CorpOutline-Haas - CHOICE OF ENTITY: 1. Structure of power...

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CHOICE OF ENTITY: 1. Structure of power 2. Fiduciary duties a. Duty of Care – standard for business decisions. b. Duty of Loyalty – putting the corporation and shareholders ahead of your own financial interests. c. Duty of stockholders – majority stockholders own a fiduciary duty 3. Voting Factors in deciding choice of entity: 1. Liability 2. Control/Management 3. Transferability 4. Continuity of Existence 5. Taxation 6. Raising Additional Capital SP: Person or business, working alone but can hire employees. Do not have to file w/government, except d/b/a on county level 1. Liability : unlimited personal liability. 2. Control : management: solely by owner. 3. Transferability : business can be sold as an asset deal. Everything goes. 4. Continuity of existence : until the earliest of selling the business, terminating the business, filing for personal bankruptcy, dying. 5. Taxation : owner directly taxed. 6. Raising Additional Capital : cannot sell ownership stake to raise capital but can secure a loan. GP: statutory laws governing. Mandatory provisions [ 103(b) RUPA ]. An association of 2 or more persons to carry on as co-owners a business for profit. Subjective intent to form partnership not required. No written agreement required; implied agreement enough. 1. Liability : each partner jointly and severably liable, regardless of which partner is at fault. EXCEPTION: [ UPA 17 ] -> new partners only liable for extent of investment. J&S liability remains with managerial interest. a. Limiting liability: insurance, limiting through K, [ RUPA 303 ] limiting apparent or actual authority of partner to bind partnership. 2. Control : [ UPA 18(e), RUPA 401(f) ]: all partners have equal rights unless partnership agreement says otherwise. 3. Transferability : [ RUPA 503 ]: transfer only entitles the transferee to financial aspects of the partnership, not decision making power. Default rule : only if all other partners agree to make you a full fledged partner, do you receive the managerial interests in the partnership. 4. Continuity of existence : until the earliest of death of partner, completion of project, drop dead date. a. [ UPA 29 ] If no partnership agreement, then UPA and RUPA refer to events which dissolve partnership. Dissolution automatically triggered upon an event. 1
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Partnership not terminated, but relationship between partners changes. Partners must agree to new partnership. 5. Taxation : no entity level tax as GPs are flow-through tax entities. 6. Raising Additional Capital : partnership can borrow money or additional partners can make a capital contribution. 7. Proving a partnership: a. Right to a voice in management. b. Division of profits. c. Look at the agreements/relationship to one another. d.
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This note was uploaded on 04/17/2008 for the course LAW ? taught by Professor Harmon during the Spring '08 term at Touro NY.

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CorpOutline-Haas - CHOICE OF ENTITY: 1. Structure of power...

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