chapters 32 33 34
Download
Skip this Video
Download Presentation
CHAPTERS 32, 33, 34

Loading in 2 Seconds...

play fullscreen
1 / 73

CHAPTERS 32, 33, 34 - PowerPoint PPT Presentation


  • 72 Views
  • Uploaded on

CHAPTERS 32, 33, 34. Business In A Nutshell. “No one form of organization is right for every business. The proper choice depends upon factors such as sources of financing, tax issues, liability concerns, and the entrepreneur’s goals.”. TYPES. Sole Proprietorships Partnerships

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'CHAPTERS 32, 33, 34' - gavril


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapters 32 33 34
CHAPTERS 32, 33, 34

Business

In A Nutshell

slide2

“No one form of organization is right for every business. The proper choice depends upon factors such as sources of financing, tax issues, liability concerns, and the entrepreneur’s goals.”

types
TYPES
  • Sole Proprietorships
  • Partnerships
  • Corporations
sole proprietorships
SOLE PROPRIETORSHIPS
  • An unincorporated business owned by one person.
  • Are easy and inexpensive to create and operate.
  • Earnings are reported on the owner’s personal tax returns.
partnership
PARTNERSHIP

An unincorporated association of two or more co-owners who carry on a business for profit.

legal
LEGAL
  • No Federal Law (Except taxes)
  • Each state regulates
  • Most modeled after the Uniform Partnership Act (UPA) of 1914, which has been revised several times (most recently in 1997).
is it a partnership
IS IT A PARTNERSHIP?

YES IF:

  • Partners share profits
  • Partners share management of business
  • Partners share losses
  • And many more as we shall see
however
HOWEVER
  • Referring to yourselves as partners does not create a partnership, but may be evidence that one was intended.
  • Charitable businesses are not partnerships.
  • Non-profit enterprises are not partnerships
types9
TYPES

Partnership at will

Term partnership

slide10
But

Be

Aware!

partnership by estoppel
PARTNERSHIP BY ESTOPPEL
  • Participants tell other people that they are partners
  • or they allow other people to say, without contradiction, that they are partners.
  • A third party relies on this assertion; and
  • The third party suffers harm.
slide12
You

Probably

Are

A

partnership

partnership pros
PARTNERSHIP PROS

Advantages:

  • Easy to form.
  • No double taxation
  • May be easy to manage
  • Easy to terminate
and cons
AND CONS
  • Disadvantages:
    • Personal liability
    • Funding may be difficult
    • Management may be difficult.
    • Transferability is limited.
    • May terminate when not desired
more cons
MORE CONS
  • Sometimes unintentional
  • Partners can be held personally liable for the partnership actions and debts.
great legal advice
GREAT LEGAL ADVICE

ALL PARTNERSHIP AGREEMENTS SHOULD BE IN WRITING!

DOT THE Is, X THE TS

TEAMWORK

authority to bind partnership
AUTHORITY TO BIND PARTNERSHIP

Partners with actual or apparent authority may bind the partnership.

  • Actual Express Authority
  • Actual Implied Authority
  • Apparent Authority
partner liability i
PARTNERLIABILITY I

Ratification:

If the partnership accepts the benefit of an unauthorized transaction or fails to repudiate it, it has ratified the transaction.

partner liability ii
PARTNER LIABILITY II

Information

Under the Uniform Partnership Act, whatever one partner knows, the partnership is deemed to know.

partner liability iii
PARTNER LIABILITY III

Tort Liability

A partnership is liable for intentional and negligent torts of a partner in the ordinary course of business or when the partner is acting with actual authority.

partner liability iv
PARTNER LIABILITY IV
  • Personal Liability
  • Joint and Several Liability
  • Incoming Partners
relationships among partners i
RELATIONSHIPS AMONG PARTNERS I
  • Financial Rights
      • Profits
      • Losses
      • Pay
  • Property
  • Ownership
relationships among partners ii
RELATIONSHIPS AMONG PARTNERS II

