred *after* he becomes a partner -for obligations incurred before, he is liable as if he had been a partner when the obligations was incurred -however, *liability is limited to the partnership's assets only, and the creditor cannot come after him individually unless agreed to undertake unlimited

assignment of a partner's partnership interest ( continued)

-such an assignment entitles the buyer or assignee to the right to receive the assigning partner's share of his partnership's profits ONLY -it does not make the buyer or assignee a partner of the partnership, give the assignee the right to inspect the partnership books, manage the partnership, make him become liable to partnership creditors, etc. ( unless agreed so) 1. assigning partner remains a partner 2. the assignment by itself foes not dissolve the partnership. the non assigning partners may not exclude the assigning partner from the partnership, but they can vote to dissolve the partnership

federal corporate tax rates

-tax rates go up as the corporation's income goes up

the effect of partnership by estoppel

-the person who held himself out as a partner or who consented to being held out is liable to the third party who was injured as though he were a partner

charging order continued

-where a creditor of a partner goes to court and gets a court order that allows it to attach the profit proceeds in a partnership that the partner has coming to him/ her by virtue of their membership in a partnership

exceptions for torts in partnership

1. a partner who authorizes a partner to commit an intentional tort is liable for such a tort 2. where a partner has a history of committing intentional torts and the partnership allows him to engage in activities where such torts may foreseeable recur, the partnership is liable

required elements of the UPA definition for partnership

1. association of two or moe persons 2. carrying on a business 3. co-owenrship 4. for profit 5. intent none of the factors in and of itself is conclusive. this a flexible sliding scale test that is designed to do justice and equity.

fiduciary Duties

1. not secretly profit while transacting business for the partnership -return profits to partnership 2. not compete against the partnership -remedy= recovery of profits made by competing venture * can be in an unrelated line of work 3. serve the partnership and help run the day to day operations 4. exercise the skill and acre of the ordinary prudent business manager 5. act within the actual authority possessed by the partner (express/implied) 6. account for the proper use and disposal of partnership funds and property 7. other: -indemnify other partners for expenditures they made from their personal funds and for liabilities they reasonably and in good faith incurred on behalf of the partnership -maintain confidentiality of partnership information -disclose to the other partners information material to the partnership business; and form partners of notices he or she has received

important factors that drive business entity/forms of business selection

1. ownership and control 2. continuity of life 3. transferability of interest 4. tax implications 5. liability 6. cost 7. ability to attract funding/financing from investors

acts that don't normally cause a dissolution

1. partner's assignment of a partnership interest 2. a creditor's obtaining a charging order against a partnership interest 3. addition of a new partner to a partnership 4. disagreement among the partners that does not threaten partnership assets or profitability 5. death or withdrawal of a partner, when the agreement states death shall not cause dissolution

property rights

a partner also has ownership rights in any real or personal property owned by the partnership UPA provides that: 1. all property originally brought into the partnership or subsequently acquired by purchase or otherwise on account of the partnership, sis parternship prop 2. unless the contrary intention appears, property acquired with partnership funds is partnership prop

power vs legal right of dissolution

a partner may have the (?) to dissolve at any time but not the (?) to

interest in the partnership

a partner's interest in the partnership is a personal asset. 1. compensation 2. sharing of profits and losses 3. assignment of a partner's partnership interest 4. creditor's lean on a partner's partnership interest

termination

after all assets of a partnership have been distributed, (term) of the partnership automatically occurs

exception to doctrine of partnership by estoppel

all three elements must be present: 1. a person who holds himself out or consents to being held out as partner of another person; 2. a third party justifiably relies on the holding out; AND 3. the third person is injured as a result of the reliance

why do an LLP

allows professionals, such as lawyers and accountants, the flexibility of management, while insulating them in part from personal liability -relatively easy to establish

novation

an agreement between the partnership, creditor and outgoing partner -to release the outgoing partner from the debt to liability -can be implied or express

outgoing partner's liability for obligations incurred by the partnership after he leaves

an outgoing partner has no liability for such debts and claims *exception: if the doctrine of partnership by estoppel applies he will be liable -should protect themselves by making some type of notice

duties of partners

basically driven from agency law ***review

carrying on a business

can be any trade, occupation or profession -requires a series of transactions (versus a single transaction)

