Ch. 12 Business Organizations

How are sole proprietorships taxed?

to the individual owner of the business

What are the two disadvantages of a sole proprietorships

1. unlimited liability

2. worst for raising capital

What things typically found in partnership agreements?

intent, especially ownership shares

Norris v. Besel

Shelly was not liable as her limited role in the business did not indicate partnership status

What is required for partners to act in good faith toward the partnership?

fiduciary duty -- trust & loyalty

What disadvantage is shared by sole proprietorships and partnerships?

unlimited liability

Eagles Landing Development, LLC v. Eagles Landing Apartments, LP

Limited partners are not liable for the debts of the limited partnership.

What do you do to create a corporation?

articles of incorporation

What constitutional rights do/don't corporations have?

recognized as a "person" has the first four amendments but not the 5th (self-incrimination)

What is the duty of loyalty owed by a director to the corporation?

fiduciary duty -- best interest of corporation not just director

What is corporate dissolution?

formal ending of corporation

What is a professional corporation?

for people who have limited & exclusive licenses like lawyers & doctors

What are the advantages of a Limited Liability Company

liability shield of a corporation & single flow through taxation of a partnership

What must be in a LLC’s articles of organization?

whether LLC is member-managed or manager-managed

What are the limitations on transferring ownership of an LLC?

Normally you can’t sell your membership interest without the consent of the other members.

What is an LLC operating agreement

provides rules about operation of company & relationships of members/establishes management, allocation of profits & losses

In re 1545 Ocean Avenue, LLC

there was not sufficient evidence that the LLC could not efficiently operate under the operation agreement so the trial court's decision to grant King's requests for dissolution was not correct

Advantage of Corporations and LLC

limited liability

State Ex Rel. Yost v. Leonard

Silman knew of the problems and failed to act, so he could be held personally liable as the alter ego of Zerzer