MBA 6010 Test 3
What are employer's defenses to discrimination claims?
1 - Business necessity 2 - Bona fide occupational qualifications (only applicable to gender and religion cases) 3 - Seniority systems
How are employees and independent contractors differentiated?
1 - Does the business have the right to direct or control how the work is done? 2 - Does the worker provide his or her own equipment or tools? 3 - Does the worker have a permanent relationship with the business? 4 - Does the business reimburse the worker for expenses incurred?
What are the two types of sexual harassment?
1 - Quid pro quo harassment - tangible aspects of the employee's employement (wage, terms and conditions, privileges) were negatively affected that the employer knew about but did nothing to remedy. (this for that harassment) 2 - Hostile work environment harassment - employee is made subject of unwelcome conduct and such conduct is sufficiently "severe" or "pervasive" to constitute abuse.
How must a business deal with an employees religious needs?
A business must "reasonably accomodate" an employee's religioun unless the religion would constitute and "undue hardship" for the employer. It should be flexible and a little creative to accomodate sincerely held religious beliefs.
Describe a copyright
A copyright is an exclusive right granted to the creator or author of the original work to use and market the creation for a specific time. The circle C symbol puts the world on notice that somebody is claiming copyright. Most copyrights are in force for the life of the creator plus 70 years Fair use of works is legal especially if only small portion of the work is used. Fair use can be for nonprofit, educational, research
Describe how a corporation is taxed.
A corporation is subject to tax on its income and is not a "flow-through" entity. As a corporation is taxed on its income and its shareholders pay tax on dividends distributed by the corporation, a corporation is said to be "double taxed." Payments of interest are tax deductible, payments of dividends are not. Corporations subject to tax are often referred to as "C"corporations as the "C" refers to the place in IRS code where tax law governing corporations is found (Subchapter C)
Describe franchises.
A franchise is an agreement between the franchisor and a franchisee wherein the franchisor licenses the rights to do business with the franchisors business dress and product. The franchisee pays a substantial fee and organizes as its own separate entity. The franchisor must disclose certain material facts under what is known as the Franchise Rule. The franchisor usually has significant control over how the franchisee operates the business in its look and feel, colors, interior design, and product production and quality.
Describe a patent.
A pantent is the government granting of exclusive rights (Patent and Trademark Office) to an inventor to use and market the invention for a limited time. Unauthorized copying is a patent infringement which gives the patent holder right to sue for damages. Patents are usually in force for 20 years and in some cases 14 years. An invention must be nonobvious (not obvious to someone with ordinary skill in the trade or business), novel (new and not already invented by someone else), and useful (some utility to society)
How is a general partnership taxed?
A partnership reports its income on IRS form 1065 but does not pay income tax in the income. The information from form 1065 is given to each partner and each partner reports their share of profits or losses on their individual income tax.
Describe the process of setting up a corporation.
A person, called the incorporator, forms a corportation filing Articles of Incorporation with the appropriate state agency. The Articles state the name, address, and purposes and powers of the corporation. It also identifies the statutory agent who is to receive legal documents on behalf of the corporation. The incorporator also engages in pre-incorporation activities and may appoint the initial board of directors, hire accountants and/or lawyers to help with the process. The incorporator must act with care to preclude personal liability for actions taken before the corporation is legally formed. The corporation issues shares of stock in return for capital investments. The owners of the stock are shareholders or stockholders. The corporation may issue certificates and should maintain a stock registry to keep track of the stockholder's names, addresses, and number of shares held. The incorporator and initial board members hold an initial organizational meeting to adopt the bylaws. Bylaws contain important provision regarding how the board is constituted, when board and shareholder meetings will take place, voting rights of board members and shareholders, etc. In addition to obtaining capital from shareholders, a corporation may issue a bond or borrow directly from financial institutions. The mix of stock and debt is the capital structure. The corporation can issue multiple classes of stock. Preferred shareholders have priority over common shareholders as to dividends and assets if liquidated.
Describe a sole proprietorship
A sole proprietorship is not an entity seperate from its owner and is in control of the business and has no other with which to share profits, but also takes on all the risks. Business profits are reported by owner on Schedule C and are added to any other income the individual may have. Typically, business taxes must by paid in quarterly installments based on "estimated tax." Sole proprietor's other personal assets are open in the event of liability or to cover debt's of the business. To form a proprietorship a person chooses a business name that is available, obtains a business license from the local government. Depending on the business type, a business may need business specific licenses or occupational licenses.