actual authority

can be express or implied

dissolution

characterized by a partner's ceasing to take part in the carrying on of the partnership business -involves a change in the partners' relationship

where no written oral agreement defining the partnership exists

courts use the definition of partnership in the UPA to determine whether on exists

successor partnership liability for the predecessor Partnership's obligations

creditors of the old partnership are creditors of the new partnership -original partners remain liable for obligations incurred prior to dissolution unless there is an agreement with creditors to the contrary

dissolving of LLC

death, retirement, or bankruptcy of any member dissolves and forces the liquidation of it, unless all the remaining members vote to continue the business (one major disadvantage)

authority of partners

each partner is a general manager which can bind the partnership and his other individual partner for acts within the *ordinary affair of the partnership business* and thereby bind the partnership to a third party creditor

charging order

entitles profits of the partner and to any asset available to the partner on the firm's dissolution -does NOT make the creditor a partner in the partnership

decisions about winding up

for decisions in this, the decision of the majority of the partners controls -when a decision is an extraordinary one, unanimous partner approval is required

interest in the partnership: compensation

general rule: a partner's compensation is her share of the profits of the business and she is ordinarily NOT entitled to a salary or wages -exception: an agreement between the partners to the contrary

limited partnership (LP)

has at least one general partner and at least one limited partner

sole proprietorship

has only one owner and is merely an extension of that owner. he makes all management decisions, all profits are his, he assumes greater liability (he is personally liable for all obligations of the business) both rewarding and risky

partnership

has two or more owners, called partners 1. partners have the equal right to make all management decisions, and they share all profits -has no life apart from its owners. when one partner dies or leaves, the partnership is dissolved

false

if a sole proprietor begins operating her business entity under a trade name, the business becomes a separate entity for income tax purposes

false

if a sole proprietor hires one or more employees, the business becomes a joint venture

ratification

if the act in question is not within the ordinary affairs of the partnership business, such an act is generally not binding on the partnership unless (this term) by the unanimous consent of all the partners -partnership may (this term) , after the fact, the unauthorized acts of any partner

partnership taxes

is not a tax paying entity for federal income tax purposes instead all income of the partnership is income to its partners and they must report on their individual tax returns. also losses are treated the same way

sole proprietorship tax

is not a tax paying entity for federal income tax purposes (owner pays, not the business) same is true with respect to deducting business losses

accounting of assets

is required to determine the value of each partner's share in the partnership -can be performed voluntarily or compelled by a court order -under UPA, a partner has the right to a formal accounting in certain circumstances

tax for LLC

like a partnership, there is no federal income taxation at the firm level, -instead, owners pay taxes on their share of the firm's profits (IRS recognizes and treats them as partnerships for federal income tax purposes)

why do an LLC?

limited liability advantage and the management advantage of the corporation -the company and its members receive the dame federal tax treatment as S corporation and its shareholders, yet the LLC has no limit on the number or type of owners

management rights in ordinary partnership

majority rule controls

limited partnership

must have a life span apart from its owners; for example, when a limited partner dies or otherwise leaves, the limited partnership is not dissolved -it is dissolved in much the same way as an ordinary partnership

winding up the partnership

next step after dissolution -involves liquidation of assets -can be accomplished by selling each asset separately or as a whole, possibly making distributions in kind to the partners, etc.

creation of a partnership

no formalities are necessary -two or more persons may become partners by an express oral agreement, and express written agreement, or by conduct/implied

sole proprietorship

not considered a legal entity---cannot sue or be sued (owner is the business, so the owner must be sued and they must sue those who harm the business) -automatically terminated at death of the owner

non-wrongful dissolution

partner has both the power and legal right to dissolve 1. end of the term stated 2. partnership's accomplishment of its objective 3. withdrawal of partner at any time from a partnership at will 4. withdrawal of a partner in accordance with the agreement 5. expulsion of a partner in accordance with the partnership agreement 6. unanimous agreement of the partners 7. illegality of the partnership business 8. death of a partner 9. insolvency (bankruptcy) 10, judicial dissolution due to the adjudicated insanity of a partner 11. judicial dissolution due to the inability of a partner to perform the partnership contract 12. judicial dissolution due to the inability of the partnership to conduct business except at a loss

partner authority during winding up

partner has express authority to do anything the partners agree a partner may perform when winding up, but also ahas the implied authority to do those acts reasonably necessary to winding up -apparent authority will continue unless appropriate notice is given to the appropriate parties.

