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Partnership

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

Attributes of a Partnership (not a list)

1. Control
2. Sharing Profits and Losses
3. Sharing Profits
4. Gross Returns
5. Contribution of Skill or Labor
6. Fixed Payment

Tenancy in Partnership

Ownership relationship that exists between partners under the Uniform Partnership Act

Partnership Authority

1. Express
2. Customary (implied)
3. Apparent

Prohibited Transactions as Partner

1. Cessation of business
2. Suretyship
3. Arbitration
4. Confession of Judgment
5. Assignment for Creditors
6. Personal Obligations

Duties, Rights, and Liabilities of Partners

1. Loyalty and Good Faith
2. Obedience
3. Other Duties

Rule on Liability of New Partners

A person admitted as a partner into an existing partnership has limited liability for all obligations of the partnership arising after such admission.

Dissolution of Partnership by Act of the Parties (not a list)

1. Agreement
2. Expulsion
3. Alienation of Interest
4. Withdrawal

Dissolution of Partnership by Operation of Law (not a list)

1. Death
2. Bankruptcy
3. Illegality

Dissolution of Partnership by Decree of Court

1. Insanity
2. Incapacity
3. Misconduct
4. Impracticability
5. Lack of success
6. Equitable circumstances

Priority of Distribution of Assets

1. Firm Creditors
2. Partner's advances
3. Contributions of capital
4. Remaining assets distributed to partners pro rata

Limited Partnership

Partnership that can be formed by "one or more general partners and one or more limited partners."

Safe Harbor activities in which limited partners may engage w/o losing their protection from liability (not a list)

1. Being a contractor for, or an agent or employee of, the limited partnership or of a general partner
2. Consulting with and advising a general partner regarding the partnership business
3. Acting as a surety for the limited partnership
4. Voting on partnership matters, such as dissolving and winding up the limited partnership or removing a general partner

Characteristics of Limited Partnerships

1. Capital Contributions
2. Firm Name
3. Management and Control of the Firm

Limited Partner

Partner who neither takes part in the management of the partnership nor appears to the public to be a general partner (only donates money, cannot be held personally liable for debts)

General Partner

Partnership in which the partners conduct as co-owners a business for profit, and each partner has a right to take part in the management of the business and has unlimited liability; general partners publicly and actively engage in the transaction of firm business

If a limited partnership acts a general partnership will it be treated as so?

Yes

Limited Liability Company Characteristcs

1. Formation
2. Capital Contributions
3. Management
4. Distributions
5. LLC Property
6. Assignment
7. Tax Classification
8. Disregarding the LLC Entity

Formation of Limited Partnerships

1. Members of a Limited Partnership
2. Certificate of Limited Partnership
3. Limited Partnership Agreement

Public Corporation

Corporation that has been established for the governmental purposes and for the administration of public affairs.

Private Corporation

Corporation organized for charitable and benevolent purposes or for purposes of finance, industry, and commerce.

Quasi-Public Corporation

Private corporation furnishing services on which the public is particularly dependent, for example, a gas and electric company.

Close Corporation

Corporation whose shares are held by a single shareholder or a small group of shareholders.

Domestic Corporation

Corporation that has been incorporated by the state in question as opposed to incorporation by another state.

Foreign Corporation

Corporation incorporated under the laws of another state.

Bylaws

Rules and regulations enacted by a corporation to govern the affairs of the corporation and its shareholders, directors, and officers.

Ultra Vires

Act or contract that the corporation does not have authority to do or make.

Corporation De Jure

Corporation with a legal right to exist by virtue of law.

De Facto Corporation

Existing in fact as distinguished from as of right, as in the case of an officer or a corporation purporting to act as such without being elected to the office or having been properly incorporated.

Corporation by Estoppel

Corporation that comes about when parties estop themselves from denying that the corporation exists.

Why would you want to incorporate?

1. Less liability
2. Some tax advantages
3. Perpetual life
4. Ease of transfer of interest
5. Separation of interest from management
6. Provides access to capital markets

Roles in the Formation and/or governing of corporations

1. Promoters
2. Incorporators
3. Shareholders
4. Directors
5.Officers

Corporations or their assets may become part of another entity by

1. Consolidation
2. Merger
3. Asset sale

Capital Stock

Declared money value of the outstanding stock of the corporation.

Par Value

Specified monetary amount assigned by an issuing corporation for each share of its stock.

Book Value

Value found by dividing the value of the corporate assets by the number of shares outstanding.

Outstanding

Name for shares of a company that have been issued to shareholders.

Market Value

Price at which a share of stock can be voluntarily bought or sold in the open market.

Common Stock

Stock that has no right or priority over any other stock of the corporation as to dividends or distribution of assets upon dissolution.

Preferred Stock

Stock that has a priority or preference as to payment of dividends or upon liquidation, or both.

Common Stock Shareholders have what rights

1. Vote
2. Receive dividends (if declared)
3. Inspect the books at reasonable times and places

Stock Subscription & Types

Contract or agreement to buy a specific number and kind of shares when they are issued by the corporation.

Types:
1. Subscription before incorporation
2. Subscription after incorporation - requires acceptance

Stock Transfer Restrictions

Restrictions on the sale of stock must be noted on the face of the stock certificate.

Stock is acquired by

1. Stock subscription agreements/or
2. Transfer of existing shares

Cumulative Voting

System of voting for directors in which each shareholder has as many votes as the number of voting shares owned multiplied by the number of directors to be elected, and such votes can be distributed for the various candidates as desired.

Straight Voting

For each share owned, each shareholder is entitled to one vote on each matter to be voted.

Preemptive RIght

Shareholder's right upon the increase of a corporation's capital stock to be allowed to subscribe to such a percentage of the new shares as the shareholder's old shares bore to the former total capital stock.

Types of Shareholder Lawsuits (2 items)

1. Minority Shareholder Suit
2. Shareholder Derivative Suit

Piercing the Corporate Veil

Ignoring the corporate entity and holding the shareholders liable

Reasons including:
1. Alter Ego Theory
2. Abuse of the Corporate Form
3. Insufficient Corporate Capitalization

Business Judgement Rule (BJR)

Protects directors from personal liability from their negligent acts or omissions in exercising corporate governance.

Quorum

Minimum number of persons, shares represented, or directors who must be present at a meeting in order to lawfully transact business.

Responsible Officer Doctrine

Corporate officers can be held criminally liable under some federal and state statutes. Responsibility sometimes attaches when the "responsible officer" fails to follow appropriate regulations.

Shareholders

1. Shareholders are owners
2. Shareholders vote to elect directors (sometimes officers)
3. Shareholders vote to authorize some types of extraordinary actions

Directors

1. The Board of Directors has oversight and policy level authority
2. Directors are fiduciaries
3. Directors hire and supervise officers

Officers

1. Officers are responsible for the day-to-day management of the corporation.
2. Officers are fiduciaries and agents.
3. Officers report to the Board of Directors.

The end of a partnership is marked by the following

1. Dissolution
2. Winding up
3. Termination