This is an extract of our Leacock Bus Orgs Spring 2020 document, which we sell as part of our Business Organizations Outlines collection written by the top tier of Barry University School Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Business Organizations Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:
WHAT KIND OF
BUS ORG WAS IT?
BIOL OPLE CA
ART L AND/
HOW MANY PEOPLE
CAN HAVE CORPS
WITH ONE PERSON,
BUT THE CORP IS
STILL A SEPARATE
TWO OR MORE
WAS ANYTHING FILED WITH THE STATE?
- Do not need to ﬁle anything to begin this organization unless the law of the state requires otherwise.
- Any person who has a sole proprietorship is free to call the business by their own name. your name is public record and has been yours since birth; perfectly legal to use your own name in a sole proprietor business.
- Not using your own name is a ﬁctitious name.
- Assumed name or ﬁctitious name Act in all of the common law states. The use of them without proper ﬁling with the state is a crime.
Can be subject to ﬁnes or imprisonment.
- A sole proprietor can select an agent; they do not need to conduct a business him/
herself and operate all aspects of the business himself/herself. Sole proprietor can hire an agent.
If two or more people are coowners of a for proﬁt business that is not a corporation or a limited liability company, that business is a partnership.
A partnership is a contractual relationship and the intention to create it is necessary.
creditors can collect from P's partners, if P's creditors are unable to satisfy their judgments in full from partner property.
Martin v. Peyton concluded that a lender who was sharing in the proﬁts was not a partner because it "may not initiate any transactions as a partner may do."
a partnership agreement does not have to be in writing or be based on words. A partnership can be based, in whole or in part, on conduct.
an association of two or more persons to carry on, as coowners, a business for proﬁt.
partnership comprised of two classes of partners general and limited that is formed bY ﬁling an organizational document with the state.
A partnership is an
"aggregate" to the extent that the law treats it as merely an aggregate of its owners rather than as a separate person.
limited partner has no liability for the debts of the venture beyond the loss of his investment
The most important example of state law treating a partnership as an aggregate is the statutory rule that partners are personally liable for the partnership's debts.
Most important rule: a person who receives a share of the proﬁts of a business is presumed to be a partner in the business unless the proﬁts were received in payment of a debt, as wages,
or for other listed exceptions.
LLP is typically a general partnership that, depending on the relevant statute,
provides the partner with limited liability for the ﬁrm's tort obligations or for both its tort and contract obligations
certain circumstances that limited liability can be forfeited if limited partner participates in the control of the business
Provides partners with pass-through tax treatment and structural
ﬂexibility (i.e. parties can contractually arrange to run the business largely as they see ﬁt)
The co-owners of a partnership do not have to be ﬂesh and blood people. A legal entity such as a corporation or a limited liability company can be a partner.
A LLP is a person, it has entity personality. The
LLP's property is protected constitutionally and so is the former partner's
Limited partnerships can only be formed by ﬁling a certiﬁcate of limited partnership with the secretary of state (or equivalent ofﬁcial) of the appropriate jurisdiction
A general partnership and a LLP
have no distinction between entity relations. There is a difference when it comes to the partners identity in the entity.
The liability and PP of the partnership in an LLP are completely separate from the partnership
The same law that applies to a partner in a LLP is the same fundamental law that applies to the partner in an LLLP
Articles more important than bylaws!
bylaws completely internal. Bylaws more detailed, lay out internal rules running corp. amending articles =
fundamental corp change. articles and bylaws should never contradict each other, if they do, articles win.
Articles essentially a contract between corp and state.
"corpus habere" - "to have a body";
business association was transformed into a legal entity distinct from its owners.
corp can sue and be sued can serve as a member in a partnership can enter a contract can incur debt limited liability: the corp is liable, not its owners, not its managers
3 MAJOR PLAYERS IN
Even though three sets of players, one person can serve in all three capacities at the same time.
§201 of RULLCA
(2013) sets out qualiﬁcations
§105 RULLCA (2013)
discusses the operating agreement,
the heart and soul of the company
Pre-Incorporation Contracts: contract entered into before corp was made;
Somebody steps up for corp not yet formed (promoter) & enters into a contract for the not yet formed corp.
