LAW335 Final - Carol Miller - Missouri State

How do partnerships and LLPs divide profits and losses?

Equally

How do limited partnerships and LLLPs divide profits and losses?

Per capital ratio

What is false about Not-for-profit organizations

The must incorporate in most states

Trade associations can qualify for nfp corp

Quorum for annual members can be satisfied with 10% attendance

*They can pay dividends*

Can be funded in whole or in part by for profit businesses

How is cumulative voting determined?

EX: If there are 4 directors being elected and there are 12 directors on the board and Mary owns 30 shares, whats the max number of votes Mary could cast?

12 x 30 = 360

List the types of Corporations

General for profit

not for profit

professional corp

closed corp

s corp

What are the formalities for General for profit corporations?

File Articles of Incorp.

-name reservation

-equity, etc

Annual taxes

Annual shareholders meeting w/ quorum

Board of Directors

State-required others

Is there a limit on the number of investors for a gfpc?

No

Writ of Quo Warranto

Takes away a corporate charter

Deep Rock Doctrine

In an undercapitalized corporation, questionable loans by "insiders" to the corp. may be subordinated, with loans of outsiders given priority.

Record date

own stock as of date of which the books close in order to receive the annual dividend distribution

Proxy

agency arrangement to allow someone else to cast your vote

Describe a Statutory close corporation

1. Fewer than 50 shareholders

2. Meeting formalities can be abandoned

3. Decision making roles can be redistributed

4. Transfer of shares is restricted

5. Taxed as corporation

6. Board of Directors can be abolished**

How are dividends divided in a traditional corporation?

By capital ratio

How is voting decided in a traditional corporation?

By capital ratio

What kind of liability do shareholders (investors) have in a traditional corporation?

Limited to capital

What kind of liability do general partners have in a general partnership?

Joint and several unlimited liability

What kind of approval is required for admission of new partners in a general partnership?

Unanimous

How is management divided in a general partnership?

Decentralized - all general partners participate with an equal voice in management.

Joint venture

Temporary partnership for a specific purpose

Describe management with a limited partnership

General partners participate in management equally, limited partners have a limited say in management

Marshalling of Assets

Creditor of partnership should first try to collect against the partnership before trying to collect against individual partners

Charging order

the creditor will go after personal assets first, and then can attach partner's interest in partnership (similar to wage garnishment)

In which type of business is pass-through income taxation possible?

All partnerships, LLC, and S Corp

Dissociation

A change in the partnership caused by a partner ceasing to be associated with the carrying on of business

Dissolution

A partnership ends entirely

Winding up

A general partner should be appointed to head the process and can get some special compensation

Priorities during winding up

1. Secured and general creditors

2. Loans by partners

3. Capital

4. Profit

Partnership by estoppel

When a non-partner represents themselves as a partner

Foreign Corp.

A corporation housed/formed in another state

Alien Corp.

A corporation housed/formed in another country

Piercing the corporate veil

the owners, shareholders, or members of a corporation or LLC can be held personally liable for corporate debts. This means creditors can go after the owners' home, bank account, investments, and other assets to satisfy the corporate debt.

*applies to ALL types of businesses

Difference between a Benefit Corp and a B Corp

Benefit = statutory entity, an actual type of business

B Corp = a certification that can be acquired

What is a Benefit Corp?

A corporation whose purpose is to elevate the importance of environmental and social implications so they have a right to consider those to variables in addition to profit

Pre-emptive rights

The opportunity to buy the same percentage of new shares you currently own to maintain the same percentage of ownership

Business Judgment Rule

Protects most decisions of Directors and Majority Stakeholders

What do shareholders have a right to vote on?

1. Amendment to articles

2. Change in rights of classes of stock

3. Change in pre-emptive rights

4. Bylaws

5. Merger/consolidation

6. Extraordinary matters

7. Election of directors

8. Resolutions

Describe a Professional Corp

1. Limited liability for shareholders

2. Only qualified people can own shares - licensed practitioners

3. Limited transfer of shares

4. Taxed as corp.

What kind of categories are eligible to become Professional Corps?

Attorneys

Accountants

Architects

Engineers

Real Estate

Medical Field

What is the purpose of cumulative voting?

To maximize the probability of shareholders electing someone of their choice

Describe an S Corp

1. Tax advantage, taxed like partnership

2. MUST establish domestic corp in US state

3. MUST have unanimous consent of shareholders for S tax status

4. Limit on types of shareholders - ONLY US citizens and residents, ONLY individuals or estates, and EXCLUDES corp. shareholders

5. Max of 100 shareholders

6. One class of stock only

5. Limited types of investments

Why is an LLC the most popular start up business?

The most flexibility of any business, fewer formalities and tax advantages

Describe a Not-For-Profit Corporation

1. Tax exemptions

2. Public purpose or mutual benefit

3. Members (not shareholders)

4. Less rigorous formalities (10% quorum)

5. Special liability limitations

Triple Bottom Line

Corporate responsibility

-People (labor)

-Planet (Environment)

-Profits (long and short term)

L3C or LLLC

Only in 8 states

Hybrid between for profit and not for profit entity

Describe an LLC

1. File Articles of Org. and Operating Agreement

2. Members

3. Inside and outside managers

4. Equal voting rights

5. Limited liabilities

Dissenter's appraisal rights

Shares appraised as of day before merger

Written notice required before and after merger vote that shareholder intends to exercise appraisal rights

Types of Mergers

A + B = A merger

A + B = C consolidation (new bus. is formed)

Both boards and shareholders get to vote with 2/3 or simple majority

Short form merger

When a parent owns 90-95% of its subsidiary, merger of two corps. can be accomplished without shareholder approval

De Facto merger

When Corp A acquires substantially all the assets of Corp B, shareholders of Corp A don't have the right to approve the deal

Shareholder derivative suit

Burden is on shareohlders to prove gross negligence, fiduciary breach, etc.

What organizations have "members?"

Partnership Firm, LLC, or Not for Profits

Difference between authorized shares and outstanding stock

Authorized = the total number of shares in the company

Outstanding = the total number of shares owned by the public

SEC Rule 10b-5 relates to what?

Anti-fraud, no insider trading, applies to all transactions in securities

Describe the LL shield

-Shield general and limited partners from most debts and torts

-Annual registration required to maintain shield

-All partners have liability limited to capital

-

Explain the role of a promoter

Acts on behalf of corp. before filing paperwork to become a corp.

Not an agent

Can have personal liability on contracts

Watered stock

stock with artificially inflated value (securities fraud)

Alter Ego Doctrine

a court of law holds individual shareholders liable for a corporation's debts if the corporation is deemed to be nothing more than an "alter ego" of the corporation's owners.

Cooperative Association

business organization formed by a group of individuals for their mutual benefit.

What is a callable bond?

allows the issuer of the bond to retain the privilege of redeeming the bond at some point before the bond reaches its date of maturity.

What is a REIT?

Real Estate Investment Trust, is a company that owns or finances income-producing real estate.

Ultra vires

beyond one's legal power or authority.