Business Law

In deciding whether a merger is lawful under section 7 of the clayton act what are the three things the court must do?

1. Line of Commerce - the products or services that will be affected by a merger, including those that consumers use as substitutes. If an increase in the price of one product or service leads consumers to purchase another, then the two products are substitutes for each other. 2. Section of the country - a division of the country that is based on the relevant geographical mark; the geographical area that will feel the direct and immediate effects of a merger 3. Probability of a substantial lessening of competition or likelihood of creating a monopoly - the probability that a merger will substantially lessen competition or create a monopoly in which case the court may prevent the merger under section 7 of the clayton act

What is a C corporation?

A C corporation is a corporation that does not qualify for or has not elected to be taxed as an S corporation. Where there is a C corporation there is double taxation; that is C corporation pays taxes at the corporate level and shareholders pay taxes on dividends paid by the corporation.

What does the certificate of limited partnership state?

A document that two or more persons must execute and sign that makes a limited partnership legal and binding. It must contain: - name of limited partnership - general character of the business - address of the principal place of business - name and business address of each general and limited partner - latest date on which the limited partnership is to dissolve - amount of cash, property, or services contributed by each partner

What does the revised uniform limited partnership act state?

A new model act that permits a new form of entity called a limited liability partnership.

What does liability of incoming partners mean?

A new partner who is admitted to a general partnership is liable for the existing debts and obligations of the partnership only to the extend of his or her capital contribution. The incoming partner is personally liable for debts and obligations incurred by the general partnership after becoming a partner.

What does the right to information act say?

Each general partner has the right to demand true and full information from any other partner of all things affecting the partnership. The corollary to this rule is that each partner has a duty to provide such information of the receipt of a reasonable demand. The partnership books must be kept at the partnership's principal place of business. The partners have an absolute right to inspect and copy these records.

Who are general partners?

Persons liable for the debts and obligations of a general partnership.

What is the securities and exchange commission?

The federal administrative agency that is empowered to administer federal securities laws. The SEC can adopt rules and regulations to interpret and implement federal securities laws.

What does the duty of loyalty state?

General partners are in a fiduciary relationship with one another meaning they owe each other a duty of loyalty. Some basic forms of breach of loyalty involve: 1. Self dealing which occurs when a partner deals personally with the general partnership. 2. Usurping a partnership opportunity 3. Competing with the partnership 4. Making secret profits 5. Breach of confidentiality 6. Misuse of partnership property

What does the right to an accounting mean?

General partners are not permitted to sue the partnership or other partners at law. They are given the right to bring an action for an accounting against other partners. An action for an accounting is a formal judicial proceeding in which the court is authorized to review the partnership and the partners transactions and award each partner his or her share of the partnership assets.

What does a sole proprietorship mean?

- owner is actually the business - no separate legal entity - easy to form and low cost - owner receives all profits

What three elements of direct price discrimination must be shown?

1. Commodities of like grade and quality 2. Sales to two or more purchasers 3. Injury

Where is the distribution of assets allocated to?

1. Creditors (except partners who are creditors) 2. Creditor - partners 3. Capital contributions 4. Profits

What are exceptions to the general rule?

1. Defective formation 2. Participation in management 3. Personal guarantee

What are the duties of general partners?

1. Duty of Loyalty 2. Duty of Care 3. Duty to Inform 4. Duty of Obedience 5. Right to an Accounting

What are the characteristics of a corporation?

1. Free transferability of shares 2. Perpetual existence 3. Centralized management

What are the different types of corporations?

1. Private corporations 2. Not for profit corporations 3. government owned corporations 4. domestic, foreign, and alien corporations

What are two restrictions of the sale of shares?

1. Right of first refusal 2. buy and sell agreement (sell shares at specified price)

What are the procedures for incorporating a corporation?

1. Selecting a state for incorporating a corporation 2. Selecting a corporate name 3. promoters and incorporators

What are the three exemptions from antitrust law?

1. Statutory Exemptions 2. Implied exemptions 3. state-action exemption

What does the articles of incorporation have to state?

1. The name of the corporation 2. the number of shares the corporation can issue 3. the address 4. the name and address of each incorporator

What are the terms under notice of dissolution?

1. Third parties who have actually dealt with the partnership must be given actual notice of dissolution or have acquired knowledge of the dissolution from another source. 2. Third parties who have not dealt with the partnership but have knowledge of it must be given either actual or constructive notice of dissolution. Constructive notice consists of publishing a notice of dissolution in a newspaper of general circulation serving the area where the business of the partnership was regularly conducted. 3. Third parties who have not dealt with the partnership and do not have knowledge of it do not have to be given notice.

What are the various liabilities involved in general partners?

1. Tort liability of general partners 2. Contract liability of general partners 3. Liability of incoming partners 4. Liability of outgoing partners

What are the methods for dissolution?

1. voluntary dissolution 2. administrative dissolution 3. judicial dissolution

What are bylaws?

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation.

What does the nor doctrine state?

