Blaw 420

Unanimous consent

1. Alter the essential nature of the firm's business 2. Admit new partners or engage in a completely new business. 3. Assign partnership property to a trust for the benefit of creditors. 4. Dispose of the partnership's goodwill 5. Confess judgement against the partnership or to submit partnership claims to arbitration. 6. Undertake any act that would make further conduct or partnership business impossible. 7. Amend the terms of the partnership agreement.

Types of Franchises (3)

1. Distributorships 2. Chain-style business operations 3. Manufacturing or processing plant arrangements

The scope of implied powers

In an ordinary partnership, the partners can exercise all implied powers reasonably necessary and customary to carry on that particular business. Some customarily implied powers include the authority to make warranties on goods in the sales business and the power to enter into contracts consistent with the firm's regular course of business.

Payment for the Franchise

The franchisee ordinarily pays an initial fee or lump-sum price for the franchise license. This fee is separate from the various products that the franchisee purchases from or through the franchisor.

Location of the Franchise

Typically, the franchisor determines the territory to be served. Some franchise contracts give the franchisee exclusive rights, or "territorial rights" to a certain geographic area. If the franchise contract does not grant the franchisee exclusive territorial rights and the franchisor allows a competing franchise to be established nearby, the franchisee may suffer a significant loss in profits.

Partnership law may apply

When an issue arise, that is not covered by the agreement. The courts often apply principles or partnership law.

Foreign corporation

formed in one state but doing business in another is referred to in the second state.

UPA guidelines to determine partnership (5)

1. A debt by installments or interest on a loan. 2. Wages of an employee or for the services of an independent contractor. 3. Rent to a landlord. 4. An annuity to a surviving spouse or representative of a deceased partner. 5. A sale of the goodwill (the valuable reputation of a business viewed as an intangible asset) o fa business or property.

Events that cause dissociation

1. By the partner's voluntarily giving notice of an "express will to withdraw." 2. The occurrence of an event specified in the partnership agreement. 3. By a unanimous vote of the other partners under certain circumstances, such as when a partner transfer unsubstantial all of her or his interest in the partnership, or when it become unlawful to carry on partnership business with that partner. 4. By order of a court or arbitrator if the partner has engaged in wrongful conduct that affects the agreement or violated a duty owed to the partnership or the other partners, or engaged in conduct that makes it "not reasonably practicable to carry on the business in partnership with the partner" 5. By the partner's declaring bankruptcy. assigning his or her interest in the partnership for the benefit of creditors, or becoming physically or mentally incapacitated, or by the partner's death.

Advantages of LLC

1. Limited liability 2. Flexibility in Taxation 3. Management and foreign Investors

Rights of partners (6)

1. Management 2. Interest in the partnership 3. Compensation 4. Inspection of books 5. Accounting 6. Property

When does a partnership exist? (3)

1. Sharing of profits or losses. 2. A joint ownership of the business 3. An equal right to be involved in the management of the business.

Disadvantages of the Sole Proprietorships

1. Unlimited liability, or legal responsibility, for all obligations that arise in doing business. 2. Lacking continuity on the death of the proprietor, when the owner dies, the business dies, automatically dissolved. 3. In raising capital, the proprietor is limited to his or her personal funds and any personal loans that he or she can obtain.

A partnership's assets are distributed according (2)

1. payment of debts, including those owed to partner and non partner creditors. 2. Return of capital contributions and distribution of profits to partners.

Torts and Criminal Acts

A corporation is liable for the torts committed by its agents or officer within the course and scope of their employment.

The nature and classification of corporations

A corporation is recognized a a person, and it enjoys any of the same rights and privileges under state and federal law that U.S. citizens enjoys.

Chain-Style business operation

A franchise operates under a franchisor's trade name and is identified as a member of a select group of dealers that engage in the franchisor's business. McDonald's and most other fast-food chains are examples of this type of franchise.

Dissociation and Dissolution

A general partner has the power to voluntarily dissociate, or withdraw, from a limited partnership unless the partnership agreement specifies otherwise. A limited partnership can withdraw from the partnership by giving six months notice unless the partnership agreement specifies a term.

Formation of a limited partnership

A limited partnership must have a least one general partner and one limited partner. Additionally. the partners must sign a certificate of limited partnership, which requires information such as the name, mailing address, and capital contribution of each general and limited partner.

Distributorships

A manufacturer (franchisor) licenses dealer (franchisee) to sell its product. An example is an automobile dealership or a beer distributorship, such as a distributorship for Anheuser-Bush products.

