BUS. ORGS. OUTLINE (2010)
A. Sole Proprietorship:
i. This is the DEFAULT category for one owner
ii. The individual and the business are one and the same for tax and liability purposes.
1. All of your business information goes on your personal tax filing.
iii. Legal claimants can pursue all assets of the owner, not simply the assets of the business.
1. This is one natural person operating a business.
2. Owner has unlimited liability
iv. A Sole Proprietor may request a “Doing Business As.”
1. This just changes your name and not your tax or liability.
v. Example: You sell tomatoes. Someone slips in your parking lot. They sue you and take your house, car and the shirt off your back.
B. Corporation:
i. A corporation’s owners are generally protected from personal liability.
ii. A corporation must pay taxes on its income just like a real person. The corporation’s owners also have to pay a tax on the earnings that is distributes to them as dividends.
1. Public Offerings mostly require the form of corporations.
C. Partnership:
i. These are default business entities that consist of 2 or more parties.
ii. TREATED LIKE A SOLE PROPRIETORSHIP FOR TAX AND LIABILITY ISSUES.
iii. For liability purposes: Each party is jointly and severally liable.
D. Limited Partnership:
i. These are a hybrid form of organization.
ii. A limited partnership has both general and limited partners.
1. Limited Partner: These have no voice in management and is legally liable only for the amount
2. of capital contribution plus any other debt specifically accepted.
a. These sort of look like a shareholder in a corporation.
3. General Partner: These assume management responsibility and unlimited liability for the business.
E. Limited Liability Corporation (LLC):
i. The owners of an LLC are not individually liable for the company’s debts.
ii. The LLC is not a tax-paying entity.
iii. Taxes are paid only once, by the owners when the company’s earnings are distributed to them.
1. Venture Capitalists Don’t like to invest in LLC’s.
F. S Corporation:
i. (This is an Accounting and Tax Designation)
ii. ELEMENTS:
1. (1) each owner will have an “equal say” in all business decisions
2. (2) the owners will n
the acts of the agent.
b. Agency is a result of conduct, and not of the words used.
2. The agent owes duties – fiduciary duties of loyalty and due care- to the principal in discharging the act. If they breach these duties they are liable for the damages that flow from that breach of duty.
3. There must be some manifestation of consent on the part of the principal.
4. There must be consent by the agent so to act. This doesn’t have to be a written agreement, it may be a manifestation such as acquiescence. IT DOES NOT MATTER WHAT YOU CALL IT. “The Duck rule says: If it looks like a duck and acts like a duck, it is a duck.”
a. 2 & 3 together give you (MUTUAL ASSENT)
3.)Binding the Agent & the Principal: Have to look to the authority
– KEEP IN MIND THAT SOMETIMES THE AGENT IS BOUND UP BY THE CONTRACT THAT THEY ARE TRYING TO BIND THE PRINCIPAl INTO.
– This depends on whether the Principle was disclosed.
o Did the 3rd party know of the authority of the agent?
o Was the 3rd party aware that the agent was purchasing something FOR the Principal?
– THE AGENT CANNOT CREATE HIS OWN AUTHORITY TO BIND THE PRINCIPAl.
COMPETITION BY AGENTS:
– Officers are agents and cannot be disloyal or engage in self-dealing to the company!!!!!!) BUT, if the agent gets approval, then they will not be liable!!!!!!
