MHR 461- Chapter 12
joint venture
a form of partnership- an association of two or more persons to carry out a single business enterprise for profit
Rightful Dissociation:
1. The death of a partner in any partnership; 2. The withdrawal of a partner in a partnership at will; 3. In any partnership, an event occurs that was agreed to in the partnership agreement as causing dissociation; and 4. In any partnership, a court determines that a partner has become incapable of performing the partner's duties under the partnership agreement.
terminating the corporation
1. dissolution phase 2. winding up phase
Actual Implied Authority
Authority that is not specifically expressed or defined in writing, but which an employee or agent assumes to possess in order to conduct business on behalf of an agency.
True or false: If a partner is allowed to sell or assign his interest in a partnership, the partnership can continue and the new owner of the interest automatically becomes a partner.
False; the new owner of the interest does not automatically become a partner
Partnership formation- the agreement
No particular form is required to form a general partnership. It can result from an oral or written agreement of two or more persons who agree to share control and share profits of an ongoing business.
When does a complete termination of a partnership occur?
Only after the partnership has been dissolved and its affairs have been wound up.
Duty of Care:
Partners owe the firm a duty of faithful service to the best of their ability.
Selection of Corporate Name:
State statutes require that the company name indicate that it is a corporation. - example: the corporate name must be followed by an ending such as "Corporation or Corp. Company or Co., Incorporated or Inc., Limited or Ltd."
True or false: By agreement, partners can allow partnership interests to be sold or assigned, usually with approval of existing partners
True
True or false: Members (alone) have no fiduciary duties, unless they are also member-managers, in which case they have the same duties of care and loyalty as sole managers.
True
True or false: The law does not require a partnership to have a name or be registered
True
Dissolution
occurs when an event takes place that prevents the partners from engaging in any new business.
Incorporators in the Formation of a Corporation
persons who sign the articles of incorporation which are then filed with the Secretary of State. - The incorporators perform a purely ministerial role (they merely sign the articles). - Their role ends after the first organizational meeting held by the shareholders.
In Re 1545 Ocean Avenue, LLC
*CASE BACKGROUND:* 1545 Ocean Avenue LLC was formed for a real estate development. It was owned 50-50 by two companies, Ocean Suffolk and Crown Royal, which each had a membership certificate in 1545. The operating agreement contained no provisions relating to dissolution of the LLC. - Two managers were appointed; Crown Royal appointed King and Ocean Suffolk appointed Van Houten to operate 1545. - As work progressed, King and Van Houten argued over the project. King announced that Crown Royal wanted to pull out of 1545 and sued for work to stop and the LLC to be dissolved. The trial court granted those requests. - *Van Houten and Ocean Suffolk appealed.* *CASE DECISION:* the court must first examine the limited liability company's operating agreement to determine whether it is or is not "reasonably practicable" for the limited liability company to continue to carry on its business in conformity with the operating agreement. Thus, the dissolution of a limited liability company under LLCL 702 is initially a contract-based analysis *The only basis for dissolution can be if 1545 LLC cannot effectively operate under the operating agreement to meet and achieve the purpose for which it was created. In this case, that is the development of the property which purpose was being met....* Upon a review of the evidence submitted, the order of the Supreme Court should be *reversed, the petition denied, and the proceeding dismissed.*
Zhou v. Bickley
*CASE BACKGROUND:* Bickley worked at Lawrence Yamaha. He frequently ate lunch at a Chinese restaurant where Zhou and Zhang worked. - Bickley told Zhou and Zhang that the Yamaha shop was going out of business and suggested that they help him open a new motorcycle repair shop. The three of them signed a two-year lease on a building for the shop. - Zhou and Zhang paid the security deposit and first month's rent. They helped pay for inventory and helped get the shop ready for business. They gave Bickley more money when he asked for it. - Soon after, Zhou and Zhang asked for keys to the building; Bickley refused. They asked to see receipts and invoices; he refused. They asked to work at the shop; he refused. They demanded a written agreement; he refused. An attorney sent a demand letter on behalf of Zhou and Zhang that was ignored. - *Suit was filed demanding return of the funds expended.* - *Bickley counterclaimed for breach of contract by his partners.* *The trial court held there was no partnership; there was only "a vague agreement to open a motorcycle repair shop." Bickley operated as a sole proprietor who borrowed money that he owed to Zhou and Zhang. Bickley appealed.* *CASE DECISION:* Generally, a partnership is the association of two or more persons to carry on as co-owners of a business for profit. - Although Zhou, Zhang, and Bickley contributed money to the start-up expenses of the motorcycle repair shop and they signed a lease together, *a reasonable person could conclude that no binding contract was ever formed* The existence of a partnership is the intent to do the things which constitute a partnership that determines whether individuals are partners *In the present case, there was sufficient evidence presented at trial upon which the district court could reasonably conclude that the parties did not intend to do those things which constitute a partnership* *Affirmed.*
