After reviewing the website for Delaware and the Division of Corporation, and reading the article on Delaware attracting corporation on page 611-12, complete a writing assignment that addresses these issues and answers these questions• Research the law of corporations in another state besides Delaware.• What issues do businesses need to consider when incorporating – include at a minimum names, tax consequences, stakeholders, etc.• How do these states compare and contrast?• What ideas justify the opinion that Delaware is preferred for corporate formation?Support your answer with legal concepts from this week’s learning. Be sure to provide in text citation and source information in APA format including a working URL.
cheeseman_blaw10e_34.pptx

cheeseman_blaw10e_35.pptx

cheeseman_blaw10e_36.pptx

cheeseman_blaw10e_37.pptx

cheeseman_blaw10e_39.pptx

Unformatted Attachment Preview

Business Law
Tenth Edition
Chapter 34
Small Business,
Entrepreneurship, and
General Partnerships
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Learning Objectives (1 of 2)
34.1 Define entrepreneurship and describe the types of
organizations that an entrepreneur can use to operate
a business.
34.2 Define sole proprietorship and describe the liability of
a sole proprietor.
34.3 Define general partnership and describe how general
partnerships are formed and operated.
34.4 List and describe the rights of general partners.
34.5 List and describe the duties of general partners.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Learning Objectives (2 of 2)
34.6 Explain the tort and contract liability of general
partners.
34.7 Describe how a general partnership is dissolved and
terminated.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Entrepreneur
• Person who forms and operates a new business either by
himself or herself or with others
• Forms of Conducting Business
– Sole Proprietorship
– General Partnership
– Limited Partnership
– Limited Liability Partnership
– Limited Liability Company
– Corporation
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Sole Proprietorship (1 of 2)
• Owner is actually the business
• No separate legal entity
• Advantages
– Easy to form and low cost
– Owner makes management decisions
– Owner receives all profits
– Ownership can be easily transferred or sold
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Sole Proprietorship (2 of 2)
• Disadvantages
– Capital is limited to personal funds and loans
– Owner is legally responsible for all activities
• Creation
– No formalities
– No federal or state government approval
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Exhibit 34.1: Sole Proprietorship
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Case 34.1: Sole Proprietorship
• Case
– Bank of America, N.A. v. Barr
– 9 A.3d 816 (2010)
– Supreme Judicial Court of Maine
• Issue
– Is Barr, the sole owner of The Stone Scone, personally
liable for the unpaid debt?
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Taxation of Sole Proprietorship
• No taxes at business level
• Earnings and losses are reported on personal income tax
filing
• File tax returns and pay taxes to state and federal
governments
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
General Partnership
• Voluntary association of two or more persons for carrying
on a business as co-owners for profit
• Creates rights and duties among partners and with third
parties
• Partners are personally liable for debts and obligations
• Uniform Partnership Act: Model act codifying consistent
partnership law
– Formed with little or no formality
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Exhibit 34.2: General Partnership
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Formation of a General Partnership
• To qualify as a general partnership under the UPA, a
business must meet the following criteria:
– Association of two or more persons
– Carrying on a business
– Should have co-owners
– Aim should be profit
• Right to participate in the management of a business
determines the existence of a general partnership
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Name of the General Partnership
• Can operate under name of any one or more of the
partners, or
• May use fictitious name
– Must file fictitious business name statement
– Publish notice in newspaper
– Cannot be similar to name used by another business
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Partnership Agreement and Taxation
• General partnership agreement
– Written agreement signed by partners
– No formalities are necessary
• Taxation of general partnerships:
– No federal income taxes
– Income and losses reported on individual partners’
personal income tax returns, called flow-through
taxation
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Case 34.2: General Partnership
• Case
– Pegg v. Kohn
– 861 N.W.2d 764
– Supreme Court of North Dakota
• Issue
– Was an oral general partnership created between Pegg
and Kohn?
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Rights of General Partners
• Right to participate in management
• Right to share in profits
• Right to compensation
• Right to indemnification
• Right to return of loans
• Right to return of capital
• Right to information
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Duties of General Partners (1 of 3)
• Duty of loyalty: Partner should not act adversely to the
interests of the partnership
• Forms of breach of loyalty:
– Self-dealing
– Usurping a partnership opportunity
– Competing with the partnership
– Making secret profits
– Breach of confidentiality
– Misuse of partnership property
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Duties of General Partners (2 of 3)
• Duty of care
– Obligation to use same level of care and skill that a
reasonable person would use
– Breach of duty of care is negligence
• Duty to inform
– Provide all information relevant to affairs of the
partnership
– Other partners are imputed with knowledge of all
notices
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Duties of General Partners (3 of 3)
• Duty of obedience
– Adhere to provisions of partnership agreement and
decisions
• Action for an accounting: Formal judicial proceeding in
which court is authorized to:
– Review partnership and partners’ transactions
– Award each partner his or her share of partnership
