LEGAL ENVIRON OF BUS
LEGAL ENVIRON OF BUS LAW 2150
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This 5 page Class Notes was uploaded by Mr. Reginald O'Reilly on Friday October 2, 2015. The Class Notes belongs to LAW 2150 at Appalachian State University taught by Richard Mattar in Fall. Since its upload, it has received 34 views. For similar materials see /class/217674/law-2150-appalachian-state-university in Law at Appalachian State University.
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Date Created: 10/02/15
Exam 3 Notes Chapter Sixteen Introduction 0 Entrepreneur 7 one who initiates and assumes the nancial risk of a new enterprise 0 Deciding on a type ofbusiness 0 Ease of creation The liability of the owners Tax considerations Need for capital OOO Sole Proprietorships 0 Sole Proprietorship 7 the owner is the business 0 Most popular form more than 23 of all American businesses Advantages of the Sole Proprietorship Proprietor owns all the business and receives all of the pro ts Easier and less costly to start than others Few legal formalities required 0 o o o No documents need to be led with the government to start a sole proprietorship o A state business license may be required for some 0 More exibility o Pays only personal income taxes on the business s pro ts which are reported as personal income on the proprietor s personal income tax return Disadvantages of the Sole Proprietorship o The proprietor alone bears all the burden of any losses or liabilities incurred by the business enterprise 7 Unlimited Liability 0 Unlimited Liability 7 legal responsibility for all obligations that arise in doing business 0 Creditors can go after the owner s personal assets to satisfy any business debts o Lacks continuity in the death of the proprietor 7 the business is automatically dissolved upon the death of the owner 0 Proprietor is limited to hisher personal funds and any personal loans he she can obtain MAIN POINTS Method of Creation 7 created at will by owner Legal Position 7 not a separate entity owner is the business Liability 7 unlimited liability Duration 7 determined by owner automatically dissolved on owner s death Transferability of Interest 7 interest can be transferred but individual s proprietorship then ends OOOOO Management 7 completely at owner s discretion Taxation 7 owner pays personal taxes on business income Organizational Fees Annual License Fees and Annual Reports 7 none or minimal Transaction of Business in other States 7 generally no limitation OOOO Franchises 0 Franchise 7 an arrangement in which the owner of a trademark a trade name or a copyright licenses others to use the trademark trade name or copyright in the selling of goods or services 0 Franchisee 7 the purchaser of a franchise o Franchisor 7 the seller of a franchise o The franchise is economically J J J on the f 39 39 s 39 A business system 0 Franchisee 7 independent business person 0 Franchisor 7 gives advantages of a regional or national organization Types of Franchises o Distributorship 7 a manufacturing concern licenses a dealer to sell its product Car dealership beer distributorship o ChainStyle Business Operation 7 a franchise operates under a franchisor s trade name and is identified as a member of a select group of dealers that engage in the franchisor s business Fast food restaurants Real Estate brokerage firms Tax preparing services 0 Must follow standardized or prescribed methods of operation 0 Certain standards of performance 0 Required to obtain materials and supplies exclusively from the franchisor o A Manufacturing or Processing Plant Arrangement 7 Franchisor transmits to the franchisee the essential ingredients or formula to make a particular product CocaCola Laws Governing Franchising 0 Franchise relationship primarily a contractual relationship 0 Federal Regulation of Franchises in Certain Industries 7 protect franchisees from unreasonable demands and bad faith terminations of the franchise by the franchisor o The Franchise Rule 7 requires franchisors to disclose material facts that a prospective franchisee needs to make an informed decision concerning the purchase of a franchise o Enables purchasers to weigh risks and benefits of investment 0 Online Disclosure Now Allowed 7 Amendment to the Franchise Rule saying that franchisors may provide disclosure documents via the intemet as long as they meet certain requirements 0 State Protection for Franchisees 7 protect from unfair practices and bad faith terminations presale disclosures State Deceptive Trade Practices Acts 0 Uniform Franchise Offering Circular UFOC may be required to be filed with a state official The Franchise Contract 0 The contract specifies the terms and conditions of the franchise and spells out the rights and duties of the franchisor and the franchisee 0 Good faith and fair dealing in franchise relationships 0 Payment for the Franchise 7 the franchisee ordinarily pays an initial fee or lumpsum price for the franchise license fees for