A doctrine stating that two or more persons can petition the executive, legislative, or judicial branch of the government or administrative agencies to enact laws or take other action without violating antitrust laws.

What does the alter ego doctrine state (piercing the corporate veil)?

A doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporations debts and obligation

What is a certificate of cancellation?

A document that is filed with the secretary of state on the dissolution of a limited partnership.

What does the limited partnership agreement state?

A document that sets forth the rights and duties of general and limited partners; the terms and conditions regarding the operation, termination and dissolution of a partnership.

What does the duty of care state?

A general partner must use reasonable care and skill in transacting partnership business. The duty of care calls for the partners to use the same level of care and skill that a reasonable business manager in the same position would use. Breach of duty of care is referred to as negligence. Partner is liable for negligence.

What does unlimited personal liability of a general partner mean?

A general partner's personal liability for the debts and obligations of the general partnership.

What does the right to indemnification mean?

A general partnership is entitled to indemnification for such expenditures if they are reasonably incurred in the ordinary and proper conduct of the business. Indemnification means - the right of a partner to be reimbursed for expenditures incurred on behalf of the partnership.

What does limited liability of shareholders mean?

A general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

What is a derivative lawsuit?

A lawsuit a shareholder brings against an offending party of behalf of a corporation when the corporation fails to bring the lawsuit.

What does foreign limited partnership mean?

A limited partnership in all other states besides the one in which it was formed.

What does domestic limited partnership mean?

A limited partnership in the state in which it was formed.

Who is a market extension merger?

A merger between two companies in similar fields whose sales do not overlap

Who is a horizontal merger?

A merger between two or more companies that compete in the same business and geographical market.

Who is a backward vertical merger?

A merger in which a customer acquires a supplier

Who is a vertical merger?

A merger that integrates the operations of a supplier and a customer

What is the small company offering registration?

A method for small companies to sell up to 1$ million of securities during a 12 month period to the public by using a question and answer disclosure form called form u-7.

What is the uniform partnership act?

A model act that codifies partnership law. Most states have adopted the UPA in whole or in part. It's goal was to establish consistent partnership law that was uniform throughout the United States. It covers issues that evolve in general partnerships.

What does the uniform limited partnership act state?

A model act that significantly amended the revised uniform limited partnership act and permits a new form of entity called a limited liability limited partnership where all the partners are provided limited liability.

What does the right to return of loans mean?

A partner who makes a loan to the partnership becomes a creditor of the partnership. The partner is entitled to repayment of the loan but this right is subordinated to the claims of creditors who are not partners. A partner is also entitled to receive interest from the date of the loan.

What is a partnership with no fixed duration called?

A partnership at will

What is a partnership with a fixed duration called?

A partnership for a term

What does right of survivorship mean?

A rule of providing that not he death of a general partner, the deceased partners right in specific partnership property vests int he remaining partner or partners, the value of the deceased general partners interest in the partnership passes to his or her beneficiaries or heirs.

What does section 7 of the clayton act state?

A section stating that it is unlawful for a person or business to acquire the stock or assets of another.

What does wrongful dissolution mean?

A situation in which a partnership withdrawals from a partnership without having the right to do so at the time.

What does the right to participate in management mean?

A situation in which unless otherwise agreed, each partner has a right to participate in the management of a partnership and has an equal vote on partnership matters. Each partner has one vote regardless of the proportional size of his or her capital contribution or share in the partnership's profits.

What does a limited partnership mean?

A type of partnership that has two types of partners: general partners and limited partners Limited partnership is used for ventures such as investing in real estate, drilling oil and gas wells, movie productions.

What does unilateral refusal to deal mean?

A unilateral choice by one party not to deal with another party. This does not violate section 1 of the sherman act because there is not a concerted action.

What are the major requirements of the SEC?

Adopting rules that further the purpose of the federal securities statues. Investigating alleged securities violations and bringing enforcement actions. Bringing a civil action to recover monetary damages from violators of securities laws.

What is an LLC liable for?

An LLC is liable for any loss or injury caused to anyone as a result of a wrongful act or omission by a member, manager, an agent or an employee of the LLC who commits the wrongful act while acting within he ordinary course of business of the LLC.

What is an operating agreement for an LLC?

An agreement entered into among members that governs the affairs and business of the LLC and the relations among members, managers, and the LLC.

What does contract liability of general partners state?

As a legal entity, a general partnership must act through its agents, partners and employees. Contracts entered into with suppliers, customers, lenders or others on the partnerships behalf are binding on the partnership. General partners have unlimited personal liability for contracts of the partnership. A general partner who is made to pay more than his or her proportionate share of contract liability may seek indemnification from the partnership and from those partners who have not paid their share of the loss.

What does the duty to inform mean?

General partners owe a duty to inform their co-partners of all information they possess that is relevant to the affairs of the partnership. Even if a partner fails to do so the other partners are imputed with knowledge of all notices concerning any matters relating to partnership affairs. Knowledge is also imputed regarding information acquired in the role of partner that affects the partnership and should have been communicated to the other partners.

What does defective formation mean?