Morrissey v. Krystopowicz
*CASE BACKGROUND:* Due to legal problems, Davidson was barred from being in the nursing home business in New Mexico. - Krystopowicz knew of Davidson's issues but agreed to be the front man for nursing homes in New Mexico. The two would split the profits 50-50. - Krystopowicz became the sole shareholder in Silverstone Healthcare, Inc. Silverstone in turn created 10 limited liability companies that each owned a nursing home. The homes were bringing in $47 million a year in revenue. Krystopowicz did no real work; he just handled transfers of funds, splitting profits with Davidson. - Frances Fernandez lived in one of the nursing homes for about a year before she died. Her daughter, Morrissey, claimed the home was negligent in its care of Mrs. Fernandez and sued for wrongful death. The home, held by an LLC, was owned by Silverstone. Neither had any assets and defaulted on the $4.8 million judgment. - Because there was no money in the companies, Morrissey sued Krystopowicz, the Silverstone owner. - The trial court held that Morrissey could not sue him, only the business entities, because there was no evidence Krystopowicz was directly involved in the wrongful death tort. *She appealed, contending that the court should pierce the corporate veil.* *CASE DECISION:* Courts may exercise their equitable power to "pierce the corporate veil," requiring shareholders to answer for the corporation's liability. the district court must make three findings: 1. "the subsidiary or other subservient corporation was operated not in a legitimate fashion to serve the valid goals and purposes of that corporation but ... instead under the domination and control and for the purposes of some dominant party." 2. That there is "some form of moral culpability attributable to the [shareholder], such as use of the subsidiary to perpetrate a fraud." 3. Third, the court must find that "there is some reasonable relationship between the injury suffered by the plaintiff and the actions of the defendant." - The question is whether Krystopowicz's abuse of the corporate form caused some injury to Plaintiff.... - We conclude that Krystopowicz's abuse of the corporate form resulted in a sham corporation leading to Plaintiff's inability to recover for her injury. - Together with the district court's findings that Krystopowicz used the Silverstone Defendants in order to obscure Davidson's involvement with the nursing homes and to funnel funds to himself and Davidson, the district court's other findings indicate that Krystopowicz failed to manage the Silverstone Defendants in good faith to meet their legal obligations.... - Krystopowicz failed to secure any such insurance and he failed to verify or even inquire as to whether or not any such insurance coverage existed.... *We hold that the corporate veil should be pierced and that Krystopowicz should be accountable for the Silverstone Defendants' default judgment....Reversed and remanded.*
Eagles Landing Development, L.L.C. v. Eagles Landing Apartments, L.P.
*CASE BACKGROUND:* Eagles Landing Development LLC (Eagles) contracted to build apartments for Eagles Landing Apartments, LP (ELA) for $1.4 million. ELA's general partner was Bluff City. There were two limited partners, PNC, a limited partnership, and Columbia, a corporation. Eagles development completed the work and was owed $931,000. - The agreement stated that Bluff City's contribution would not exceed the net cash flow from the rental of the apartments. The cash flow was not good, so there was no money there. All cash invested in ELA by the partners was gone. Eagles development sued for contribution by PNC and Columbia. - The trial court held that the LP ELA owed the $931,000. It appealed. *CASE DECISION:* As partners in a limited liability partnership, neither Columbia nor PNC can be held liable for the debts of the partnership. Limited Liability Partnership protects partners in limited liability partnerships - In its order, the trial court appears to disregard PNC and Columbia's status as limited liability partners remands to the trial court for the sole purpose of entry of judgment against only
Storetrax.com v. Gurland
*CASE BACKGROUND:* Gurland founded Storetrax.com, an Internet-based commercial real estate listing service, in Maryland. - Gurland became president and a member of the board. An employment contract spelled out some terms of employment, including a year's pay if he was fired. - Two years later, he was removed as president, but stayed on the board for another year. - He requested the severance pay, but it was denied. He sued. - The board claimed he was not due severance pay because his job duties, titles, and salary changed while he worked at Storetrax. - Further, as a board member, it was a breach of fiduciary duty to sue the company. The lower court held for Gurland; Storetrax appealed. *CASE DECISION:* It is well settled that directors of a corporation occupy a fiduciary relation to the corporation and its stockholders. This fiduciary relationship requires that a director perform his duties - Gurland's seeking severance pay from Storetrax in the amount of $150,000 clearly was not in the corporation's best interests. - the director may find "safe harbor" by disclosing to the corporation the conflict of interest and facts surrounding the conflict so that a majority of the remaining shareholders or directors may ratify the transaction or otherwise take action to protect the corporation's financial interests - However, we believe that Gurland notified Storetrax sufficiently of the probability of a lawsuit such that he may claim the protections of the "safe harbor." *Affirmed.*