Wrongful dissociation

A partner has the power to dissociate from a partnership at any time, but if she or he lacks the right to dissociate, then the dissociation is considered wrongful under the law. For example, if a partner refuses to perform duties required by the partnership agreement, such as accounting for profits earned from the use of partnership property, this breach can be treated as a wrongful dissociation.

Breach and waiver of fiduciary duties

A partner's fiduciary duties may not be waived or eliminated in the partnership agreement, and in fulfilling them each partner must act consistently with the obligation of good faith and fair dealing. For example, a partner who owns a shopping mall may vote against a partnership proposal to open a competing mall provided that the partner has fully disclosed her interest in the existing shopping mall to the other partners at the firms.

Compensation

A partner's income from the partnership takes the form of a distribution of profits according to the partner's share in the business. Example, the managing partner of a law firm often receives a salary- in addition to her or his share of profits-for performing special administrative or managerial duties.

Partnership by Estoppel

A partnership by estoppel may be imposed when a partner represent, expressly or impliedly, that a non-partner is a member of the firm.

Preincorporation contracts

A person who are forming a corporation may enter into contracts during the process of incorporation but before the corporation becomes a legal entity.

Franchisee

A purchaser of the a franchise.

Mangement

All partners have equal rights in managing the partnership unless the partners agree otherwise.

Liability in an LLP

Allows professionals, such as attorneys and accountants, to avoid personal liability for the malpractice of other partners. A partner in an LLP is still liable for her or his owen wrongful acts, such as negligence, however. Also liable is the partner who supervised the individual who committed a wrongful act.

Dissolution

Any events that makes it unlawful for the partnership to continue its business will result in dissolution. For example, if a business can only be operated at a loss.

Taxation of the LLC

Any incorporated business with more than one owner is automatically taxed as a partnership unless it indicates other on its tax form or fit into one of the exceptions.

Partnership

Arises from an agreement, express or implied, between two or more person to carry on a business for a profit. Partners are co-owners of the business and have joint control over its operation and the right to share in its profits.

The formation of the LLC

Articles of organization must be filed with a central state agency, usually the secretary of state. Include information as the name of the business, its principal address, the name and address of a registered agent, the name of owners, and information on how the LLC will be managed.

Partnership formation

As a general rule, agreements to form a partnership can be oral, written, or implied by conduct. Some partnership agreements, however, must be in writing to be legally enforceable under the Statue of Fraud. Example, a partnership agreement that authorizes the partners to deal in transfer or real property must be in writing.

Business Organization

As part of the franchise agreement, the franchisor may require that the business use a particular organizational form and capital structure. Examples include sales quotas, quality, record keeping and training of personnel involved in the operation and over administrative aspects of the business.

Partnership buy-sell agreements

Before entering into a partnership, partners should agree on how the assets will be valued and divided in the event that the partnership dissolves. Sometimes called a buyout agreement.

Inspection of the books

Books and records must be kept accessible to all partners.

Articles of partnership

Can include almost any terms that the parties wish, unless they are illegal or contrary to public policy or statue.

The Uniform Partnership Act

Governs the operation of partnerships in the absence of express agreement and has done much to reduce controversies in the law relating to partnerships. Except Louisiana, have adopted the UPA

Rights and Duties

His or her right to participate int he management and conduct of the partnership business terminates. The partner's duty of loyalty also ends. For example, Debbie Pearson is a partner who is leaving an accounting firm, Bubb & Pearson. Pearson can immediately compete with the firm for new clients. She must exercise care in completing ongoing clients transactions, however, and must account to the firm for any fees received from the old clients base don those transactions.

Authorized versus Unauthorized

If the partner acts within the scope of authority, the partnership is legally bound to honor the partner's commitments to third parties. For example, a partner's authority to sell partnership products carries with it the implied authority to transfer title and to make usual warranties.

Confession of judgement

Is an act by a debtor that permits a judgement to be entered against him or her by a creditor, for an agreed sum, without the institution of legal proceedings.

Franchise

Is an arrangement in which the owner of a trademark, a trade, or a copyright licenses others to use the trademark trade name , or copyright in the selling of goods or services.

The buyout price

Is based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation. Offset against the price are amounts owed by the partner to the partnership, including damages for wrongful dissociation.

Winding up

Is the actual process of collecting, liquidating, and distributing the partnership assets.

Federal Regulation of Franchises

It is regulated through laws that apply to specific industries through the Franchise Rule, created by the Federal Trade Commission (FTC).

Joint property ownership and partnership status

Joint ownership or property does not in and of itself create a partnership. In fact, the sharing of gross returns and even profits from such ownership "does not by itself establish a partnership". Example, MacPherson and Bunker jointly own a piece of farmland and lease it to a farmer for a share of profits from the farming operation in lieu of set rental payments. This arrangement normally would not make MacPherson, Bunker, and farmer partners.

