Law 122 Final Notes .docx - REVIEW SESSION Business...

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REVIEW SESSIONBusiness Organizations (Ch 21) Four Key Types Sole Proprietorships General Partnerships Limited Partnerships Corporations Liability and benefits differ depending on type used dFor entrepreneurs, other stakeholders Mandatory and Default Rules Depending on Structure Purpose to encourage free flow of commerce while enabling owners, partners and other third parties to understand and manage riskDefine ProCons Additional notes Sole Proprietorship Create once person begins to conduct businessE.g starting cutting someone’s lawn for money Simple to set up & dissolveUnlimited personalliability Money raised only by personal borrowing Both problems grow as business grows Best for small businessesIf different from your name, must register business name Must comply with business licensing requirement if anyGeneral Partnerships -Statutes provide default rules for partnerships → equiality amongst finance -->Equality amongst partnersfor managemenVary default rulesFlexible between partners Problem: rarely exists Distribution is not equal Partnership comesto the end if death occurs Contracts (partnership agreements) may be usedto modify statutory rulesConsider addressing key issues in partnership agreement e.g. , name, criteria for admission of partners, capitalization, profit division, magamen and dissolution procedureGeneral Partnerships
Creation automatic when relationship begins: no formalities requiredTwo or more people carry on business together with a view to a profitNo separation between partner and partnership All benefits of partnership accrue to partnersEach partner responsible for all partnership debtsEach partner can commit partnership to obligations Extends risk of unauthorized obligations and torts to all partners Partners have unlimitedpersonal liability Liability extends to both partners if one partner commits a tort, or finances supplies etc. Indicia of Partnerships Look for: Independent contractor versus partnerships Sharing profits/losses- not just revenues Jointly- owning property or contributing capitalInvolvement in business/management Joint authority for contract/bank accounts Equal access to business information Holding each other out as partnersEngaging in ongoing activity QUESTION ON FINAL EXAM: USE EVIDENCE TO SPECIFY THE TYPE OF PARTNERSHIP OR BUSINESS ORGANIZATION I.E GENERAL PARTNERSHIP, Independent contractors get paid regardless if a loss is suffered. Partnerships will get a loss if there is a loss and get profits if there are profits. Sole proprietorship is looking for people to work for themOne party is informing parties on decisions it is an independent contractor If the only business information is what you are given you are a sole proprietor working with an independent contractor Holding each other out as partners- if one partner does not object to this you are a

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