Close corporation
- a closely held corporation - a corporation that has stock that is not allowed to be widely held - the number of shareholders are limited (often 30-50); and - the shareholders are active in the oversight of the firm
Terminating a Limited Partnership
- similar to general partnership - whereas the bankruptcy of a general partner dissolves an LP, the bankruptcy of a limited partner usually does not. - partnership agreements usually account for issues such as death or withdrawal of a limited partner so the partnership need not end. - The limited partners receive their share of the profits and their capital contributions before general partners receive anything, unless the LP agreement holds otherwise.
Express Statutory Powers of a corporation
- to have perpetual succession, - to sue and to be sued in the corporate name, - to acquire and dispose of property, - to make contracts, - to borrow money and secure obligations, - to lend money, - to be a promoter, partner etc. in any other entity, - to do business inside and outside of the state of incorporation, - to establish pension plans, profit-sharing plans, etc. and - to make charitable donations.
Typically, parties in a partnership formalize their relationship by a written agreement that may cover issues such as:
1. *Basics—*name of the partnership, name of the business, place and date of formation; state law that applies to the partnership 2. *Finances—*contributions of the partners (which may be money, facilities, or work); when payments are due; how additional capital contributions will be handled; the allocation of ownership shares; accounting rules; the distribution of profits; and priority rights in payments 3. *Management—*voting rights of partners; appointment of managing partners with decision-making authority; and, in some cases, a compensation committee 4. *Dissolution—*procedures to be followed if the partnership is terminated; rights of partners to leave the partnership; procedures to be followed if a partner dies; how partnership shares will be valued; limits on transfers of partnership shares; and requirement to go to arbitration in case of dispute among partners
Duration of businesses:
1. *Sole proprietorship:* terminates with the death or incapacity of the owner. 2. *Partnership:* dissolved by the death, retirement, or other incapacity of a partner, but it is not necessarily terminated. - To avoid liquidation, partners usually agree in advance to a continuation agreement. (same is true of LLCs.) 3. *Corporation:* Unless its articles of incorporation provide for a specified period of duration, a corporation has the potential of perpetual existence. - The death or retirement of a shareholder does not bring about the termination of the corporation (in most corporations, the death of a shareholder has no impact on the operations of the business)
A Member's Interest in an LLC has two components:
1. *The financial interest* which is the right to share in profits and losses and to receive distributions; and 2. *The management interest* which consists of all other rights granted to a member by the LLC operating agreement and the LLC statute; including, the right to manage, vote, get info, and bring enforcement actions.
Attributes of a Corporation (8)
1. Creature of State Statute 2. Legal Entity Separate from its Owner(s) 3. Recognition as a "Person" 4. Recognition as a "Citizen" 5. Perpetual Existence 6. Limited Liability for Owner(s) 7. Centralized Management 8. Freely Transferable Shares
The articles of incorporation must include the following:
1. Name and address of the corporation 2. Name and address of the corporation's registered agent 3. Purpose of the business 4. The class(es) of stock to be issued and their par (nominal) value 5. Names and addresses of the incorporators
Co-ownership
1. Right to Share in the Profits: 2. Right to Manage the Business: Evidence of participation in management and control is strong evidence of partnership when taken with other factors including profit-sharing.
A partner may contractually bind the firm by his/her act if the partner has:
1. actual authority (either express or implied) or 2. apparent authority to perform the act. *Where there is neither actual authority (express or implied) nor apparent authority, the firm is bound only if it later ratifies the unauthorized act.*
Duties among partners
1. fiduciary duty 2. duty of obedience 3. duty of care
Two greatest disadvantages of the sole proprietorship:
1. limited alternatives exist for raising capital; and 2. the owner is personally liable for all business debts
Recognition as a "Citizen":
A corporation is a "citizen" of the state where it is incorporated and the state that its principal office is located for purposes of this diversity jurisdiction under the U.S. Constitution.