Foreign LLC

LLC formed in one state but doing business in another state is referred to in the second state as foreign LLC.

Joint and several liability

Means that a third party has the option of suing all the partners together or one or more of the partners separately. This is true even if a partner did not participate in, ratify, or know about whatever it was that gave rise to the cause of action.

Management of an LLC

Members have two options for managing the firm. It can be either a member manages LLC or manager managed LLC.

A writing is preferred

Need not be in writing. however, members should protect their interests by creating a written operating agreement. For example, if the members have not specified how profits will be divided, they will be divided equally among the members.

Dissociation of partner

Occurs when a partner ceases to be associated in the carrying on of the partnership business. Although, the partner has the power to dissociate, he or she may not have the right to dissociate.

Property Rights

Property acquired by a partnership is the property of the partnership and not the partners individually. A creditor cannot seek to use partnership property to satisfy the partner's debt. However, creditor may petition a court for charging order.

Accounting of partnership assets or profits

Required to determine the value of each partner's share in the partnership. Can be performed voluntarily, or it can be compelled by court order.

Corporate Personnel

Responsibility for the overall management of the firm is entrusted to a board of directors, whose members are elected by the shareholders.

Effects of dissociation

Rightful or wrongful terminates some of the rights of the dissociated partner, requires that the partnership purchase his or her interest, and alters the liability of the parties to the third parties.

Sole Proprietorships

Simplest form of the business, the owner is the business; thus anyone who does business without creating a separate business organization has a sole proprietorship.

Sharing Liability among partners

Some sates provide for proportionate liability, that is, for separate determinations of the negligence of the partners. For example, accountants Don and Jane are partners in an LLP, with Don supervising Jane. Jane negligently fails to file a tax return for one their clients, Centaur Tools. Centaur files a suit against Don and Jane. Don will be liable for no more than his portion of the responsibility for the missed tax deadline.

The Franchise Rule

The FTC 's Franchise Rule requires franchisor to disclose certain material facts that a prospective franchisee needs in order to make an informed decision concerning the purchase of a franchise.

Dissociation and Dissolution of an LLC

The LLC has the power to dissociate from the LLC at any time, but he or she may not have the right to dissociate. These include voluntary withdrawal, expulsion by other members or by court order, bankruptcy, incompetence, and death.

Formation of LLP

The appropriate form must be filed with a central state agency, usually the secretary of state's office, and the business's name must include either "limited liability partnership or LLP" In addition, the LLP must file an annual report with the state to remain qualified as an LLP in that state.

Quality Control

The day to day operation of the franchise business normally is left up to the franchisee. However, the franchisor may provide some degree of supervision and control by so the it can protect the franchise's name and reputation. Periodic inspection may be done.

Franchise Termination

The duration is determine by both parties. Generally, the relationship starts with a short trail period, about a year, so that the franchisee and franchisor can determine whether they want to stay in business with on another. Usually, the franchise agreement termination must be "for cause", insolvency of the franchise, breach of the franchise, failure to meet specified sales quotas.

Business Premises

The franchise agreement may specify whether the premises for the business must be leased or purchased. Building must be constructed to meet the terms of the agreement and who will be responsible for supplying equipment and furnishings for the premises.

The Franchise Contract

The franchise contract specifies the terms and conditions of the franchise and spells out the rights and duties of the franchisor and the franchisee.

Pricing arrangements

The franchisor may require the franchisee to purchase certain supplies from the franchisor at an established price. But cannot set the price to which the franchisee will resell the goods.

Manufacturing Arrangement

The franchisor transmits to the franchisee the essential ingredients or formula to make a particular product. Examples of this type of franchise include Coca-Cola and other soft drink bottling companies.

Liabilities of Partners in a limited partnership

The liability of a limited partner, as mentioned, is mentioned is limited to the capital that she or he contributes or agrees to contribute to the partnership.

Fiduciary duties

The partner owes to the partnership and the other partners the duty of care and loyalty. Limited to gross negligent or reckless conduct, intentional misconduct , or a knowing violation of law A partner is not liable to the partnership for simple negligence.

Liability of partners

The partners are personally liable for the debts of the partnership.

Duration of the partnerships

The partnership agreement can specify the duration of the partnership by stating that it will continue until a designated date or until the completion of a particular project. This is called the partnership for a term. If no fixed duration is specified, the partnership is a partnership at will.

