Ch 37 Intro
An ___________ is an individual who organizes, manages, and assumes the risks of starting a new business venture, typically with the goal of making a profit.
entrepreneur
A partner’s implied authority may not contradict a partner’s _______ authority created by agreement of partners.
express
The RUPA defines __________ as a change in relation of the partners caused by any partner ceasing to be associated in the carrying on of the business.
dissociation
An LLC is owned by _______.
Members
When starting a business, there are a number of key considerations. Name at least 3 key considerations.
Considerations:
Owners’ liability
Control
Ease of creation
Tax considerations
Ability to raise capital
There are numerous business forms (ex. nonprofit corporation). Name 3 business forms.
Sole proprietorship
Partnership - General, limited, limited liability, limited liability limited
Corporation - regular "C", subchapter "S", nonprofit, professional, close
Limited liability company
The duty of ____ includes refraining from:
Gross negligence
Reckless conduct
Intentional misconduct
Knowing violation of the law
care
After the partnership assets have been distributed, the _________ of the partnership occurs automatically.
termination
True or False.
LLC members share profits in proportion to their capital contributions to the business, unless the members agree otherwise.
False.
LLC members share equally in the profits of the business, unless members agree otherwise.
A __________ has only one owner and is an extension of its owner.
sole proprietorship
Name 2 advantages and 1 disadvantage of a sole proprietorship.
Advantages:
•Few formalities
•Taxes flow to owner
•Owner takes all profit
•Owner controls
Disadvantages:
•The owner bears all the risk of loss
•Potential higher tax liabilities
Ann and Elkie own Ann Elk Tavern as general partners. Ann wants to invest in her boyfriend Brock’s auto shop and neighbor Carol’s Bar N’ Grill.
Are either of these investment opportunities problematic regarding the duty of loyalty?
Yes, Ann could invest in Brock’s auto shop without competing with the Ann Elk Tavern partnership, but she should not invest in Carol’s Bar N’ Grill without first getting Elkie’s consent.
•A tavern and a bar are too similar and may give rise to a breach of duty claim.
Explain what the following statement means "A partner has the power – but not necessarily the right – to dissociate from a partnership at any time, such as by withdrawing from the partnership."
A partner has the power (can leave the partnership)
Dot not necessarily have the right (it could be a wrongful dissociation that has legal consequences like monetary damages)
True or False.
Members of an LLC may choose to have the LLC taxed as a partnership or as a corporation.
True
Name 3 different types of partnerships.
A partnership has two or more owners or partners managing the business and takes several forms:
General
Limited (LP)
Limited liability (LLP)
Limited liability limited (LLLP)
Professional
List 2 advantages of a partnership and 2 disadvantages of a partnership.
Advantages:
•Relatively easy to create
•Has legal entity status but individual taxation
•Partners control the business
•Partners assume all gain (or losses)
•Flexible structure
Disadvantages:
•Partners bear all the risk of loss jointly and severally
•Different levels of liability to partners depending on sub-form
•May be created as a general partnership by default (unintentionally)
Under the RUPA, the duty of ______ requires partners to prioritize the partnership’s interests above their own.
loyalty
Dissolution begins the winding up process:
The orderly ________ of partnership assets and _________ of proceeds to those having claims against the partnership.
liquidation
distribution
To form an LLC, __________ must be filed with the central state agency.
Articles of organization
A ________ is owned by shareholders who elect a board of directors to manage the business.
corporation
List 2 advantages of a corporation and 2 disadvantages of a corporation.
Advantages:
•Shareholders enjoy limited liability for corporate obligations
•Perpetual existence
•Ability to raise large amounts of capital
Disadvantages:
•Greater formality required for formation and operation
•Double-taxation
•Complexity of structure
•Added regulatory costs
What are the 3 main fiduciary duties of partners?
Duty of care
Duty of loyalty
Duty of good faith and fair dealing
To eliminate the ________ authority of a winding up partner to conduct business in the ordinary way, the partnership should ensure the third party has notice that the partnership has been dissolved.
apparent
In a LP, _____ partners contribute capital, manage business, share in profits, and possess unlimited liability for its obligations.
general
What does the RUPA stand for?
Revised Uniform Partnership Act