true

partner's interest in a partnership is not freely transferable -a purchaser of a partner's interest in the partnership is not a partner of the partnership unless the other partners agree to admit the purchaser as a partner

crimes

partners are not criminally liable for a crime by another partner in the course and scope of transacting partnership business *exceptions: a partner participated in the act or authorizes its commission; he knows tf the other partner's criminal tendencies and still places him in a position where he may commit a crime OR the crib elf a partner is foreseeable b/c of the past conduct

partnership: personal libaility

partners assume personal liability for all of the obligations of the business. all debts are debts of the partnership ---if assets of the business are insufficient to pay the claims of its creditors, the creditors may require one or more of the partners to pay the claims, using their individual/personal assets

co-ownership

partners must co-own the business in which they associate -no requirement that the capital contributions or the assets of the business be co-owned -consider the sharing of profits and the sharing of management of the business

partnership property

property purchased with partnership funds intended for use by the partnership

inspection of books

records must be kept accessible to all partners

torts

respondeat superior is applied in determining the liability for the partnership and of the other partners for the torts of partners and other partnership employees

doctrine of partnership by estoppel

situation: two people may not be partners, yet in the eyes of a third person, they may appear to be partners -general rule under the UPA: ---persons who are not partners as to each other are not partners as to third parties/persons

apparent authority

something an entity does or does not to give an impression that another has the authority to act on his/her behalf

outgoing partner's liability for obligations incurred by the partnership while he was a partner

such partners remain liable for partnership liabilities incurred while they were partners *exception: is a novation occurs they are not liable

tax rules for a general partner

tax rules that apply are the same as with partners in a regular partnership

consequences of wrongful dissoltuion

the bad guy partner cannot demand the business be wound up and can't participate in the winding up -goodwill cannot be taken into account when valuing his interest -share of the partnership is reduced by any damage he cause to the partnership through his wrongful act

for profit

the owners of an enterprise must intend to make a profit to create a partnership -if the enterprise suffers losses, yet the owners intended to make a profit, a partnership may still result

intent

the parties must intend to create a relationship that the law (note that this is different than the parties) recognizes as a partnership -thus, even if the parties create a writing which states that they do not intend to form a partnership, that is not conclusive if their actions meet the UPA test!

respondent superior

the principal who is an employer is liable for torts committed by agents who are employees (vs. independent contractors) and who commit the tort while acting within the "scope of their employment"

rights among partners

the rights of partners are governed largely by the specific terms of their partnership agreement -in the absence of provisions to the contrary in the partnership agreement, the law imposes the rights

creating an LLP

to create there must be an agreement by the owners and they must comply with the limited liability partnership statute

joint and several liability

together or individually third party may sue and collect against any one or more of the partners without suing all of them or the partnership itself

matters other than ordinary pastorship for management rights

unanimous vote to bind the partnership -such actions are so important that its necessary all rules can be modified by the agreement*

distribution of assets after winding up

under the UPA they are distributed: 1. those owing to creditors, other than partners -ex; landlord, wages to employees 2. those owns to partners other than for capital contributions and profits -maybe one of the partners was entitled to a salary 3. those owing to partners for capital contributions -what the partnership paid or contributed to get it started or to buy into to become a member 4. those owing to partners in respect to their share of profits

management rights

under the UPA, all partners have equal rights in managing the partnership -each partner has one vote in management matters regardless of the proportional size of his or her interest in the firm

creation of a limited partnership

unlike a sole proprietorship or partnership, this kind may only be created by complying with a state statute permitting limited partnerships (the parties must sign a certificate of limited partnership and file it with the Secretary of State and this is usually open to public inspection) -cannot be created by default

taxes for a regular c corp

usually a tax paying entity for federal income tax purposes -shareholders do not report their share of the corporation's profits on their individual tax returns. -they only report when the corporation distributes profits to the shareholders in the form of dividends, or the shareholders sell their stock at a profit -this creates a double tax liability as profits are taxed at the corporation level and again at the shareholder level when dividends are paid

wrongful dissolution

where the partner dissolves the partnership in violation of the partnership agreement