Occurs when 1. a certificate of limited partnership is not properly filed 2. there are defects in a certificate that is filed 3. some other statutory requirement for the creation of a limited partnership is not met.

What does the right to return capital mean?

On termination of a general partnership, the partners are entitled to have their capital contributions returned to them. However this right is subordinated to the rights of creditors who must be paid by their claims first.

What does prima facie mean?

Receipt of a share of business profits. This is evidence of a general partnership because non partners usually are not given the right to share in a businesses profits.

What does the right to compensation entitle?

The UPA provides that no general partner is entitled to remuneration for his or her performance in the partnership's business. Under this rule partners are not entitled to receive a salary for providing services to the partnership unless agreed to by the partners.

What is the general partnership agreement?

The agreement to form a general partnership may be oral, written, or implied from the conduct of the parties. It may be created inadvertently. No formalities are necessary in most states. The parties can agree to almost any terms in their partnership agreement, except terms that are illegal. The articles of partnership can be short and simple or long and complex. If an agreement fails to provide for an essential term or contingency, the provisions of the UPA apply.

What does liability of outgoing partners mean?

The dissolution of a general partnership does not of itself discharge the liability of an outgoing partner for existing partnership debts and obligations. If a general partnership is dissolved each general partner is personally liable for debts and obligations of the partnership that exist at the time of the dissolution.

What is flow through taxation?

The income and losses of partnership flow onto and have to be reported on the individual partners personal income tax returns. A general partnership has to file an information return with the government, telling the government how much income was earned or the amount of losses incurred by the partnership.

What does it mean for a sole proprietor ship to have unlimited personal liability?

The personal liability of a sole proprietor for all the debts and obligations of a sole proprietorship.

What is monopoly power?

The power to control prices of exclude competition, measured by the market share the defendant possesses in the relevant market.

What does winding up mean?

The process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership.

What does the right to share in profits mean?

Unless otherwise agreed, the UPA mandates that a general partner has the right to an equal share in the partnership's profits and losses.

What is insider trading?

When an insider makes a profit by personally purchasing shares of a corporation prior to public release of favorable information or by selling shares of a corporation prior to the public disclosure unfavorable information.

What is the most important factor in determining co-ownership?

Whether the parties share the businesses profits and management responsibility.

What does tort liability of general partners mean?

While acting on partnership business a partner or an employee of the general partnership may commit a tort that causes injury to a third person. This tort could be caused by a negligent act, a beach of trust, breach of fiduciary duty, defamation, fraud, or another intentional tort. The general partnership is liable if the act is committed while the person is acting within the ordinary course of partnership business or with the authority or his or her co-partners.

What are types of debt instruments?

1. Debenture 2. Bond 3. Note

What is an entrepreneur?

A person who forms and operates a business. They may start a business by themselves or may cofound a business with others.

What is a tortfeasor?

A person who intentionally or unintentionally causes injury or death to another person. A person liable to persons he or she injures and to the heirs of persons who die because of his or her conduct.

What is an ultra vires act?

An act by a corporation that is beyond its express or implied powers.

What is a general partnership?

An association of two or more persons to carry on as co-owners of a business for profit.

What can the capital contributions be given as?

Cash, property, services rendered, or a promissory note

What are two voting arrangements?

Voting trust (transfer stock to trustee) Shareholder voting agreement

How is an LLC formed?

delivering articles of organization to the office of the secretary of state of the state of organization for filing

What are the 2 defenses to monopolization?

Innocent acquisition natural monopoly

What are the four criteria businesses must meet to qualify as a general partnership under the UPA?

It must be an association of two or more persons, must be carrying on a business, as co owners or for profit.

What are debt securities?

Securities that establish a debtor-creditor relationship in which the corporation borrows money from he investor to whom a debt security is issued.

What is the dissolution of a partnership?

The change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business.

What is a fiduciary duty?

The duties of obedience, care and loyalty owed by directors and officers to their corporation and its shareholders.

What does duty of obedience mean?

It requires general partners to adhere to the provisions of the partnership agreement and the decisions of the partnership. A partner who breaches this duty is liable to the partnership for any damages caused by the breach.

What are antitrust laws?

Laws enacted to limit anticompetitive behavior in almost all industries, businesses and professions, operating in the United States

What does joint liability mean?

Liability of partners for contracts and debts of the partnership. A plaintiff must name the partnership and all of the partners as defendants in a lawsuit. A third party who sues to recover on a partnership contract or debt must name all the general partners in the lawsuit. If such a lawsuit is successful the plaintiff can collect the entire amount of the judgement against any or all of the partners.

What does the general rule state?

Limited partners are not individually liable for the obligations of the partnership beyond the amount of their capital contribution.

Does a sole proprietorship pay taxes?

They are not a separate legal entity so it does not pay taxes at the business level. Instead the earnings and losses from a sole proprietorship are reported on each personal income tax filing.

What does joint and several liability mean?

Tort liability of partners together and individually. A plaintiff can sue one or more partners separately. If successful the plaintiff can recover the entire amount of the judgement from any or all of the defendant partners who have been found liable.