Business Organizations I Outline
Introduction to Business Organizations pp. 1-24
There are four business entities:
Partnerships (general and limited)
Limited Liability Companies (LLC)
Corporate Statute: statute that has the least amount of flexibility, in terms of how you decide to operate and work.
Limited Liability Company Statute: statute that has the greatest amount of freedom.
General Partnership Statute: statute that requires the least amount on your part and has default terms, in other words if you don’t write your own agreement, the statute provides it.
Introduction to Business Forms:
1. General Partnership:
A partnership is sometimes called a general partnership so as to distinguish from a limited partnership
A partnership is voluntary agreement entered into by two or more parties to engage in business and to share any attendant profits or losses
A joint venture is undertaken based on an express or implied agreement between the members, common purpose and interest, and an equal power of control
A general partnership is a voluntary agreement entered into by two or more parties to engage in business whereby each of the parties is to share in any profits and losses there from equally and each to participate equally in the management of the enterprise
There is no need for a written agreement and no public filing of any document (other than any name certificate). A handshake is sufficient.
Under the statute, a partner may dissolve a partnership at any time.
Every partner is jointly and severally liable for all the responsibilities (claims against the enterprise) of the business. All tax responsibilities flow through to the partners.
partners are jointly and severally liable, model is egalitarian and participatory, that everyone will be working in the business and they have a say, under the partnership statute, adopted in 1914 in NYS, Model Partnership is a business where every partner makes equal contributions and share equally in the osses.
Everyone has the right to participate and control. If you don’t say how you share the profits and losses, you share the profis equally.
You can contract out of it, you can have your own partnership agreement, deciding that since one person is making a more valuable contribution then they should get more of the profits, if you don’t decide then you will revert back to the basics of the statute.
If you agreed how you will share the profits 60-40 then you will share the losses in the same way, 60-40. Some people don’t even know that they’ve created a partnership, but all they have to do is agree in sharing the profits.
You don’t have to do anything to form a partnership, don’t need to write an agreement. The Partnership Statute will be your agreement.
There are two rules: either have unanimity to make decisions or majority rule, but there’s no formal provisions on how often you have to meet…etc.
An oral agreement to share profits may be sufficient to establish the existence of a general partnership even though initial financial contributions are unequal. A general partnership is also fragile, a partner may dissolve it at any time simply by a statement of his or her express will. A partner can leave the partnership at any time (dissociation). P. 9
Unlike general or limited partnerships, a corporation provi
have to make sure you have this, otherwise you’ll be in big trouble mister!! Even if it is a closely held corporation, still have to do this.
The individual can elect to be a closely held corporation. It is sometimes an incorporated partnership, when there are only a few people who hold the stock and are involved in the operation of the business. If you have tiers, you just do one. You then form a close corporation, this means that under the statutes you have elected to identify yourself as a corporation where the shareholders will manage the corporation.
Another distinction for liability, if one of your employees runs over someone, the person suing cannot come after you (owner) personally, they will go after the assets of the corporation.
Statute governs large part of the law in terms of what the relationship is between the parties and third parties. There is also substantial amount of law in business law that is common law that we need to learn.
Piercing the Corporate Veil, this is what we talk about when we speak of common law. This is what judges do when they allow you to recover against shareholders. This permits creditors of closely held corporations in limited circumstances to recover directly from directors, officers, or shareholders.
Many concepts of fiduciary duty have a common law gloss to it. Jurisprudence fiduciary duty governs it.