BUS FINAL KNOWLEDGE CHECKS
Sole Proprietorship
- no special formalities - only required to comply with local laws concerning licensing and permitting, taxes, etc. and who has not created some other business organization to operate that business through -default business entity when there is just one owner - pass through tax entity - unlimited liability - business dissolved when owner dies or retires --- cannot transfer or sell ownership of the business - only business ASSETS can be sold
Chop is a painter in Cycle R US, a bicycle repair shop. Chip has the right to
- share in partnership profits -participate in management - share in the ownership of partnership property
partner authority to bind comes from
-actual express (partnership agreement and/or UPA) - implied reasonably necessary to carry out express - apparent authority - third party reasonably relied on and transaction within the course/scope of the business
The essential elements of a partnership
1. sharing profits and losses 2. joint ownership of partnership business 3. equal right to be involved in the management of the business
partnershipp
2 or more individuals carryon a business for profits
LLC
= artificial "legal person" provides limited personal liability protection to its owners (members)
articles of organization
= document required to form a business
new partner
= no personal liability for existing obligations only capital contribution is at risk
dissociation of partner
= no rights to manage; only entitles to have interest bought out
Vick and Georgia agree to go into business together. They do not formally declarer that their business has a specific form of organization. Vick and Georgia's business is
A partnership, is default form
A member who dissociates from the LLC still have management rights
False
If there are three equal partners in a business, one of them can sell a third of the assets to someone else
False
A LLC is a citizen only in the state in which it was formed
False, citizen in every state where member lives
To form a limited liability corporation, articles or organization must be filed with an attorneys office
False, files with state or gov, never with attorneys office
at the option of the partners, a partnership can pass through entity or a taxpaying entity
False, pass-through entity only
In a limited partnership, all owners are considered to be limited partners and have limited liability
False, this is an example of limited liability partnership
To obtain a contract with Oscar, Leidy misrepresents that she is a partner with Kirk. Kirk overhears Leigh's misrepresentation but says nothing to Oscar. Leidy breaches the contract. who is liable to Oscar?
Leidy and Kirk
Dr. Jones and Dr. Smith are partners in a medical clinic. Jones manages the clinic, which is organized as a limited liability partnership. A court holds Smith liable in a malpractice suit. Jones is
Liable only to the extent of her investment int he firm; all all partners have limited liability and have the authority to manage the business
the personal assets of a partner may be seized to satisfy partnership debts
True, their personal assets are at risk
uniform partnershop act (UPA)
applies in absence of an express agreement (partnership agreement)
corporation
articifal legal person - separate and distinct from its owners will lose this designation if bc of fraud, commingling, undercapitalized, not following formalities = piercing the veil
federal jurisdiction purpose
citizen in every state where a member resides
Liability in a limited liability partnership
consists of all limited partner limited liability (only investment at risk) limited partners have equal right to management
articles of incorporation
document required to form a business organization
partners owe
duty of care a loyalty to the partnership
shareholders
elect the Board of Directors at the first annual shareholder meeting
Directors and officers are protected from liability due to bad business decisions under which rule the doctrine of ultra vires
false
In a limited liability corporation, the owners are subject to personal liability
false
Management of a LLC must include at least one of its members
false
shareholders may inspect the corporate records at any time and for any purpose
false
the shareholders have a duty to elect officers to operate the corporation
false
the UPA governs the operation of partnerships in spite of a different agreement among the partners
false because if the partnership has an agreement that covers a specific area....
general policy for a corporation is determined by the shareholders
false, board of directors
A partnership can be formed only by the express agreement of the parties
false, can also be implied
the board of directions are responsible for the daily operations of the corporation
false, duty of directors
Members in a LLC are given shares to signify their ownership interest in the company
false, given membership
a single person carryon a business for profit with control over its operation can be considered a partnership
false, need two people to be partnership
The board of directors are the owners of the corporation
false, shareholders
LLC Tax
has the option to be taxed like a corporation (pay taxes on profits) or a partnership (pass-through entity)
who hired officers
hired by the board of directors and responsible for daily operations
liability in general partnership
joint and several --> unlimited personal liability (personal assets at risk) only general partner can manage the partnership
bylaws are
legally required and are also adopted at the first organization meeting
Liability in limited partnership (limited partner)
limited personal liability (only investment at risk) cannot participate in management or will lose the limited liability protection - treated like general partner - joint and several liability
board of directors
management decision, initial directors either appointed in the articles or elected by the incorporates at the first organizational meeting
partners have rights to share in
management, participate in partnership business, share in profits, and ownership of the property generally not entitled to compensation unless involved in the daily operations right to an accounting; inspect records
Pacer Inc. is a LLC in which the owners manage the company, this is referred to as
member managed
default management for LLC
member managed - articles or organization have to specify that the LLC will be member managed
operating agreement
not required - outlines how the business will be managed and operating
partnership agreement is
not required, can be express or oral
directors and officers have a duty
of care and loyalty
share
ownership interest
business judgment rule
provides a shield for directors and officers
piercing the corporate veil
shareholder liability
Jay is a general partner is Kappa Sales, a limited partnership. Jay is liable for the firms debts
the full extent of the debts
franchise
the license of a trademark, trade name, or copyright in the selling of goods or services for a franchise fee to another
must have written agreement if
the purpose of partnerships is to sell real estate or will be for more than one year --> statute of frauds (writing requirement applies)
directors have rights
to inspect facilities and records; indemnification
corporation liable for the
torts and crimes of its agents, directors, officers and employee = respondent superior
A LLC is considered to be an individual
true
A LLC is taxed like a partnership and has the liability of a corporation
true
A limited partnership provides personal liability protections from business debts and obligations for the limited partners only
true
Some states require that a LLC have at least two members to be entitles to the highest amount of limited liability
true
The law recognizes a partnership as a separate entity for the purpose of suing or owning property
true
a shareholder can have someone vote on their behalf at the annual meeting through a proxy
true
as a general rule, shareholders are not personally responsible for the debts of the corporation
true
duty of care means that the board and officers must use reasonable skill and be fully informed before making a decision
true
officers of a corporation are hired by the board of directors
true
the members of a LLC should protect their interests by creating a written operating agreement
true
a sole proprietor who uses a name for the business that is not their own must register that name with the appropriate government agency
true, "doing business as"
In a LLC when a member guarantees payment of a loan to the company, the member is not entitles to a limited liability protection
true, personal guarantee
Liability in limited partnership (general partner)
unlimited personal liability