BA Outline
I. Introduction
a. What is the study of business organizations?
i. A study of how people engage in business and how the law facilitates and regulates the operation of the business.
b. Closely held business organization
i. Business whose ownership interests are not publicly traded on an established market.
ii. A closely held business usually has a smaller number of owners who tend to take a more active role in the management and operation of the business.
iii. Agency
1. Sole Proprietorship
a. Definition
i. Business owned by a single individual that is not operated as a corporation or other special legal form.
b. The major advantage of this is that it is easy to establish – the proprietor simply begins to conduct business.
c. The major disadvantage is that the owner has unlimited personal liability for the obligations of the business.
c. Introduction to Business Structures
i. Partnerships
1. General Partnership
a. Definition
i. An association of two or more persons to carry on, as co-owners, a business for profit.
b. Can be created informally.
c. All of the partners in a general partnership have the right to participate in the management of the business.
d. Characterized by structural flexibility, restricted transferability of ownership interests, and passage through taxation.
e. Primary disadvantage is that the law imposes unlimited personal liability on partners for the obligations of the partnership.
2. Uniform Rules
a. Revised Uniform Partnership Act
i. 35 states and DC have adopted some version of this act.
b. Choice of Law
i. General choice of law principles suggests that a court will apply the law of the state with the most significant relationship to the partnership and transaction at issue.
ii. RUPA §106(a) provides that the law of the state in which the partnership has its chief executive office governs internal partnership affairs.
1. Waivable provision
ii. Corporations
1. Definition
a. A corporation is viewed as a separate legal entity whose identity is distinct from that of its owners (known as “shareholders”).
b. A corporation formed by filing an organizational document within the state.
c. Shareholders have no right to participate in the management of the business (except things like mergers).
d. The most important advantage of a corporation is that it provides its shareholders with limited liability for the obligations of the business.
e. Taxes
i. The income of a corporation is taxed twice – once at the corporation level and a second time at the shareholder level.
ii. Also subject to state franchise taxes – taxes imposed for the privilege of organizing a business in a state.
2. Choosing a State
a. The internal affairs of a corporation are normally governed by the jurisdiction of incorporation.
b. Wh
ii. The purpose of a business trust is to carry on a business for profit.
iii. Often referred to as a “Massachusetts trust” and often defined as…
1. A form of business organization consisting essentially of an arrangement whereby property is conveyed to trustees, in accordance with the terms of an instrument of trust, to be held and managed for the benefit of such persons as may from time to time be the holders of transferable certificates issued by the trustees showing the shares into which the beneficial interest in the property is divided.
iv. Trust instrument includes:
1. A designation of the trustees and a specification of their powers and duties;
2. Provisions establishing how successor trustees are appointed;
3. A description of the trust property and the business to be operated;
4. An authorization of shares of beneficial interest and provisions addressing their transferability; and
5. The rights of beneficial interest holders.
v. Similar in many ways to a corporation.
d. Joint Stock Company
i. An unincorporated business organization with ownership interests represented by shares of stock.
Major Features:
