Study guide chapter 14,15,16 + definitions BUSA LEGAL
Study guide chapter 14,15,16 + definitions BUSA LEGAL BUSA 2106
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This 7 page Study Guide was uploaded by Vraj Patel on Tuesday February 9, 2016. The Study Guide belongs to BUSA 2106 at Georgia State University taught by Sherman in Spring 2016. Since its upload, it has received 180 views. For similar materials see Legal Environment of Business in Business Administration at Georgia State University.
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Date Created: 02/09/16
BUSA Midterm 2 February 9, 2016 Definitions: • Sole proprietorship: o The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts • General Partnership : o A general partnership (or simply partnership) is an association of two or more people carrying on a business with the goal of earning a profit. Apartnership is viewed as being one and the same as its owners. There is little formality involved in creating a partnership. • Limited Partnership: o A limited partnership (LP) is a form of partnership similar to a generalpartnership, except that where a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited partner • Limited partner: o a partner in a company or venture who receives limited profits from the business and whose liability toward its debts is legally limited to the extent of his or her investment. • General partner: o General partner is a person who joins with at least one other person to form a business. A general partner has responsibility for the actions of the business, can legally bind the business and is personally liable for all the business's debts and obligations. • Certificate of limited partnership : o A certificate of limited partnership is a very simple document created forlimited partnerships, when the partnership is first being setup, and which is then filed with the state. It basically identifies the existence of the partnership, and notifies the state of the partnership’s existence. Most states do not require partnerships to draft and file a certificate of limited partnership, but suggest you do so. However, you should check your state law to ensure that you are in compliance with its requirements. • Limited liability companies: o A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The "owners" of an LLC are referred to as "members." • Member: o Shareholder (stockholder) of a firm BUSA Midterm 2 February 9, 2016 • Articles of organization : o The articles of organization are a document similar to the articles of incorporation, outlining the initial statements required to form a limited liability company (LLC) at the state level. It is a necessary document for setting up an LLC in many U.S. states. • Corporation: o a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law. • Incorporation: o The process of legally declaring a corporate entity as separate from its owners. Incorporation has many advantages for a business and its owners, including: 1) Protects the owner's assets against the company's liabilities. • Certificate of or Articles of Incorporation: o (sometimes also referred to as the Certificate of Incorporation or the Corporate Charter) act as a charter to establish the existence of a corporation in the United States and Canada, and are filed with Secretary of State, or other company registrar • Shareholder: o an owner of shares in a company. • Annual shareholder’s meeting : o AGM' A mandatory, public yearly gathering of a publicly traded company's o executives, directors and interested shareholders. • Proxy: o the authority to represent someone else, especially in voting. • Dividends: o a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves). • Director: o a person who is in charge of an activity, department, or organization, a member of the board of people that manages or oversees the affairs of a business. • Officer: o a person holding a position of command or authority in the armed services, in the merchant marine, or on a passenger ship • Securities Exchange Act of 1934 : o was created to provide governance of securities transactions on the secondary market (after issue) and regulate the exchanges and broker- dealers in order to protect the investing public. • SEC: o U.S. Securities and Exchange commission BUSA Midterm 2 February 9, 2016 • Securities fraud: o also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws. • Rule 10b-5: o is one of the most important rules targeting securities fraud promulgated by the U.S. Securities and Exchange Commission, pursuant to its authority granted under § 10(b) of the Securities Exchange Act of 1934. • Scienter: o is a legal term that refers to intent or knowledge of wrongdoing. This means that an offending party has knowledge of the "wrongness" of an act or event prior to committing it. • Insider trading: o the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information. • Insider: o a person within a group or organization, especially someone privy to information unavailable to others • Tipper: o a person who leaves a specified sort of tip as a reward for services they have received. • Tippee: o Person who receives inside information • Remote tippee: o Sub-Tippee ______________________________________________________________________________ ______________________________________________________________________________ BUSA Midterm 2 February 9, 2016 Chapter 14 • Sole Proprietorship o Form of business in which the owner is the business o Business is not a separate legal entity o Includes only one owner of the business called the sole proprietor • Sole proprietor: Owner of a sole proprietorship • Formation of a general partnership o Criteria to qualify as a general partnership under the UPA, business must be § Association of two or more persons § Carrying on as a business § Co-owned § For profit • Limited Partnership o Type of partnership that has two types of partners § General: Partners who invest capital, manage the business, and are personally liable for partnership debts § Limited: Partners who invest capital but do not participate in management and are not personally liable for partnership debts beyond their capital contributions o Required to have one or more general partners and one or more limited partners § Liability on a Personal Guarantee o Creditor may require a limited partner to personally guarantee the repayment of a loan in order to extend credit to the limited partnership § If a limited partner personally guarantees a loan and the limited partnership defaults on the loan: § Creditor then enforces the personal guarantee and recovers payment from the limited partner who personally guaranteed the repayment of the loan BUSA Midterm 2 February 9, 2016 Chapter 15 • Forming an LLC o Member: Owner of an LLC o Articles of Organization -- Formal documents that must be filed at the secretary of state’s office of the state of organization of an LLC to form the LLC • Limited Liability of Members of an LLC o Liability of an LLC § Liable for any loss or injury caused to anyone as a result of a wrongful act or omission by § Member, manager, agent, or employee of the LLC o Members’ limited liability § Limited liability of members of LLCs: Liability for the LLC’s debts, obligations, and liabilities is limited to the extent of members’ capital contributions • Members are not personally liable • Taxation of LLCs o Flow-through taxation § LLC’s income or losses flowing through to the members’ individual income tax returns § Avoids double taxation o LLCs accept the default status of being taxed as a partnership but can elect to be taxed as a corporation • Management of an LLC o Member-managed LLC: Members of the LLC have the right to manage the LLC § Each member has equal rights in the management of the business of the LLC § All members have agency authority to bind the LLC to contracts § Manager-managed LLC: Members designate a manager to manage the LLC • Manager of an LLC can be a member of an LLC or a non-member • Designated manager has the authority to manage the LLC • Managers have authority to bind the LLC to contracts • Nonmanager members cannot bind the LLC to contracts • Global Perspective: Joint Venture o Arrangement in which two or more business entities combine their resources to pursue a single project or transaction o Commonly used in international business transactions BUSA Midterm 2 February 9, 2016 Chapter 16 • Characteristics of a Corporation o Free transferability of shares § Corporate shares are freely transferable by a shareholder (unless they are issued pursuant to certain exemptions) o Perpetual existence § Corporations exist in perpetuity unless a specific duration is stated in a corporation’s articles of incorporation o Centralized management § Composed of the board of directors and officers of the corporation § Board of directors makes policy decisions concerning the operation of a corporation § Corporate officers run the corporation’s day-to-day operations • Limited Liability of Shareholders o Provides that shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation § Not personally liable for the debts and obligations of the corporation • C Corporation o Double taxation § Pays taxes at the corporate level § Shareholders pay taxes on dividends paid by the corporation • Incorporating Online o Locate your state’s incorporation web site at : www.statelocalgov.net o Many companies provide incorporation services online, including: § The Company Corporation, www.incorporate.com § Harvard Business Services, Inc., www.delawareinc.com § Corporate Service Company, www.incspot.com/public. Shareholders Amend Articles and Bylaws Elect and Remove Directors Approve Certain Corporate Matters _________________________________________________________ Board of Directors Determines Corporate Policies and Supervises Execution Officers and Employees Carry out Policies and Make Routine Decisions BUSA Midterm 2 February 9, 2016 • Shareholders: Owners of the corporation o Annual: Held by the corporation to elect directors and to vote on other matters o Proxy: Shareholder’s authorizing of another person to vote the shareholder’s shares in the event of the shareholder’s absence • Board of Directors: Make policy decisions for the corporation • Corporate officers: Manage the day to day operation of the corporation
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