Tax treatment of partnerships

The partnership is a pass-through entity and not a taxpaying entity. A pass-though entity is a business entity that has not tax liability; the entity's income is passed through to the owners of the entity, who pay taxes on it.

Advantages of a Sole Proprietorships

The proprietor owns the entire business and receives all of the profits because he or she assumes all of the risk. Starting is easier and less costly than starting any other kind of business, as few legal formalities are required.

Wrongful Termination

The provisions of contracts are more favorable to the franchisor than to the franchisee. Meaning the franchisee, who invest a substantial amount of time and financial resources may receive little to nothing for the business termination.

Agency Concepts and Partnership Law

The relationship is similar to an agency relationship because each partner is deemed to be the agent of the other partners and of the partnership. However, partnership law is distinct from agency law. In a partnership, two or more person agree to commit some or all of their funds or other assets, labor, and skills to a business with the understanding that profits and losses will be shared.

Franchisor

The seller of the franchise.

corporate taxation

The state can suspend the entity's corporate status until the taxes are paid or even dissolve the corporation for failing to pay taxes.

Partnership Termination

The termination of a partnership is referred to as dissolution, which essentially means the commencement of the winding up process.

The nature of the LLC

They must formed and operated in compliance with state law. Like the shareholders of a corporation, the owners of LLC, who are called members, enjoy limited liability. If the LLC is sued for wrongful discharge, its individual members, managers, and agents cannot be held liable based solely on their status in the LLC.

Joint liability

This means that a third party must due all of the partners as a group, but each partner can be held liable for full amount. The partnership's assets must be exhausted before, creditors can reach the partners individual assets.

Charging Order

To attach the individual partner's interest in the partnership (her or his proportionate share of the profits and losses and right to receive distributions) to satisfy the partner's obligation.

State protection for Franchisees

To protect franchisees, a state law might require the disclosure of information such as the actual cost of operation, recurring expenses, and profits earned, along with facts substantiating these figures.

The LLC operating Agreement

Typically contain provisions relating to management how profits will be divided, the transfer of membership interests, weather the LLC will be dissolved on the death or departure of a member. and other important issue.

Authority of partners

When a partner is carrying on partnership business or business of the kind with third parties in the usual way, apparent authority exist, and both partner and the firm share liability. The partnership will not be liable, however, if the third parties know that the partner has no such authority. For example, Patricia, a partner in a law firm, applies for a bank loan on behalf of the partnership without authorization from the other partners. If the bank manager knows that Patricia has no authority to do so and nonetheless grants the loans, Patricia will be personally bond, but the partnership will not be liable.

Winding up and distribution of Assets

Winding up includes collecting and preserving partnership assets, discharging liabilities (paying debt) and accounting to each partner for the value of his or her interest in the partnership.

Member managed

all the members participate in management, and decisions are made by majority vote.

Publicly held corporation

any corporation whose shares are publicly traded in a securities market.

Public corporation

formed by the government to meet some political or governmental purpose. For example, cities and towns that incorporate.

Nonprofit corporation

formed for purposes other than making a profit. For example, private hospitals, educational institutions, charities, religious organization.

Alien corporation

formed in another country but doing business in the United States.

Rights and duties in a Limited partnership

have a right to access to the partnership's books and to information regarding partnership business.

Holding companies

is a company whose business activity consists of holding shares in another company.

Limited liability LLC

is a hybrid form that combines the limited liability aspects of the corporation and the tax advantages of a partnership.

Limited Liability Partnership

is hybrid form of business designed mostly for professionals who normally do business as partners in a partnership.

Limited Partnerships

refer to as special partnerships. Assumes management responsibility for the partnership and has full responsibility for the partnership and for all its debts. Limited partnership contributes cash or other property and owns an interest in the firm but does not undertake any management responsibilities and is not personally liable for partnership debts beyond the amount of his or her investment.

The limited liability of shareholder

shareholders are not personally liable for the obligations of the corporation beyond the extent of their investments.

Manager managed

the members designate a group of person to manage the firm. The management group may consist of only members, bother members and nonmembers or only nonmembers.

Disadvantages of the LLC

the state LLC statutes are not uniform. Businesses that operate in more than one state may not receive consistent treatment in these states.

Domestic corporation

the state in which it incorporated

Corporate earnings and taxation

when a corporation earns profits, it can either distribute them to its shareholders in the form of dividends or retain the profits.

Liability from state to state

when an LLP formed in one state wants to do business in another state, it may be required to register in the second state. For example, by filing a statement of foreign qualification. Because LLP are statutes are not uniform, a question sometimes arises as to which law applies if the LLP statutes in the two states provide different liability protection.