Management Rights

  • equal rights in management
  • right to bind the partnership to a contract
  • have an equal vote
  • right to inspect and copy the partnership’s books and records.
  • required to share any important information
relationships among partners iii
RELATIONSHIPS AMONG PARTNERS III

Management Duties

  • Duty of Care
  • Duty of Loyalty
  • Duty of Good Faith
  • Duty of Fair Dealing
terminating a partnership
TERMINATING A PARTNERSHIP

Partnership at Will vs. Term Partnership

  • Partnership at Will
  • Term Partnership
dissociation i termination is better term
DISSOCIATION I(TERMINATION IS BETTER TERM)
  • Automatic if a partner quits.
  • Automatic if a partner dies
  • May happen by agreement
dissociation ii
DISSOCIATION II

Must remember, a partner always has the power to leave but may not have the right.

dissociation iii
DISSOCIATION III

When one or more partners dissociate, the partnership can:

1. buy out the departing partner and continue in business or

2. wind up the business and terminate the partnership

dissociation iv
Dissociation IV

Rightful Dissociation

Vs.

Wrongful Dissociation

choice 1 continuation of partnership
CHOICE #1. CONTINUATION OF PARTNERSHIP
  • Financial Settlement
  • Liability of the dissociated partner to outsiders for debts incurred before dissociation
  • Liability of Dissociated Partner for Debts Incurred After Dissociation
  • Liability to the Partnership
choice 2 termination
CHOICE #2. TERMINATION

Ending a partnership business involves three steps:

  • Dissolution
  • Winding Up
  • Termination
limited partnerships
LIMITED PARTNERSHIPS
  • General (active management) and limited (money-only) partners.
  • Only the general partners are personally liable.
joint venture
JOINT VENTURE

A partnership for

a limited purpose.

limited liability limited partnership
LIMITED LIABILITY LIMITED PARTNERSHIP
  • None of the partners are personally liable
  • Formation requires a filed certificate of limited partnership.
  • Very technical
corporations
CORPORATIONS

A legal business entity created under state laws

corporations37
CORPORATIONS

Several types:

  • Close
  • Publicly held
  • Non-profit
corporations38
CORPORATIONS
  • Corporations offer limited liability – usually the managers’ and investors’ personal property is not at risk.
  • Corporate stock can be bought and sold, making investments easy to get.
  • Corporations involve a lot of expense and effort to create and operate.
forming a corporation
FORMING A CORPORATION
  • Where
  • State laws
  • By whom
  • How
  • Registration
  • Ownership
where to incorporate
WHERE TO INCORPORATE
  • State law – not Federal
  • Either the home state of the business or a state which has favorable laws for corporations (often Delaware)
articles of incorporation charter
ARTICLES OF INCORPORATION(CHARTER)

Required Provisions

  • Name of corporation
  • Address and Registered Agent
  • Incorporator
  • Purpose
  • Stock
optional provisions
OPTIONAL PROVISIONS
  • Indemnification of Directors
  • Cumulative Voting
definitions
DEFINITIONS
  • Promoters
  • Shareholders
  • Officers
  • Stock
  • De Facto Corporation
  • De Jure Corporation
  • Corporation by Estoppel
promoter
PROMOTER

The person who normally is hired to set up the corporation.

Also called the “incorporator”

promoter s liability
PROMOTER’S LIABILITY
  • The promoter is personally liable on any contract signed before formation.
  • The corporation is not liable unless it adopts the contract after incorporation.
novation
NOVATION

Even if the corporation adopts the contract, the promoter is still liable until the third party agrees to a novation (new contract), unlessthe contract clearly indicates that the other party is relying only on the corporation, which he knows does not yet exist.

shareholders
SHAREHOLDERS

The owners of a corporation who pay value for the stock in the corporation.

Stock represents their ownership.

Take over from the promoter

board of directors
BOARD OF DIRECTORS

Elected by the shareholders to oversee the corporation.

Normally draw up by-laws.