Recognition as a "Person":
A corporation is a "person" under the 5th and 14th amendments as related to the requirement that no person be deprived of "life, liberty, or property without due process of law" and under the 14th amendment equal protection clause. *Corporations are not persons with regard to 5th Amendment right against self incrimination.*
Corporation
A corporation is an artificial person, or legal entity, created under state law. *Most large, well-known businesses—such as Coca-Cola, General Motors, and Microsoft—are corporations.*
Limited liability for owners
A corporation is liable for payment of corporate contract and tort liability, and shareholders are usually held liable only to the extent of their investment. *A shareholder may be liable for any corporate obligation personally guaranteed by that individual.*
Legal Entity Separate from its Owner:
A corporation is recognized as having a legal existence separate from its owners (shareholders). It may sue or be sued as a legal entity and holds title to all corporate property in its corporate name.
Selection of a State for Incorporation:
A corporation usually incorporates in the state in which it intends to be located and transact the principal part of its business. - It may incorporate any state with more favorable regulations and obtain a license to conduct business in another state. - Delaware has been a popular state for incorporation for companies that are headquartered or do the principal amount of their business in other states (experienced in corporate law)
Termination of an LLC
A limited liability company is dissolved and its affairs are wound up usually because of an event specified in the articles of the organization to bring about the dissolution of the company or by the consent of all the members
Relationship of parties in limited partnership
A limited partnership has at least one general partner and one or more limited partners. - Limited partners are investors who may not participate in managing the business. - not liable for the debts or torts of the LP beyond their capital contributions. - lose their limited liability and become general partners if they take an active role in managing the business.
Wrongful Dissociation:
A partner's dissociation is wrongful if it breaches the partnership agreement.
Effect of Dissolution
A partnership continues after dissolution only for the purpose of winding up its business. - The remaining partners may continue the business after dissolution if all of the partners, including any rightfully dissociating partners, waive the right to have the business wound up (partnership resumes carrying on its business as if dissolution had not occurred.)
Association
A partnership is formed by the association of two or more persons to carry on as co-owners of a business for profit. This forms a partnership, whether or not the parties intended to form a firm.
Tort liability in a partnership
A partnership is liable for loss or injury that a partner causes through any wrongful act or omission while acting within the ordinary course of the firm's business or with the authority of the firm. - If the firm is liable, each partner has unlimited personal liability for that tort obligation.
Distribution of assets (partnership)
After partnership assets have been reduced to cash, they are distributed to creditors and then to partners.
Organizational Meetings:
After the secretary of state issues the corporate charter, the legal entity is officially "born". - Shareholders hold their first (required) annual meeting to elect the board of directors and initially adopt the bylaws. - The board of directors then holds its first meeting to appoint (hire) officers and to carry on any other day-to-day business brought before the meeting.
Professional Corporations
All states have enacted statutes to allow professional corporations (PC or P.C.) to be formed by licensed professionals. *Example: groups of doctors in practice together* - In a PC, the liability of the members of the group (doctors) can be limited to what is invested in the entity.
Creature of State Statute
All states have general incorporation statutes authorizing the Secretary of State to issue a certificate of incorporation or charter upon compliance with its provisions.
Winding up an LLC
An LLC continues after dissolution only for the purpose of winding up its business which involves completing unfinished business, collecting debts and disposing of inventory, reducing assets to cash, paying creditors, and distributing the remaining assets to the members. - During this period, the fiduciary duties of member/managers continue.
Dissolution of an LLC
An LLC will automatically dissolve upon: 1. the expiration of the LLC's agreed duration; 2. written consent of all members; or 3. a decree of judicial dissolution.