Describe a trademark
A trademark is a distinctive symbol, logo, name, phrase, image, etc. used to dinstiguish a business or its products from to the competition. Typically protected intrastate basis by state common law or statute. To be protected interstate, the trademark must be registered with the PTO. The circle R symbol means the trademark has been registered with the PTO. The TM symbol puts the world on notice that the owner is claiming tradsemark rights but has not yet been granted. A SM symbol is a servicemark for service providers. Trademarks are not given for generic names such as aspirin, zipper, etc. Federal law prohibits "cybersquatting" which is a person registering a domain name of a famous trademark and looking to profit from it by selling the domain to the trademark owner.
How does a "S" corporation differ from a "C" corporation?
An "S" corporation generally not subject to federal income taxes and is a "flow-through" entity. To obtain this special tax status a corporation must meet the following strict requirements. 1 - Must have 100 or fewer shareholders (family members are combined to count as one shareholder) 2 - Cannot have more than one class of stock 3 - Cannot have a non-resident alien, corporation, partnership, or multi-member LLC as a shareholder 4 - The corporation must "timely" make the "S" election. IRS code governing "S" corporations is found in Subchapter S.
What is a disability?
Any mental or physical impairment that substantially limits one or more major life activities.
Where does the Constitution provide intellectual property rights?
Article 1 Section 8 Promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive rights to their respective writings and discoveries.
What issues did Bank of America v. Barr deliberate?
Barr obtained an unsecured small business line of credit as 100% owner of the The Stone Scone from BoA. Subsequently Barr filed Articles of Organization registering The Stone Scone as LLC. BoA was not notified and if it had been would have asked for documentation and had a new line of credit agreement under the new entity name. Barr stopped paying off the line of credit entered into as sole proprietor. The court finds that a sole proprietor is personally liable for the debts of the sole proprietorship even if the sole proprietorship is dissolved.
What is the Business Judgment Rule?
Boards are typically not liable merely because they voted for a particular course of action that turned out to be less that ideal for the corporation.
What issues did Breen v. Judge deliberate?
Breen worked for Judge at Patriot Trucking and borrowed from her personal credit cards to infuse Patriot with cash. These infusions were not solicited and were kept on Patriot's books as loans. Breen sued to recover the money when Patriot dissolved and won but there was no assets to recover. Breen then sued to pierce the LLC veil to make Judge personally liable for the debts and lost. The court found for Judge and Breeen appealed but Court upheld that their was insufficient evidence to fail the instrumentality and identity test.
What issues did Cortez v Wal-Mart deliberate?
Cortez sued that we was not promoted to general manager based on age. He sued under the ADEA. Multiple previous promotions went to employees much younger than Cortez. Wal-Mart argued he had an open "coaching for improvement" isssue and that was why. Court found for Cortez and appeals upheld on grounds that "cip" could be for any number of subjective issues.
What are the duties of corporate officers?
Duty of care - Officers and board members should attend meetings, understand the contents of the corporate reports and records, and make informed decisions. Duty of loyalty - Officers and board members should not engage in activities in direct competition to the corporation, nor usurp (personally take advantage of) opportunities that may come to the corporation. Corporations usually have conflict of interest policies that are signed by officers and directors. Officers and directors may face personal liability for breach of duty of care or loyalty
What does disparate treatment in discrimination entail?
Employee shows prima facie case of intentional discrimination with disparate treatment then burden shifts to employer to show that actions was justified for business reasons. Examples of 80 women and 20 men apply and all men are hired.
Describe liability in Limited Partnerships
General partners are liable for debts of the partnership whereas limited partners are not.
What issues did Guth v Loft deliberate?
Guth, president of Loft, intiated a process to stop purchase of Coca-Cola syrup for Loft stores because Coca-Cola did not give Loft discounts Guth felt Loft was entitled to. Loft determined to Pepsi Cola at a substantial reduced price. Almost simultaneously, Guth became aware that Pepsi was going into bankruptcy and the Pepsi formula and trademark could be had at a small price. Guth appropriated the opportunity for himself after showing it to Loft and Loft sued Guth. Court found that Pespi opportunity belonged to Loft and that fiduciary duty requires something more than the morals of the marketplace.
Describe Limited Partnerships.
I limited partnership must file a document with the appropriate agency identifying the partnership as a limited partnership and the general and limited partners. This document is usually called a "certificate of limited partnership." A limited partnership must have at least on general and limited partner. If a partnership fails to file this document or renew its status as a limited partnership, the partnership may then be considered a general partnership. The general partner has all the authority to manage the day-to-day operations. Limited partners have the right to vote on partnership matters and to inspect the books. The partnership agreement sets forth the rights, powers, and limitations of the partners. Limited partnerships are also flow-through entities in tax matters and partnership income is reconciled in partners personal income statements.
Describe Limited Liability Partnerships.
