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Business Organizations
University of Connecticut School of Law
Oquendo, Angel R.

Business Organizations Outline
9. Introduction
a. Nature of partnerships
i. “general” – any association of two or more people who carry on a business as co-owners. Any partnership is a general one unless the special requirements for limited partnerships are complied with
ii. “Limited” – can be created only where: 1) There is a written agreement among the partners; and 2) A formal document is filed with state officials
a. Limited partners have two types of partners: 1) one or more “general” partners who are each liable for all debts to the partnership; and 2) one or more limited partners who are not liable for the debts of the partnership beyond the amount they have contributed
b. Limited Liability
i. Corporation – a shareholder’s liability is normally limited to the amount he has invested
ii. Partnership – depends on whether partnership is “limited” or “general”
a. General – all partners are individually liable for the obligations of the partnership
b. Limited – general partners are personally liable but the limited partners are liable only up to the amount of their capital contribution (But a limited partner will lose this limit if he actively participates in the management of the partnership
c. Limited Liability Partnership (LLP) – each partner may participate fully in the business’ affair s without becoming liable for the entity’s debts
c. Management
i. Corporation: centralized management: shareholders only elect the board of directors; the board of directors supervises the corporation’s affairs, with day-to-day control resting with “officers”
ii. Partnership: management is not centralized
a. General – all partners have an equal voice
b. Limited – all general partners have an equal voice unless they agree otherwise, but the limited partners may not participate in management
d. Perpetuity
i. Corporation has perpetual existence
ii. A general partnership is dissolved by death of a general partner
iii. A limited partnership is dissolved by the withdrawal or death of a general parent, but not a limited partner
e. Transferability
i. Corporation – readily transferable (shareholder can just sell stock)
ii. Partnership – interest is not readily transferable; all partners must consent to the admission of a new partner
f. Taxation
i. Corporation – corporation is taxed as a separate entity, leading to “double taxation” (first at corporate level, then shareholder level)

all dividend
b. Ps wanted an injunction from the court saying – stop this nonsense with the expansion plan; second, you have to give these investors a certain percentage of their investment back as dividends
c. Decision by trial court – Ps got an order from the court to stop expansion and that a dividend be declared
d. On appeal: court said that a dividend had to be declared; court does not endorse order to stop the expansion plan
e. Court is getting involved and telling Ford how to run his business – very unusual
a. Business judgment rule – courts usually defer to the business for making its own decisions
b. That’s why court here says that they are not telling the business what to do – they’re just saying that Ford has gone too far; court wants to present it as a decision that is not interfering with his business judgment
You can make long-term investments that don’t directly benefit the shareholders but you can’t go too far – like not declaring the dividend here