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
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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.”
An unincorporated association of two or more co-owners who carry on a business for profit.
Partnership at will
ALL PARTNERSHIP AGREEMENTS SHOULD BE IN WRITING!
DOT THE Is, X THE TS
Partners with actual or apparent authority may bind the partnership.
If the partnership accepts the benefit of an unauthorized transaction or fails to repudiate it, it has ratified the transaction.
Under the Uniform Partnership Act, whatever one partner knows, the partnership is deemed to know.
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.
Partnership at Will vs. Term Partnership
Must remember, a partner always has the power to leave but may not have the right.
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
Ending a partnership business involves three steps:
A partnership for
a limited purpose.
A legal business entity created under state laws
The person who normally is hired to set up the corporation.
Also called the “incorporator”
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.
The owners of a corporation who pay value for the stock in the corporation.
Stock represents their ownership.
Take over from the promoter
Elected by the shareholders to oversee the corporation.
Normally draw up by-laws.
Elected by the directors to run the
corporation on a day-to-day basis.
Stock can be:
STOCK MUST BE REGISTERED WITH THE PROPER AUTHORITIES OR YOU GET FREE ROOM AND BOARD
Number of shares
Classes and series:
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.
The promoter has substantially complied with the requirements for incorporation, but has made some minor error.
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.
Larger, with many shareholders.
Very strict laws govern.
(make lawyers lots of money)
An LLC offers the limited liability of a corporation and the tax status of a partnership, without the disadvantages of an S corporation.
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.
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.
A court may hold shareholders and officers, personally liable for debt in four circumstances:
Terminating a corporation is a three-step process:
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