Is similar to Limited Partnerships but in the LLP the general partners are afforded liability protection from the debts of the LLP. LLP is formed by filing with the respective State establishing itself as a LLP naming general and limited partnerships. Without filing the partnership is treated as a general partnership. Some states only allow certain professional partnerships to register as LLP such as doctors, lawyers, accountants, engineers. Operations and taxes are treated similarly to general partnerships. Partners are not liable for the debts of the partnership but are typically liable for his own acts of negligence but not the actions of the other partners.
What is an Employer Identification Number?
It is a number obtained from the IRS by filing form SS-4. This number is the business' tax number for paying of payroll taxes, income taxes, and is usually required by financial institutions to open a bank account.
What is affirmative action?
It is the concept that people in protected classes ought to be strongly considered based on their protected class status. Is acceptable if there is no "quota" or if is one factor among many factors. Protected class cannot be the "only" factor.
Describe Limited Liability Corporations
LLC's are formed by filing Articles of Organization stating the name, address, members, and managers if any and whether the LLC is member or manager managed. Members have ownership similar to stockholders or partners. Typically LLC's have an operating agreement similar to partnership agreements on how situations are to be resolved. LLC's are also "flow-through" organizations as partnerships and income or losses are stated on members income statements. A single-member LLC is a "disregarded entity" which means the LLC is not treated as separate from the owner and all items of income, expense, are reported on the sole member's income tax return and no income tax return is required to be filed for the single-member LLC. As in LLP's, members of a LLC are not personally liable for the debts of the LLC but may in some cases be liable for a tort he or she committed in their capacity if a plaintiff can successfully pierce the LLC veil.
What issues did New Faith v Commisioner of Internal Revenue deliberate?
New Faith purportedly organized under 501(c)(3) "to supply money, goods, and services for the poor" to be funded by "raffles, bingo, and donations." The IRS revoked New Faith's tax-exempt status as its main activity was operating canteen-style lunch trucks for which "donations" were made for the food. The IRS found this indistiguisable from normal commerical activity in its revokation. The court found for the IRS.
What issues did Ricci v DeStefano deliberate?
New Haven, Connecticut used objective examinations to vet prospective candidates for promotion to lieutenant and captain in its fire department. When finding the results of the examinations showed only white applicants passed the city refused to certify the test results on disparate impact discrimination issues. The passing white applicants sued to have the results certified on disparate treatment grounds. The court gave summary judgment to the city that not certifying the results was okay as they would have faced a disparate impact lawsuit. The appeals court overturned the judgment and found that discarding the tests violated Title VII.
What issues did Nolan v Arkema deliberate?
Nolan an Arkema employee of 27 years was diagnosed with a mental health condition and prostate cancer. During surgery on his prostate he had an impinged nerve in his back. On exhausting his short term leave and FMLA Arkema gave Nolan's job to another employee. When Nolan came back, Arkema's doctor's specified two restrictions of no lifting more than 50 pounds and sitting for 20 - 30 minutes after standing/walking one hour. Arkema said he was not allowed to return to work as they could not accomodate these restrictions. Arkema sought summary judgment as a matter of law. Court rejected motion and case went to court.
What issues did Okoli v City of Baltimore deliberate?
Okoli sued on hostile work environment, quid pro quo harassment, and retaliation that her boss made many unwelcome sexual harassment actions. Okoli sought help from many officers of the city who did nothing though they told Okoli's boss. When Okoli's boss heard she was seeking to file a complaint he fired her. The court granted summary judgment to Okoli's boss. On appeal, the appeals court vacated the summary judgment and remanded the court.
Describe nonprofit corporations
Organizations promoting "public good" may form as a nonprofit by filing Articles of Incorporation though they typically do not have shareholders. Section 501 of IRS code governs tax exemption and donating to 501(c)(3) organizations qualify as tax deductions for donors.
Desribe partner liability in a general partnership.
Partners in a general partnership are personally liable for the actions of the other partners within the scope of doing business and also personally liable for the debts of the partnership.
What is a derivative suit?
Shareholder's filing a suit on behalf of the corporation when the board declines to file one.
What issues did Shimko v. Guenther deliberate?
Shimko represented a partnership of which Guenther was a limited partner and a court decided that Guenter was personally liable for legal fees to Shimko's law firm because Guenther participated in the control of the business and Shimko reasonably assumed Guenther to be the general partner. Guenther appealed and won on the grounds that even though he would have been liable to debts to a normal creditor if he interacted with them in the manner decribed, Shimko was their legal counsel and had fiduciary duty of care and should have first examined their organizational structure where it would have learned Guenther was a limited partner.
What issues did Sturm v. Harb Development deliberate?
