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Exam 3, Part 3 Notes

by: Zohar Peleg

Exam 3, Part 3 Notes BSL485

Zohar Peleg
GPA 3.5
Preventative Law
Dr. Segal

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About this Document

Detailed and colorful notes covering lectures and textbook material in preparation for Exam 3.
Preventative Law
Dr. Segal
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This 10 page Bundle was uploaded by Zohar Peleg on Thursday February 26, 2015. The Bundle belongs to BSL485 at The American University of Rome taught by Dr. Segal in Spring2015. Since its upload, it has received 57 views. For similar materials see Preventative Law in Business Law at The American University of Rome.

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Date Created: 02/26/15
BSL304 Exam 3 Notes Part II Limited Liability Company LLC 0 Hybrid entity incorporates bene ts of corp amp of pship Governed by state law 0 Formation 0 File articles of organization in substantial compliance with state statute Name like LLC Address Name amp address of registered agent Indicate whether its member managed or manager managed Perpetual existence 0 Members contribute capital 0 Dictates participation in pro ts amp in some states voting rights 0 Operating agreement supercedes many statutory provisions 0 Rights of members owners 0 Transferrable interests Economic interests 0 Nontransferable Mgt rights a Manager managed vs member managed a Impacts authority a Manager managed only manager can bind LLC a Tadabor Case Right to vote a Pship model 0 Equal rights to vote a Corporation model 0 Voting based on of ownership n Both impacted by whether member or manager managed Right to info Right to sue in LLC s name Duties of LLC duciary care obedience o Managermanaged Managers have duciarycareobedience duties Members have no duties I Can compete can be selfdealing o Membermanaged Just like a pship All members have duties 0 Liabilities O 0 Members aren t personally liable for debtsobligations of LLC Keota case Explosion P sued LLC Dissociation dissolution amp winding up 0 OO O O Dissolution required if Term expires Unanimous written consent Court order of impracticability Notice of termination required Winding up Asset distribution to creditors outside then inside return of capital contributions pro ts based on capital contributions Corporations Creature of statute 0 Pro t maximization vs corporate citizenship 0PM o Fiduciary duty Competition Invisible hand of the market Creates jobs economic opportunity Lack of expertise can be damaging 0000 0 Just focusing on bottom line may not ultimately be good for the bottom Common goods Recognize those who don t have a voice May prevent gov regulation Social K 0 Legal entities Arti cial persons 0 Legal and constitutional rights Speech n Advertising a Political Citizens United 0 Donations to political campaigns 0 Free speech Due process Religion hobby obby affordable care act Governing law 0000 a State law a RMBCA n lnternal affairs doctrine Characteristics of corps O O O O 0 Limited liability of owners unless Shareholder responsible for own tort Piercing the corp veil Personal guarantee Access to greater resources Perpetual existence unless Voluntary dissolved by shareholders lnvoluntarily a Bankruptcy a Charter revoked Centralized management Free transferability Double taxation unless S corp which are passthru Shareholders get taxed Classi cationstypes of Corps O For pro t corp Maximize pro ts is distributed to owners Non pro t corp Education religious scienti c charitable purposes Exempt from fed tax Can t engage in political activity Donations are not tax deductible Public corp Owned by gov Private corp Owned by private entities Publicly held corp Has many shareholders ls traded on a public exchange Closely held corp Few shareholders usually less than 50 Not traded on public exchange Shareholders often involved in management Restrictions on transferability Most corps start out as closely held IPO initial public offer Heavily regulated by SEC amp states Extensive disclosures Offering for sale to the public Once corp goes public it s subject to all kinds of additional regulations quotgoing privatequot allows long view removes much regulation professional corps operated by professional groups lawyers doctors etc where formed domestic in state foreign in every other state alien not formed in US subchapter S Corp taxed like a pship passthru taxation requirements a US not alien a No more than 100 shareholders n Corps amp pship can t be shareholders must be individuals a SH s must be US citizensresidents a Can only have 1 class of stock n Passive income can t exceed 25 of corp income like rent licensing fees 0 Formation of Corp 0 Promoter Recruit investors a Investors are called subscribers They make an offer to purchase sharesstocks in the corp which is to be formed Preincorporation subscriptions irrevocable Post incorporation subscriptions are revocable Enter into contract on behalf of the corp to be formed a Liability o If corp is not formed only promoter is able o If corp is formed corp is not liable it rati es 0 Board resolution 0 Even if corp rati es promoter remains personally liable Coopers Case n Accounting rm a Enters into K on corp to be formed a Coopers never gets paid Sues Fox a Promoter entering into K on behalf of non existing corp promoter is liable for payment unless there s a novation party releases the promoter and substitutes corp in their place Even if corp is formed corp is not liable on K unless they explicitly ratify Promoter has duciary duty to promoters and subscribers o Formalities of Incorporation Articles of incorporation n Signed by incorporators I Must include 0 Name of corporation 0 Name amp address of incorporators amp registered agent 0 of shares and classes of stock a May include 0 Nature of business 0 Identity of board of directors 0 Cumulative voting 0 Preemptive rights 0 Super majority voting requirements protect minority shareholders Organizational meeting a Adopt the by laws Timeplace of SH amp board meeting Quorums Corp of cers descriptions Board committees o Ratify preincorporation K s Recognition and disregard of corporation 0 Defective incorporation Common law approach a Corp de jure in law Corp formed in substantial compliance 0 SH retain limited liability and state court can t dissolve corp n Corp de facto in fact 0 Not in substantial compliance 0 SH retain limited liability if they acted in good faith 0 State can dissolve Statutory approach u If articles led and accepted SHs have limited liability u If articles not led limited liability will not exist for SH purporting to act on behalf of corp knowing having reason to know there wasn t a corp n SH will have limited liability if 0 Not porpouting to act on behalf of a corp OR had good faith belief corp was formed a HARRIS CASE 0 Piercing the corporate veil Close corps n Alter ego of SH n Factors 0 Didn t conduct business properly funds commingling Adequeatly capitalized Used to defraudcommit wrongdoing Parentsubsidiary n Adequaltely capitalized n Formalities of separation n Held out as entity public a Funds comingled


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