Introduction
Introduction – PP 1-6
· What is a business association?
o How people conduct business
o A study of how people engage in business and more importantly how the law facilitates and regulates the operation of such business
· What is closely held?
o It is a business whose ownership interests are not publicly traded on an established market
§ Not publicly traded on an established market
§ Usually only a few owners
§ Stock is the ownership interest
o Most common type of business are closely held:
o Harder to trade and lack of marketability
o Owner expectations are different
o Closely held, small businesses are the major driving force in our economy (less than 50 million dollars – 99% of business, 60-40% net new jobs, 14 times more patents, etc.)
o Types are:
§ Sole Proprietorship
ú Owned by a single individual
ú Easy to establish
ú Unlimited personal liability for the obligations of the business
§ General Partnerships
ú An association of two or more persons to carry on as co-owners a business for profit
ú Does not require filing
ú Regardless of intent to carry on as a partnership
ú Both have right to participate in management
ú Structural flexibility
ú Unlimited personal Liability
§ Close Corporation
ú Viewed as a separate legal entity whose identity is distinct from that of its owners (SHs)
ú Formed by filing with the state
ú SHs have no right to participate in the management
ú Exit rights are restricted
ú No established market for the company’s ownership interest
ú Provides SHs with limited liability
ú Double taxation
§ Limited Partn
s
§ Limited Liability Partnership
ú General partnership that depending upon the relevant statute, provides the partners with limited liability for the partners tort obligation or for both its tort and K obligations
ú Filing with state is required
§ Limited Liability Corporation
ú Business org. formed upon a required state filing that adopts many of the best features of the corporation and partnership forms
ú A legal entity that is separate and distinct form its owners
ú Can be structured to provide mgmt rights to member or to designated group of managers
ú Limited liability to the member for all of the ventures obligation
ú Exit rights tend to be restricted like a corp.
ú Characterized by structural flexibility, restricted transferability of ownership interests and pass through taxation
ú Most states avoid a franchise fee
§ Limited Liability Limited Partnership
ú A limited partnership provides LLP like limited liability protection to some or all of the partners
ú Filing a document with the state is required
§ Professional Corporation & Professional Association
ú Allow professionals (lawyers, accts, docs) to practice corporate like form
§ Business Trust
ú Org that derives from the conventional common law trust
§ Joint Stock Company & Limited Partnership Association
ú Fallen into disuse
ú Serve as precursors to the modern closely held business orgs prevalent today