Dissolution can come about in several ways:
Change in the composition of the partners results in a new partnership and dissolution of the old one. *--> the withdrawal, bankruptcy, or death of a partner causes the partnership to be dissolved.*
General partnership Aggregate theory
Common law regards the partnership as a legal aggregate, a group having no legal existence apart from its members. *The IRS holds this view and treats a partnership as an aggregate for purposes of taxation; partners are taxed on the income each derives from the partnership.*
Freely Transferable Shares:
Corporate shares are readily transferable unless there is an agreement to the contrary. *The Ohio Uniform Commercial Code (Article 8 on Investment Securities) governs transfers of shares of stock.*
Piercing the corporate veil
Creditors unable to fully recover against a corporation often sue to impose liability on individual shareholders. Courts may employ (sparingly) the doctrine of piercing the corporate veil if: 1. business was not conducted on a corporate basis; 2. the company was inadequately capitalized; or 3. the company was used to defraud creditors.
Fiduciary duty
Each party owes a fiduciary duty of good faith, fairness and loyalty to the other partner(s).
True or false: An LLC is allowed a perpetual life
False
S corporation
Regular corporations (C corporations) can elect through the IRS to be classified as an S corporation. Rules for S corporations: 1. may have only one class of stock 2. may not have more than 100 shareholders. 3. Only natural persons who are U.S. citizens or legal residents may be shareholders, not other corporations or partnerships. *election is taken for tax considerations. Profits and losses must be allocated to the shareholders who pay income taxes.* *The S corporation does not pay taxes, so it is like a partnership for tax purposes.*
Centralized Management:
Shareholders elect a board of directors to manage the business of the corporation. - The board appoints officers (employees) to run the day-to-day operations. - Since management responsibility is separate from ownership, shareholders do not (as shareholders) participate in running the company.
Who is the principal of a corporation?
The Board of Directors- it sets corporate policy and decides corporate business *i.e., the sale of assets, entrance into new product lines, major financing decisions, and appointment of corporate officers.*
Formation of an LLC
The LLC is formed by filing with the secretary of state a document called articles of organization. - The words "limited liability company" or "LLC" must be included in the firm name.
Rights among partners
The RUPA provides partners with certain rights which include: 1. Rights to use/possess firm property for firm purposes; 2. Right to a transferable interest in the firm 3. Right to share in distributions; 4. Right to participate in management; 5. Right to choose associates; and 6. Enforcement Rights (inspect the books and records).
Adoption of Bylaws:
The bylaws of the corporation contained the rules and regulations governing the company's internal management.
Courts can "pierce the corporate veil" of limited liability organizations and hold the owners personally liable under some circumstances:
The court disregards the corporate entity by finding that the entity is a sham and that the owner(s) actually operate the business as a proprietorship or partnership. - The court can then impose liability on shareholders in instances of fraud, undercapitalization, or failure to follow corporate formalities.
General partnership Entity theory
The law considers a partnership a legal entity for many purposes. It may enter into contracts, commit wrongs, sue or be sued. Under RUPA, a partnership is a legal entity as follows: a) The assets of the firm are treated as those of the business, distinct from individual assets of members; b) A partner is accountable as a fiduciary to the firm; c) A partner is considered an agent of the firm; d) A partnership may sue/be sued in the firm name.
Duty of Obedience:
The partner must act in accord with the partnership agreement and any business decisions properly made by the firm.
Carry on business for profit
The partners must carry on a business for profit. A non-profit association is not considered a partnership. A one-time project (venture) is not a partnership
Limited liability in an LLC
There is no personal liability for LLC's obligations incurred by any member or manager solely by reason of being a member or acting as a manager. - As with shareholders in a corporation, members can lose their investment in the LLC; but they do not risk exposure of their personal assets to LLC creditors.
Corporate liability for torts and crimes:
Under the doctrine of respondeat superior, a corporation is liable for the torts committed by agents in the course of their employment. - A corporation may be criminally liable for violations of statute imposing liability without fault or for offenses perpetrated by a high corporate officer or its board of directors. (selling liquor to a minor)
Management in an LLC
Unless otherwise agreed, each member has an equal voice in the management of the LLC. - It may be managed by one or more managers who may or may not be members. (i.e. "member-managed" or "manager-managed")
Control by partners
Unless otherwise specified in the partnership agreement, each partner has an equal voice in partnership management. - Each partner has one vote in managerial decisions. - The partners have a duty to one another to disclose all financial aspects of the business
Effect of Dissociation
Upon a partner's dissociation, the partner's right to participate in the management and conduct of the business terminates. - If the dissociation results in a dissolution, all partners who have not wrongfully dissociated may participate in winding up the business.
Winding up
Whenever a dissolved partnership is not to be continued, the partnership must be liquidated. - involves completing unfinished business, collecting debts, taking inventory, reducing assets to cash, auditing partnership books, paying creditors and distributing the remaining assets to the partners.
