Business Organizations and Entities Lecture Notes

Practice flashcards covering the various forms of business organizations, legal liabilities, and corporate governance based on lecture notes.

Respondeat Superior

The legal rule that says employers are usually liable for the negligent conduct of employees.

Fiduciary Duty

A duty of absolute loyalty to another person or entity, requiring corporate directors, officers, and partners to act in the best interest of the entity or shareholders.

Sole Proprietorship

A business owned by a single person where no separate legal entity exists, resulting in unlimited personal liability for the owner.

Pass-through Entity

A business structure, like a partnership, where the entity itself does not pay federal income tax; instead, profits and losses are reported on the owners' personal tax returns.

Uniform Partnership Act (UPA)

A state law that provides default rules for joint control and equal sharing of profits in a partnership when a written or clear oral agreement is absent.

Statement of Disassociation

A formal notice filed with counterparties to alert them that a partner has left a partnership and no longer has the authority to bind the entity.

Dissolution

The legal termination of a partnership.

Winding Up

The process of settling a partnership's affairs after dissolution, including paying creditors first, followed by the return of original contributions and the distribution of remaining profits.

Limited Partnership (LP)

A partnership consisting of at least one general partner with unlimited liability and one or more limited partners who are passive investors with liability limited to their investment.

Public Corporation

Also known as a C corporation, this is a business whose stock is publicly traded on exchanges and is subject to extensive government regulation and reporting requirements.

Private Corporation

A corporation with a small number of shareholders (typically fewer than $500$) whose shares are not traded on open markets, exempting it from many public reporting requirements.

Piercing the Corporate Veil

A legal exception where courts hold shareholders personally liable for corporate debts if the corporation is used for fraud or lacks sufficient separateness from its owners.

Bylaws

The specific rules that regulate and govern the internal operations of a corporation.

Shareholders' Derivative Suit

A lawsuit brought by shareholders on behalf of the corporation against third parties, officers, or directors, where any damages awarded go to the corporation.

Say on Pay

A provision of the Dodd-Frank Act that allows shareholders a nonbinding, periodic vote on executive compensation.

The Business Judgment Rule

A legal protection for corporate directors and management stating they are not liable for honest mistakes if there was a reasonable basis for their decision made in good faith.

Limited Liability Company (LLC)

A business form that provides owners with the limited liability of a corporation and the pass-through tax status of a partnership.

Franchisor

An entity that sells a business model, licenses intellectual property, and provides brand support to buyers.

S Corp

A corporation that has fewer than $100$ shareholders and only one class of stock, which allows it to be taxed as a pass-through entity without individual liability.

Benefit Corporation

A type of for-profit corporation that includes environmental or social goals in its charter in addition to the traditional goal of maximizing profits.