Key Concepts of Business Entities and Contracts

These flashcards cover vocabulary and key concepts related to business entities and contracts, focusing on definitions and important characteristics necessary for understanding business law.

Business Entity

A structure through which individuals conduct business, such as a sole proprietorship, partnership, corporation, or LLC.

Longevity

The ability of a business entity to continue existing over time.

Limited Liability

A feature of certain business entities where the owners' personal assets are protected from the company's debts and liabilities.

Contractual Capacity

The legal ability of a party to enter into a binding contract, often relating to age and mental competency.

Partnership Agreement

A legal document that outlines the terms of a partnership between two or more individuals.

Bylaws

The rules and regulations governing the internal management of a corporation.

Operating Agreement

A document that outlines the management structure and operating procedures of an LLC.

Piercing the Corporate Veil

The legal concept that allows courts to hold shareholders personally liable for the corporation's debts under certain circumstances.

Insolvency

A financial state in which a business cannot meet its debt obligations.

Cumulative Voting

A voting system that allows shareholders to allocate their votes in a way that gives minority shareholders a greater chance of being represented.

De Facto Corporation

An entity that operates as a corporation but has not fulfilled all necessary legal requirements to be recognized as such.

Preemptive Rights

Rights that allow existing shareholders to purchase additional shares before the company offers them to others, preventing dilution of their ownership.

Quorum

The minimum number of members required to be present for a meeting to be valid and to conduct business.

Sub S Corporation

A special type of corporation that avoids double taxation by allowing income to pass through to shareholders' personal tax returns.

General Partnership

A business entity where two or more individuals manage a business and share its profits and liabilities.

Promoter

An individual who organizes and plans the formation of a business entity, often seeking investment to launch the business.

Ease of Formation

Some business associations can be created with no formality, others require filing documents with the state.

If ease of formation is the primary concern, the owners would choose a general partnership. (T/F)

True

Sole Proprietorship

An unincorporated business owned by just one person; formed with no formality and no documents to be filed.

General Partnership

A partnership is an unincorporated business formed for profit, owned by two or more persons; formed with no formality and no documents to be filed.

Limited Partnership

An unincorporated business formed for profit, owned by at least one general partner and at least one limited partner; requires filings of certificate of limited partnership with the state.

General Partnerships have unlimited liability for all debts; limited partners have limited liability equal to the amount of their investment. (T/F)

True

Tip:

Each partner, does NOT have equal rights in the management and conduct of the business of a general or a limited partnership