Business Associations/Corporations Outline

Corporations: Cohn
 
 
08/27
 
Chapter 1: Development Of Business Law
 
Earliest corporations created for church purposes. To give continuity to ownership of church property.
Two types
–          Public
–          Close
–          Middle: many shareholders, not involved in management
99.5% of all corporations have fewer than 10 shareholders. 100% overlap between shareholders and management
Enabling statute: one statute for incorporation, which allows corporation to structure it to fit its needs.
Almost all corporate law governed by state law
Model Business Corporation Act: Florida has adopted a version of this
 
Chapter 2: Business Forms
 
Handout 1, p. 1
Potential conflicts: management, distributions
The attraction of corporation is limited liability, but here, they will probably not get money or supplies as a corporation. They will probably have to personally guarantee the loans. Get insurance for tort liability.
How will the additional money be raised? Bank loan, equity investors (what will the form be?)
–          Will probably have to find several investors. Structure is becoming more complicated.
What is your other income. Who is investing what. Projections. How are they going to be distributed.
 
Pass-through taxation: company doesn’t pay taxes, partners pay taxes on their share of the profits at their rate. Still file income tax forms reporting income, just don’t pay anything
 
Form
Requires Registration
Limited Liability
Corporate Structure / Capital Structure
Taxation
General Partnership
No
No
Partnership agree
Pass-through
Limited Liability Partnership
Not a form, it allows general partnership to elect ltd liability status. 
Must register annually
Yes
Yes
 
 
Limited Partnership
Yes
No for General. 
Yes for Limited
Partnership agreement
Pass-through
Limited Liability Ltd Partnership
Not a form, allows l. partnership to elect limited liability status. 
Must register annually
Yes
Yes for both
 
 
Limited Liability Company
Yes
Yes
Default provisions, few mandatory
Allows corporate capital structure
Default is pass-through, but can “check box” and elect corporate taxation
Corporation
Yes
Yes
Default provisions which can be drafted around
Corporate
S Corporation
Yes
Yes
Default provisions which   can be drafted around
Pass-through
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General Partnerships, SS p. 203
Common law creation, codified in 1914 Uniform Partnership Act (UPA), 1996 RUPA (Revised UPA). 
–          Made some noteworthy changes
–          Adopted entity theory (i.e. previously a change in partners dissolved partnership, problems with property ownership, etc.). Now can be ongoing, like corporation.
–          See others p203
Partnership agreement controls nearly all relations among partners, in absence of provision, default governs. Some things cannot be changed, e.g. fiduciary duties
Common characteristics
–          Fully participatory management structure
–          Everyone equal for votes, distribution, responsibility (any can enter into contracts), regardless of money put in
–          Admission of new partners requires unanimous vote
–          A partner’s conveyance of interest to another requires approval
–          Personal liability
–          Pass-through taxation
Joint venture: similar to partnership. Usually created to complete a specific project rather than an ongoing enterprise.
 
Formation
Only type of formation that doesn’t have to go through the state
Expressly or by operation of law
Partnership agreements setting out issues like management and voting are a good idea
 
Limited Liability Partnership LLP, SS p. 203-204, 231
Contained within RUPA
Have to register with state for this yearly.
LLP is not a form of enterprise; it is a general partnership or limited partnership electing limited liability status.
8306(3) provides partners in LLP are not personally liable in contract or tort when acting as a partner.
–          When would a partner be liable? When not acti