Perpetual Existence:
Where the articles of incorporation do not specify a limited duration, corporations have perpetual existence. *--> the withdrawal of any shareholder or officer will not cause dissolution of the Corporation.*
limited partnership
a business organization made up of two or more persons (partners) who have agreed to carry on a business for a profit. - Unlike in a general partnership, not all partners in a limited partnership have the right to participate in the management of the enterprise and not all are liable for partnership debts.
Limited Liability Companies
a business organization that is treated like a corporation for liability purposes but like a partnership for federal tax purposes. - The profits are taxed only once as LLC owners' income.
Sole proprietorship
a business owned by a person who is not organized as a corporation *do not require a government license or permit* *states require business names to be registered if a fictitious business name is used (name other than the name of the individual running the business)*
Benefit Corporation
a corporate form that voluntarily meets high standards of purpose, accountability, and transparency Benefit corporations: 1. have a corporate purpose to create a material positive impact on society and the environment; 2. are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and 3. are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third-party standard.
Promoter in the Formation of a Corporation
a person who organizes a corporation in compliance with state statute. A promoter is an "agent" acting for a nonexistent principal and is personally liable on contracts he/she signs on behalf of the corporation to be formed. - The promoter remains liable, even if the corporation is formed and subsequently adopts the contract.
Term partnership
all parties agree to conduct business for specified length of time (withdrawal of partner is wrongful in this agreement)
Partnership
an association of two or more persons to carry on a business for a profit. *Many attorneys, doctors, accountants, and retail stores are organized as partnerships.*
Apparent authority
authority that a third party would reasonably assume to exist from the nature of the firm or its business and the partner's conduct. Example: a partner of landscaping business pulls up into car dealership driving landscaping truck and the partner eventually signs contract to purchase another truck on behalf of the partnership- third party salesperson has reason to believe that partner had authority to do that
profits and losses of an LLC
determined by the operating agreement and allocated on the basis of the members' contributions. - Absent an agreement, the default is to share profits equally.
what happens when a partnership becomes liable to third-party on a contract?
each partner has unlimited personal liability for that obligation. (they are jointly and severally liable) *However, judgment creditors are required to exhaust firm assets before enforcing a judgment against assets of a particular partner.*
Fiduciary duty of directors in a corporation
fiduciary duty of loyalty: requires that directors place the interests of the corporation before their own interests. - In many corporations, it is common for shareholders to be both directors and managers, giving them multiple roles to play.
Uniform Partnership Act (UPA)
governs partnerships & partnership relations
manager of corporations
hired by the board of directors to run the business
Members in an LLC
in LLCs, owners of the enterprise have this title rather than shareholder as in the case of a corporation; members report income or losses from the LLC on their personal tax returns. *Individuals, corporations, partnerships, and other LLCs may be members.*
business judgement rule
makes directors and managers immune from liability when problems result from honest mistakes in judgment, so long as there is a reasonable basis for the decisions
Actual Express Authority:
may be set forth in the partnership agreement or in a separate oral or written agreement between the partners. Example: a person is given authority to buy supplies, a copy machine, and equipment for a company
Dissociation
occurs when a partner ceases to be associated in carrying on a business. - A partner has the power to dissociate at any time, but may not always have the right to do so - A partner who wrongfully dissociates is liable to the firm for damages.
Distributions in an LLC
of cash or other assets are determined by the operating agreement or allocated on the basis of members' contributions.
Implied powers of a corporation
powers which are necessary to the operation of the business and not inconsistent with the express powers.
voluntary dissolution of a corporation
requires approval of the shareholders and the board of directors. - When voluntarily, the board of directors is responsible for winding up the affairs of the corporation - After the corporation's affairs have been completed, the assets are liquidated (proceeds first used to satisfy creditors, and any remainder goes to the shareholders)
Membership interest in an LLC
shares of ownership in limited liability; much like shares in a corporation or shares in a partnership; the legal claim to a portion of an LLC's profits.
Operating agreement
signed by members in an LLC- is the basic contract governing the affairs of the LLC and stating the various rights and duties of the members. - Each member contributes to the LLC in cash, property or services rendered. - Members are liable to the LLC for failing to make an agreed contribution.
Partnership at will
there is no end date specified in business operation- could go on forever
Partnership formation - TESTS
under RUPA, a partnership has the following components: 1. Association 2. Carry on Business for profit 3. Co-ownership