assets
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Liability of General Partners (1 of 3)
• Tort liability
– Unlimited personal liability for debts and obligations of
partnership
– Joint and several liability: For torts and breaches of
trust
▪ Plaintiff can sue each partner separately
▪ Plaintiff can recover entire amount from all liable
partners
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Liability of General Partners (2 of 3)
• Contract liability
– Unlimited personal liability for contracts of partnership
– Joint liability: For contracts and debts of partnership
▪ Plaintiff must name all partners as defendants in a
lawsuit
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Liability of General Partners (3 of 3)
• Liability of incoming partners: Liable to debts and
obligations only to extent of capital contribution
• Liability of outgoing partners
– Liable for debts and obligations incurred at time of
dissolution
– Not liable for new debts and obligations incurred after
dissolution
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of General Partnership (1 of 5)
• Change in the relation of partners caused by any partner
ceasing to be associated with the business
• Partnership for a term: Partnership created for a fixed
duration
• Partnership at will: Partnership created with no fixed
duration
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of General Partnership (2 of 5)
• Winding up: Liquidation of partnership assets
– Distributing the proceeds to satisfy claims against the
partnership
• Wrongful dissolution: Partner withdraws from partnership
prior to the expiration of the term
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of General Partnership (3 of 5)
• Notice of dissolution: Third parties, who have:
– Dealt with the partnership, must be given actual notice
of dissolution
– Not dealt with the partnership but have knowledge of it,
must be given actual or constructive notice
– No knowledge of the partnership, do not have to be
given notice
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of General Partnership (4 of 5)
• Distribution of assets:
– After dissolution of partnership, debts are satisfied in
the following order:
▪ Creditors (except creditor-partners)
▪ Creditor-partners
▪ Capital contributions
▪ Profits
• If partnership cannot satisfy claims, partners are personally
liable
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of General Partnership (5 of 5)
• Continuation of a General Partnership After Dissolution
– Partners have a right to continue after partnership
dissolution
– Continuation agreement expressly sets forth details about
continuation
• Right of survivorship:
– A rule that provides that, on the death of a general partner,
the deceased partner’s right in specific partnership property
vests in the remaining partner(s); and
– The value of the deceased general partner’s interest in the
partnership passes to her beneficiaries or heirs
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Copyright
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Business Law
Tenth Edition
Chapter 35
Limited Partnerships and
Special Partnerships
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Learning Objectives
35.1 Define limited partnership.
35.2 Identify and describe the liability of general and limited
partners of a limited partnership.
35.3 Describe how a limited partnership is managed.
35.4 Define a limited liability limited partnership.
35.5 Describe the process of dissolution and winding up of
a limited partnership.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Limited Partnership (1 of 2)
• Two types of partners:
– General partners: Invest capital, manage the
business, and are personally liable for partnership
debts
– Limited partners: Invest capital, but do not participate
in management
▪ Personally liable for partnership debts beyond their
capital contributions
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Limited Partnership (2 of 2)
• At least one general partner and one limited partner
• No restrictions on maximum number of general or limited
partners
• Any person may be a general or limited partner, or could
be both
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Exhibit 35.1: Limited Partnership
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Revised Uniform Limited Partnership Act
(RULPA)
• Modern, comprehensive law for the formation, operation,
and dissolution of limited partnerships
• Supersedes the Uniform Limited Partnership Act (ULPA)
• Provides basic foundation for limited partnership law
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Certificate of Limited Partnership
• Document executed and signed by two or more persons
that makes a limited partnership legal and binding
• Contents of the certificate under RULPA:
– Name and business address of each general and
limited partner
– Name, character, and place of business
– Name and address of registered agent
– Latest date partnership is to dissolve
– Amount of cash, property, or services contributed by
each partner and any contributions to be made in the
future
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Foreign Limited Partnership
• Limited partnership in all other states besides the one in
which it was formed
• Law of the state governs its organization, internal affairs,
and partners’ liabilities
• For business transactions, a certificate of registration is
required
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Name of Limited Partnership
• Name may not include surname of limited partner unless:
– It is also surname of general partner
– Business was carried on under that name before
admission of limited partner
• Other restrictions:
– Should not be the name of other corporations
– States can designate words that cannot be used in
limited partnership names
– Name must contain the words, “limited partnership”
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Capital Contributions
• Contribution may be in cash, property, services rendered,
or promissory notes or other obligations to contribute cash,
property, or to perform services
• Partner or creditor may bring lawsuit to enforce promise to
make contribution
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Defective Formation
• Occurs when:
– Certificate not properly filed