products to be purchased through the franchisor franchisor may receive stated percent of annual sales annual volume franchisee may have to pay a percent of the franchisor s advertising costs and certain administrative expenses 0 Business Premises 7 whether the premises for the business must be leased or purchased who supplies equipment and furnishings for the premises 0 Location of the Franchise 7 the territory to be served 0 Business Organization 7 may require the business have a particular form and capital structure standards of operation training of personnel involved administrative aspects 0 Quality Control 7 some degree of supervision and control by the franchisor to protect the franchise s name and reputation periodic inspections 0 If they exercise too much control they may incur vicarious indirect liability under agency theory for the acts of their franchisees employees 0 Pricing Arrangements 7 an outlet for the f1rm s goods and services may require the franchisee to purchase certain supplies from the franchisor at an established price 0 A franchisor cannot set the prices at which the franchisee will resell the goods violations of state or federal antitrust laws Franchise Termination 0 Duration usually starts with a short trial period one year 0 Notice of termination must be given 0 Wrongful Termination 7 generally the termination provisions of contracts are more favorable to the franchisor than to the franchisee 0 Statutory and Case law 7 good faith and fair dealings o The Importance of Good Faith and Fair Dealing 7 balance the rights of both parties Partn ersh ip s o Partnership 7 an agreement express or implied between two or more persons to carry on a business for profit 0 Most common form of business organizations selected by two or more persons 0 Partners 7 coowners of a business and have joint control over its operation and the right to share in its profits Agency Concepts and Partnership Law 0 Each partner is deemed to be the agent of the other partners and of the partnership 0 The imputation of knowledge of and responsibility for acts carried out within the scope of the partnership relationship 0 A partnership is based on a voluntary contract between two or more competent persons who agree to place some or all of their funds or other assets labor and skills in a business with the understanding that profits and losses will be shared The Uniform Partnership Act 0 The Uniform Partnership Act UPA 7 governs the operation of partnerships in the absence of express agreement When Does a Partnership Exist o UPA defines partnership as an association of two or more persons to carry on as co owners a business for profit One cannot join a partnership unless as others consent Intent 0 Essential elements of partnerships o A sharing of profits or losses 0 A joint ownership of the business 0 An equal right to participate in the management of the business 0 Profits are not payments of the following type 0 A debt by installments or interest on a loan Wages of an employee or for the services of an independent contractor Rent to a landlord An annuity to a surviving spouse or representative or a deceased partner A sale of the goodwill of a business or property 0000 Joint Property Ownership and Partnership Status 0 0 Joint ownership of property does not in and of itself create a partnership 0 Joint Tenants Tenants in Common i a partnership 0 The sharing of gross returns and even pro ts from such ownership i partnership Sharing both pro ts and losses typically partnership Entity versus Aggregate O A partnership is sometimes called a company or a firm The law of partnership recognizes the independent entity for most purposes but may treat the partnership as a composite of its individual partners for some purposes Partnership as an Entity 7 a common law suit goes after partners individually federal procedural laws permit a partnership to be treated as an entity in such matters as lawsuits in federal courts and bankruptcy proceedings 0 The capacity to sue or be sued 0 To collect judgment 0 Have all accounting procedures carried out in the name of the partnership Partnership as an Aggregate 7 A mass of the individual partners collecti w 39 39 39 o A partnership is not a taX paying entity 0 The income and losses it incurs are passed through the partnership framework and attributed to the partners on their individual taX returns 0 The partnership itself has no taX liability and is responsible only for filing an information return with the Internal Revenue Service Partnership Formation O Agreements to form a partnership can be oral written or implied by conduct The Partnership Agreement 7 Articles of Partnership 7 include virtually any terms that the parties wish so long as the terms are not illegal or contrary to public police or statute Duration of the Partnership 7Partnership for a Term 7 when will the partnership dissolve Partnership at Will 7 no fixed duration is specified
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