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BLAW EXAM 4/108 EXAM QUESTIONS AND ANSWERS
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BLAW EXAM 4/108 EXAM QUESTIONS AND ANSWERS
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BLAW EXAM 4/108 EXAM QUESTIONSAND ANSWERS
When choosing a business entity, entrepreneurs should consider: - - Ease of
creation
Owner's liability
Tax considerations
Need for Capital
- has sole proprietorship - - anyone who does business without creating a
separate business organization has a sole proprietorship
- major disadvantage of owning - - personally liable for all losses or
liabilities incurred by the business
- formation - - done by an individual
may have a fictitious name
no formal requirements for formation
may have to publish d/b/s name
- Sources of funding - - loans, government help
- tax consequences - - owner claims all income and losses, no separate
filing requirement
- management and control - - all assets with one person
- transferability of interest - - business can be sold- property, inventory and
goodwill, owner will usually sign a non-compete agreement
- advantages of sole proprietorship - - owner is in complete control and
receives all profits, flexibility, ease of creation, maintenance
- Disadvantages of Sole Proprietorship - - unlimited liability, lack of
continuity after death , difficulty to raise financing
- partnership - - an association of two or more persons to carry on as co-
owners, a business for profit
Can include corporations and natural persons
- Uniform partnership act - - act ordering common ownership interests,
profit and loss sharing, and shared management responsibilities in a
partnership
, - involuntary partnership formation - - sharing of profits, constitutes prime
facie evidence that a partnership exists.
- Partnership funding - - capital contributions of partners, loans by partners,
outside loans
- Agency Concepts and Partnership Law - - Partnerships are governed both
by common law and by statutory laws.
-Each partner is deemed to be an agent and fiduciary of the other.
-There may be imputation of liability.
- LLC - - a hybrid entity that combines the limited liability of a corporation
and the tax advantages of a partnership
- LLC's are creature of state law - - owners are called "members" not share
holders
ownership is called an "interest" not shares
- formation of an LLC - - requires filing articles of organization with central
state authority
Name of business
Principal Address
Name and Address of registered agent
Names of the Owners
- limited liability - - members stand to lose capital contributions, but their
personal assets are not subject to attachment
- tax consequence - - income passes through to members
LLC does not pay taxes
- advantages of LLC - - limited liability
flexibility in taxation
management and foreign investors: can be member-owners of an LLC
- disadvantage of the LLC - - lack of uniformity with state laws
- LLC Operating Agreement - - Members decide how to operate the
business. Operating agreements may contain provisions concerning
management, including the selection and removal of managers, the division
of profits (unless otherwise agreed, profits will be distributed equally), the
transfer of membership interests, whether the death or departure of a
member will trigger dissociation or dissolution (or both), formal members
meetings, the apportionment of voting rights.
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