DIRECTORS BEWARE!!!!!

officers
OFFICERS

Elected by the directors to run the

corporation on a day-to-day basis.

officers BEWARE!!!!!

stock i
STOCK I

Stock can be:

  • Authorized and unissued
  • Authorized and issued or outstanding
  • Treasury stock (been issued, then bought back by company)
stock ii
STOCK II

STOCK MUST BE REGISTERED WITH THE PROPER AUTHORITIES OR YOU GET FREE ROOM AND BOARD

stock iii
STOCK III

Number of shares

Par value

stock iv
STOCK IV

Classes and series:

Common

or

Preferred

de facto corporation
DE FACTO CORPORATION

The promoter has made a good faith effort to incorporate and has actually used the corporation to conduct business but has failed to comply with all the laws.

de jure corporation
DE JURE CORPORATION

The promoter has substantially complied with the requirements for incorporation, but has made some minor error.

corporation by estoppel
CORPORATION BY ESTOPPEL

If a party enters a contract believing in good faith the corporation exists, he cannot later take advantage of the fact that it does not.

close corporations
CLOSE CORPORATIONS
  • Few shareholders
  • Stock is not publicly traded on a stock exchange.
  • Normally limited purpose
public corporations
“PUBLIC CORPORATIONS”

Larger, with many shareholders.

Very strict laws govern.

(make lawyers lots of money)

non profit corporations
NON-PROFIT CORPORATIONS
  • Very strict laws
  • Normally serve “public purpose”
  • No shareholders
  • Board of trustees
s corporations
“S” CORPORATIONS
  • Limited liability of a corporation and the tax status of a partnership.
  • Very technical
  • Used quite often by professionals
s corporations disadvantages
“S” CORPORATIONS - DISADVANTAGES
  • There can only be one class of stocks.
  • There can be no more than 75 shareholders.
  • Shareholders cannot be partnerships or other corporations.
  • Shareholders must be U.S. citizens or residents.
professional corporations
PROFESSIONAL CORPORATIONS
  • Lawyers, accountants, doctors, engineers, etc. – must have professional license
  • Normally PCs provide more liability protection than a partnership.
  • Tax advantages
  • May limit professional liability
  • Easy to add new members
limited liability companies
LIMITED LIABILITY COMPANIES

An LLC offers the limited liability of a corporation and the tax status of a partnership, without the disadvantages of an S corporation.

other forms of organization
OTHER FORMS OF ORGANIZATION
  • A business trust is an unincorporated association run by trustees for the benefit of investors (who are called “beneficiaries”).
  • Cooperatives are groups of individuals or businesses that join together to gain the advantages of volume purchases or sales.
franchises
FRANCHISES

Franchising is a popular method of starting a business that is a compromise between employment and starting your own business.

Franchisees have freedom to make many choices, but are limited in other ways.

foreign corporations i
FOREIGN CORPORATIONS I
  • Does business in any another state besides the state of incorporation.
  • Must “register” in foreign state.
foreign corporations ii
FOREIGN CORPORATIONS II

An unqualified company that is doing business cannot file a lawsuit until it has registered. It can, however, defend itself against a suit and it can file a lawsuit if it is NOT doing business in that state.

piercing the corporate veil
PIERCING THE CORPORATE VEIL

A court may hold shareholders and officers, personally liable for debt in four circumstances:

  • Failure to observe formalities
  • Commingling of assets
  • Inadequate capitalization
  • Fraud
death of a corporation
DEATH OF A CORPORATION
  • May be voluntary
  • By court order
  • By shareholder vote
  • By original articles of incorporation terms
termination
TERMINATION

Terminating a corporation is a three-step process:

  • Vote by a majority of the shareholders.
  • Filing Articles of Dissolution with the Secretary of State.
  • Winding up – paying debts and distributing assets.
final advice
FINAL ADVICE

PUT TOGETHER A TEAM:

Lawyer, accountant, banker, financial advisor, cfp, clu, and specialist in the business you are starting!

slide73
And take

Their

Advice!

ad