Business Law and Franchising Lecture Flashcards

Vocabulary flashcards covering chapters 34 through 40, including franchising, partnership types, corporate formation, and liability rules of liability, and debt/equity instruments.

Franchisor

The party that grants the franchise to another party.

Franchisee

The party that pays for the franchise and operates as an independent contractor, liable for their own contracts and torts such as negligence.

Unlimited Personal Liability

The legal obligation of a sole proprietor to be personally responsible for all debts of the business.

General Partnership Requirements

The specific conditions that must be met to form a general partnership, found on page $597$.

General Partner Rights

The rights of partners in a general partnership, including the right to participate in management, found on pages $599$ through $601$.

Limited Partnership

A specific business entity defined on page $613$ involving both general and limited partners.

Joint and Several Liability

A type of liability described on page $618$ where partners can be held responsible together or individually for the full amount of a debt.

Steps for Dissolving a Partnership

The three-step process consisting of disassociation, disillusion, and winding up.

Limited Liability Partnership (LLP)

A business entity defined on page $629$ that provides partners with limited liability.

Flow-through Taxation

A tax treatment for entities like LLCs where income is taxed only at the individual member level rather than at the entity level.

Member-managed LLC

An LLC where the management is handled directly by its members, as described on pages $640$ and $641$.

Manager-managed LLC

An LLC where members designate specific managers to handle the company's management.

Publicly Held Corporation

A corporation with many shareholders whose shares are often traded on national stock exchanges.

Closely Held Corporation

A corporation owned by a few shareholders, often family members or management, whose shares are not publicly traded.

Four Major Classifications of Corporations

$1.$ For-profit, $2.$ Not-for-profit, $3.$ Government-owned, and $4.$ Domestic, foreign, and alien.

Promoter

A person who organizes and starts a corporation, finds investors, and enters into contracts on behalf of the yet-to-be-formed corporation.

Articles of Incorporation

The primary document that must be filed with the Secretary of State to create a corporation.

Registered Agent

A person or corporation empowered to accept service of process on behalf of a corporation.

Bylaw

A set of rules adopted by the board of directors that contains provisions for managing the business and regulating the affairs of the corporation.

Ultra Viridis Act

An act by a corporation that is beyond its express or implied powers.

Common Stock

A type of equity security that represents the residual value of a corporation.

Preferred Stock

A type of equity security that is given certain preferences and rights over common stock.

Debt Instruments

The three major types of instruments used to finance a corporation: debenture, bond, and note.

Equity Securities

The two major types of securities issued by a corporation: common stock and preferred stock.

Proxy

A shareholder's authorization of another person to vote the shareholder's shares at a shareholders' meeting.

Piercing the Corporate Veil

A doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable.

Fiduciary Duties of Officers and Directors

The three major duties are the duty of obedience, the duty of care, and the duty of loyalty.

Business Judgment Rule

A rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

Four Types of Franchises

The classifications include distributorship franchise, processing plant franchise, chain cell franchise, and area franchise.