– Defects in certificate that is filed
– Other statutory requirement for creation of limited
partnership is not met
• In case of such defects, limited partners may be liable as
general partners
– Can escape liability by filing certificate of amendment
or certificate of withdrawal
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Limited Partnership Agreement
• Document that sets forth the rights and duties of general
and limited partners
• Includes terms and conditions regarding operation,
termination, and dissolution of partnership
• Good idea to establish voting rights
– Specify which types of transactions must be approved
by which partners (i.e. general, limited, or both)
– General and limited partners may be given unequal
voting rights
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Share of Profits and Losses
• Agreement may specify how profits and losses are to be
allocated among the general and limited partners
• If not specified, RULPA provides that profits and losses are
shared on the basis of value of the partner’s capital
contribution
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Right to Information
• Each limited partner has right to obtain full information
regarding state of business, finances, etc.
• Partnership must keep the following records:
– Certificate and all amendments
– Full names and addresses of each partner
– Written limited partnership agreements
– All income tax returns
– Three years of financial statements
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Admission of a New Partner
• New limited partner can be added only upon the written
consent of all partners
– Agreement can provide otherwise
• New general partner can be admitted only upon written
consent of each partner
– Agreement cannot vary this requirement
• Admission effective after amendment is filed
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Master Limited Partnership
• Limited partnership interests are traded on organized
securities exchanges
• An investment in an MLP is liquid as it can be sold on the
stock exchange
• Pay their investors quarterly; required distributions at an
amount stated in the investment contract
– Tax benefits
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Liability of General and Limited Partners
• General partners have unlimited liability for debts and
obligations of the partnership
• Limited partners are liable only up to their capital
contributions
• Creditor may enforce personal guarantee and recover
payment from limited partner who guaranteed repayment
of loan
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Participation in Management
• General partners have management rights
• Limited partners give up these rights in exchange for
limited liability
– Liable as general partner if participation is substantially
the same
– Only liable to persons who reasonably believe them to
be general partners
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Permissible Activities of Limited Partners
• Being an agent, employee, or contractor of the partnership
• Acting as surety for the partnership
• Being a consultant or advisor to a general partner
regarding the limited partnership
• Approving or disapproving an amendment to the
partnership agreement
• Voting on other partnership matters, including dissolution,
removal of general partner, etc.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Summary: Liability of Limited Partners
General Rule
Limited partners are not individually liable for the
obligations or conduct of the partnership beyond the
amount of their capital contribution
Exceptions to the
General Rule
Limited partners are individually liable for the debt,
obligations, and tortious acts of the partnership in
three situations:
1. Defective Formation
2. Participation in Management
3. Personal Guarantee
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Limited Liability Limited Partnership
(LLLP)
• Organized under state law by filing articles of LLLP with
the secretary of state’s office
• Must have at least one general partner and one limited
partner
• General partners are not personally responsible for debts
of the LLLP
• General partners have management responsibility of the
LLLP
– Permits limited partners to participate in the
management without losing their limited liability shield
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Dissolution of a Limited Partnership
• Certificate of cancellation must be filed upon dissolution of
limited partnership
• Causes of dissolution:
– End of life of limited partnership
– Written consent of general and limited partners
– Withdrawal of general partner
– Entry of decree of judicial dissolution
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Exhibit 35.2: Limited Liability Limited
Partnership (LLLP)
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Winding Up of a Limited Partnership
• Partnership must wind up its affairs upon dissolution
• Affairs may be wound up by general or limited partners
• Partner may petition the court to wind up the affairs
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Distribution of Assets
• Proceeds must be distributed after the assets of the limited
partnership have been liquidated
• Order of distribution of partnership assets:
– Creditors of the limited partnership
– Partners with respect to
▪ Unpaid distributions
▪ Capital contributions
▪ The remainder of the proceeds
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Copyright
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Business Law
Tenth Edition
Chapter 36
Corporate Formation and
Financing
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Learning Objectives
36.1 Define corporation and list the major characteristics of a
corporation.
36.2 List and describe the classifications of corporations.
36.3 Describe the process of incorporating and forming a
corporation.
36.4 Describe the powers that a corporation possesses.
36.5 Describe how a corporation is financed by equity
securities and define common stock and preferred stock.
36.6 Describe how a corporation is financed by debt
securities.
36.7 Describe how a corporation is dissolved and terminated.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.
Introduction (1 of 2)
• Corporation: Fictitious legal entity that is c …
Purchase answer to see full
attachment