Class Two - Business Entity Law

Sole Proprietorship

Unincorporated business structure owned by one individual w total control and receives all profits, and bears unlimited personal liability for all debts and legal actions

• they are the business thus if they DIE so does the business

Business Names Act (RSO)

• Name of corporation must be registered

• Name must be registered by all partners

General Partnership - Overview

Relation between persons carrying on a business, are collectively called a firm

• contractual relationship founded on mutual trust (fiduciary)

• existence determined by intention, definition and relevant facts

General Partnership - Liability

Every partner is jointly liable with co-partners and ALSO severally liable while a partner at the firm

General Partnership - Income Tax

Share of income taxed at partner-level, the partnership is a flow through entity and is not taxed

General Partnership - Determining Existence

• Joint tenancy DOESNT create a partnership

• Sharing gross returns DOESNT create a partnership

General Partnership - By Statute

Key provision if there is no agreement

• All partners share equally in profit/loss

• Firm must reimburse partners for expenses/liabilities incurred while conducting busienss

• Every partner can participate in running the business

• All existing partners must agree to admit a new partner

• Ordinary decisions need majority while fundamental changes require unanimous consent

• All partners have right to inspect books and records

General Partnership - Third Parties

• Each partner is an agent of the firm and of other partners

  • actions bind the entire firm unless the partner doesn’t have authority AND the 3rd party knows

• Admission by a partner is evidence against the firm

General Partnership - Dissolution

• End of term written within contract

• Death/Insolvency of a partner

• Illegailty of business

• Agreement between partners

• Court application

Limited Liability Partnership (LLP) - Liability

Every partner is jointly liable, BUT is not liable due to indemnification, contribution or otherwise due to actions of another partner OR for any debts/obligation incurred by partnership

• only available for professionals

• If fraud or criminal acts are commited, all are liable

Limited Partnership - General

• liability limited to own capital contributions

• must have a “GENERAL” partner and a limited partner

  • limited partner must not particiapte in management