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LEGL 2700 Final Exam UGA (Hackleman)/679 Q’S AND A’S
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- LEGL 2700 Final Exam UGA /679 Q’S AND A
LEGL 2700 Final Exam UGA (Hackleman)/679 Q’S AND A’S
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LEGL 2700 Final Exam UGA(Hackleman)/679 Q’S AND A’S
Closely Held Organizations - -small group of people (like family owned)
-Publicly Held Organization - -A corporation that may have thousands of
stockholders and whose stock is regularly traded on a national securities
exchange.
-basic forms of business organizations - -1. Sole Proprietorship
2. Partnership
3. Corporation
-hybrid forms of business organizations - --limited partnerships
-s corporations
-limited liability companies
-limited liability partnerships
-factors to consider when picking a business' organization form - -1) cost of
creation (time, paperwork, money)
2) continuity of the organization (stability/ durability of business and impact
of disillusion)
3) managerial control of decision (who manages the business)
4) owner liability (how personally liable is the owner of the business)
5) taxation (single/ double taxed)
-Sole Proprietorship - --business owned and operated by one person
-least expensive business organization
-continuity is tied directly to will of owner
-owner is in total control of the business' goals & operations
-no formal documentation necessary
-owner has unlimited liability for the obligations of the business organization
-not taxed as an organization (person is taxed)
-ownership (legal entity of sole proprietorship) can't be transferred
-Example of sole proprietor - -writer, painter, vendor at farmers market
-partnerships - --agreement between 2 or more persons to share a common
interest in a commercial endeavor
-cost to form is minimal
-strongly recommended to get a legal partnership agreement
-state assumed name statute is necessary if names aren't included in
company name
,-may need to dissolve partnership before adding a new person unless you
have the buy out clause
-unlimited liability (jointly and unseverably liable)
-not a taxable organization
-3 types of partnerships - -1. General
2. Limited
3. Limited Liability
-partnership examples - --2 doctors, general partners in same practice, case
brought against 1 doctor for negligence, both liable
-father and son both grow potatoes, own their own equipment/ land, once
harvested they advertise together with both names, a loss arises, both liable
-corporations - --artificial and intangible entity created under the authority
of a state's law
-more expensive to form than sole prop/ partnership
-have their own personal taxation rate
-types of corporations - --domestic (located in original state it was formed
in)
-foreign (located in a state outside of it's originated state)
-alien (relocated from a different country)
-articles of incorporation - -a written legal document that defines ownership
and operating procedures and conditions for the business
-includes business name, purpose of business, intended timespan,
information about initial owners, etc.
-Deleware - --tons of corporations started here
-Delaware court of chancery (most prestigious business court in America)
-stable legal system
-Tamika R. Montgomery-Reeves - --from UGA
-first African American and second woman to serve on Delaware Chancery
-first African American on Delaware Supreme Court
-fiduciary duty - -A legal obligation of one party to act in the best interest of
another.
-proxy - -Agent, substitute, person authorized to act on behalf of another
-corporate managerial control flow chart - -Shareholders -> board of
directors -> officers -> employees
-board of directors are elected
-officers and employees are hired
, -derivative suit - -a minority shareholder who believes a majority
shareholder has acted in his/ her personal interest to the detriment of the
corporation may bring a derivative suit against the majority shareholder on
behalf of the company
-is limited personal liability guaranteed? - -NO!
-piercing the corporate veil - -An action in which a court disregards the
corporate entity and holds the shareholders personally liable for corporate
debts and obligations.
-Alli v. US (2008) - --formed B.S.A Corp., they bought apartments, went into
agreement with Hud, Hud stopped paying housing assistance (written in
contract), Alli sues
-court found that B.S.A breached contract and awarded damages to Hud
-court allows piercing of the corporate veil... now Alli's are held personally
liable
-double taxation - -a corporation pays income taxes on its earnings, and
when dividends are distributed to stockholders, the stockholders pay taxes a
second time on the corporate dividends they receive
-501(c)(3) organization - --nonprofit corporation exempt from federal
income tax
-when a company donates to one of these they can deduct their contribution
from their taces
-limited partnership - --A partnership with one or more general partners and
one or more limited partners
-includes all attributes of a partnership
-continuity is the same as usual with general partners; with limited
partnership you don't have to dissolve with adding/ removing people
-general partners are in control; limited partners need to stay silent
-general partners have total liability; limited partners are liable
-Limited vs. General Partnership - -limited: not responsible for debts of the
business organization
general: personally liable for the organization's debts
-S corporations - -• Shareholders of certain corporations unanimously elect
to have the organization treated like a partnership for income tax purposes
• Has all legal features of a corporation
• Shareholders have to account on their individual income tax returns for
shares of profits or losses
• Shareholders avoid having a tax assessed on the corporate income
, • Cannot have more than 100 shareholders
-qualifications to be an S corporation - --must be a domestic corporation
-shareholders must be individuals
-cannot have more than 1 class of stock
-can't be an ineligible corporation
-can't have more than 100 shareholders
-limited liability company - --A business organization in which the business
(not the owner) is liable for the company's debts
-treated as nontaxable entities
-NOT a corporation
-owners have more flexibility compared to an S corporation
-limited liability partnership - --All partners are limited partners and not
responsible for the debts and other liabilities of other partners
-variation of LLC
-have characteristics of both a partnership and a corporation
-professionals like these
-operating the organization through agents - --principal (employer)
-agent (employee)
-3rd party
-individual contractor
*all employees are agents, but not all agents are employees
-types of authority - --actual
-implied
-apparent
-actual authority - -is the express and implied powers of an agent.
-implied authority - -an agent's authority to do things not specifically
authorized in order to carry out express authority
-apparent authority - -The appearance or the assumption of authority based
on the actions, words, or deeds of the principal or because of circumstances
the principal created.
-authority example - -actual: giving an agent actual authority/ power in the
company to order 100 shirts
implied: agent you gave power to buys product for company
apparent: agent is fired so she buys 100 of the worst shirts possible because
she's mad at the company, the company is still liable for the purchase
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