Sturm contracted with Harb to have a new home built which was constructed poorly. Strum sued Harb Development for breach of contract and violating the Connecticut Unfair Trade Practices Act. Strum also sued John Harb personally for tort of fraudulent and negligent misrepresentations and negligencee. Court struck the counts of personal liability on grounds that these charges were covered under the suit against Harb Develpment. Strum appealed and Court held that LLC liability protections do not protect against liability stemming from torts committed by members.
What is the equal pay act?
The 1963 Equal Pay Act requires employers to compensate both men and women in a similar mannaer for similar working conditions, skill, effort, and responsibility. The law allows differences in pay in the basis is not gender.
What is the ADEA?
The Age Discrimination Employment Act which applies to employees who are forty years or older and employers who have at least 20 employees. If an employee feels discriminated against he brings a claim to show prima facie and the employer must show the adverse action against the employee was not on account of age.
What issues did Allen v Choice Hotels International deliberate?
The Allens were subject to robbery in their hotel room at a Comfort Inn where Mr. Allen was fatally shot. Darlene Allen sued the Choice franchisee and Choice International the franchisor for failing to provide reasonable security in protecting its guests. The court found by summary judgment for Choice the franchisor as the franchisor could not be liable for something for which it did not have right to control. The appeal court found the same.
What is the ADA?
The Americans with Disabilities Act. An employer must "reasonably accomodate" an employee with a disability unless the accomodation would constitute an "undue hardship." Businesses also must not discriminate against customers.
What is the EEOC?
The Equal Employment Opportunity Commission which investigates claims by employees of discrimination. The employee first files claim with the EEOC and the EEOC will evaluate whether to bring suit on behalf of the employee. The employee can bring suit if the EEOC does not.
What law governs partnerships in most states?
The Uniform Parthership Act
How does a corporation terminate?
The corporation terminates by filing Articles of Termination, liquidates assets, paying creditors, and distributing remaining assets to shareholders.
What is disparate impact?
The impact on the employee or class of employees of unintentional discrimination of employer notwithstanding intentional discrimination. Example of this is a test given by employer to applicants that only one class of applicant passes.
Describe how a corporation operates.
The officers of the corporation (president, vice-president, treasurer, and secretary) are hired by the board of directors to run the day-to-day operations. The board oversee the corporations affairs and approve major policies and transactions. A corporation may have a shareholder's agreement, common in closely held corporations, governing admitting new shareholders and restrictions on selling of stock. In large corporations, the board establishes subcommittes to oversee major specific functions (Compensation, audit, litigation)
What does it mean that partnerships are "flow-through" entities?
The partnership does not pay taxes but income "flows-through" to the individual partner's personal income.
What are corporate shareholder preemptive rights?
The right to purchase additional shares of newly offered shares to maintain the same ownership percentage in the corporation they had before the new issue. Shareholders also have rights to inspect the books but must be for a proper purpose and not to gain confidential information or trade secrets. Shareholder must give advance notice to corporation of the desire to inspect the books.
What is employment at will?
The usual case that an employee or employer can terminate employment at any time and reason except when firing classifications of people that the law protects.
What is Title VII of the Civil Rights Act of 1964?
Title VII states that an employer cannot discriminate on the basis of race, color, national origin, religion, gender, age, and disability. These are protected classes.
What are trade secrets and trade dress?
Trade secrets - financial and marketing strategies, business policies, manufacturing practices and methods. Most employers require employee signing a nondisclosure. Trade secrets are protected by common law as long as the business makes diligent effort to protect them Trade dress - is the basic design, shape, color, and overall appearance or image of a place or product
Describe trademark infingement
Trademark infringement or dilution is using a someone else's logo, image, or one very similar. To prevail in a trademark infringement case, the owner must demonstrate that there is significant customer confusion because of the similarity of the marks. In trademark dilution, the owner of a famous trademark can prevail even without showing customer confusion.
Describe joint ventures
Two or more parties join together to participate in a short-term project. The joining companies may form an LLC or other entity for operating purposes during the joint venture. The joint venturers agree upon their respective share or profits and losses. Once the project completes, the LLC or other entity winds up and terminates. A joint venture is typically treated as a general partnership if another entity is not formed and the venture is treated as such for tax purposes unless another entity is formed. Usually the venturers have a sophisticated contract between them.
Describe general partnerships
Two or more persons entering into a business relationship with intent to make profit with no formal organizational document required. Each partner has the right to manage the partnership and each partner can bind the partnership by entering into a contract on behalf of the partnership. Partnership may file a statement of partnership with states in order to limit the authority of a partner or partners. Partners have right to inspect the books and require the partnership to provide an accounting of income and expenses. Setting forth of internal governing policy is typcically set forth in the partnership agreement and would include allocation of profits and losses, rights to vote, process of admitting new partners, withdrawing from the partnership, and partnership dissolution.
