LAW
JS-BizOrg Outline

JS-BizOrg Outline - Business Organizations Joe Scroppo Prof...

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Business Organizations Joe Scroppo Prof. Baynes, Fall 2003 Sole proprietorship Unlimited liability--own personal assets are vulnerable Sole proprietorship and general partnership are default business structures (forms) that can exist without any active effort on the parties' part. Taxes: the sole proprietor is taxed only once Partnerships Two or more persons operating a business for profit Liability is still unlimited (for a general partnership) but spread around more Taxes flow through to the individual partners--the partnership (the partners) is taxed only once Corporations 1. A separate entity 2. Limited liability--shareholders' personal assets are protected in any claim against the corporation. The shareholder's investment (the corporation's assets) is the only assets at risk 3. Shareholders are the owners 4. Shareholders vote in a board of directors , who manage the overall policy of the corporation 5. Board of directors vote in officers who discharge the daily corp. duties through employees 6. Corporations are taxed twice. First, the profits are taxed. Then, in a corporation, some or all of the profits can be distributed to the stockholders in the form of dividends. These dividends are treated as income to the stockholders at a personal level, and it is taxed again. The counterview is that, in a corporation, there are two separate entities involved (corporation and individual shareholder). If there are 35 or less shareholders (Sub Chapter S?), the corporation can have the profit flow through to the individual shareholders. Note that 35 or fewer shareholders is very similar to a big partnership (so, allowing flow-through is consistent here). Note : a corporation is not a default business structure: there must be filing of articles of incorporation with the secretary of the individual state. A corporation has a citizenship based on where it is incorporated. The corporation must have a unique name, and the name must convey the business structure used via use of "Inc.," "Corp.," or "Limited." This indicates to those dealing with the corporation the limited-liability nature of whom they are dealing with. AGENCY Definition of Agency: 1) person acting on behalf of another person, with the 2) mutual consent of the persons (consent may be to some actions and not to others). The capacity to terminate the relationship at will is often cited as a key fact in identifying a principal-agent relationship The employer-employee relationship is an example of a principal-agent relationship General Points about Agency Advantage of agency is to get more done. Principal is the one who is using the agent, and the agent works on behalf of the principal. Why should the principal be vulnerable to suit? Because the principal derives the benefit of the agent's actions, and the agent is standing "in the shoes" (acting for) the principal--so, the principal is ultimately responsible for the agent's action.
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  • Fall '03
  • Baynes
  • Corporation, Shareholders, fiduciary duty, Joe Scroppo

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