Corp not liable until it adopts contract.
Promoter personally liable to the lease until Novation occurs.
De Facto Corp: defective corp can be treated as successfully created; need relevant incorp statute, can show party made good faith attempt to comply w/ statute, must have some exercise of corporate privileges.
Corp by Estoppel: if you treat a bus like a corp & act like it's a corp then may be estopped from denying corp existence
shareholders might lose their investment.
LL major advantage to corp.
stockholders, own corp,
come to own bc corp sells shares of stock.
shares of stock = units of ownership in general corp model SHs elect corp leaders (BOD who manage/run corp amount of shares = stake in corp, # of votes, & amount of money received on investment.
2. Board of Directors the managers, set corp policy, make big decisions
act as a group; individual director has no authority to do anything, must act as a group; allow passive investment - own it but don't have to run it
3. Ofﬁcers appointed by BOD &
monitored by BOD
BOD sets policies, ofﬁcers carry out policies; ofﬁcers act in individual capacity;
i.e. CEO, secretary, agents of the corp;
individual directors are not agents of the corp, ofﬁcers are, this means they can bind corp to contract, etc.; have agency authority BOD is principal, ofﬁcer is agent
1. Public Corp: stock traded on public exchange
MBCA §2.04: those who act on behalf of a corp knowing it does not exist are personally liable. the partnership agreement can change much of the statutory partnership law that would otherwise govern disputes among the partners and between the partnership and the partners
partnership is the default form of association/organization for a business with two or more owners.
If such a business has not met the requirements for being a corporation or limited liability company, then it is a partnership.
Partnership results from contract, express or implied. If denied it may be proved by the production of some written instrument; by testimony as to some conversation; by circumstantial evidence. If nothing else appears the receipt by the defendant of a share of the proﬁts of the business is enough
RUPA (2013) legislature has enacted §303 (a) sets out in detail what the statement of partnership authority can include. That statement put on the public record would be contract law. The contract that the partners agreed to in creating the partnership.
Legislature has enacted that a person becomes a partner, after the formation of the partnership, with an afﬁrmative vote by 100%
of the partners
Partners may agree on how losses in a partnership will be allocated, but, absent a contrary agreement, losses in a general partnership are shared in the same ratio that proﬁts are shared
In the absence of a partnership agreement, the proﬁt would be divided equally between or among the partners. Despite how much each partner contributed individually
2. Closely held Corp:
vast majority of corps,
few SHs, family owned businesses sometimes
Certiﬁcate is a relatively skeletal document that that includes basic information about the company,
including, among other items, the name of the limited partnership and the identity of the general partners
Regular business corp governed by state law.
Real details on rights and duties of the partners is in the partnership agreement a separate, non-public document that the parties draft to govern their particular ﬁrm
ULPA (2013) 102(14)
- requirements of a partnership agreement
Incorporation: must be accepted for ﬁling to start corp.
Corp can raise capital in two ways:
every time there is limited liability, the state must accept something for ﬁling.
1. Debt ﬁnancing getting loans
2. Equity ﬁnancing ownership interest
LIMITED LIABILITY =
Limited partnership not required to have a partnership agreement. Default rules of the limited partnership statute would provide the operative terms
ULPA (2013) 201(d)(1) & 207(1): requiring certiﬁcate of limited partnership to become effective as a condition to formation and stating that the certiﬁcate is effective on the date and at the time of
can even do away with
BOD and let SHs run;
shareholders can sometimes be held liable for debts
FORM A CORP:
1. A Person - incorporator
2. Paper - Articles of incorporation
3. Some Act - deliver articles to appropriate state agency for ﬁling
De Jure Corp = legal corp in the eyes of the law
ULPA (2013) 306:
mitigates effects of defective formation
Organized - if initial directors were named in articles, they will get together and hold organizational meeting. at meeting they will select ofﬁcers and adopt initial bylaws & other important
if directors not named,
incorporators will have initial meeting. doesn't have to actually be a meeting,
can be done by written consent. imcorp. will set
Incorporator: can have more than one but no point; usually a person but doesn't have to be; corp can be an incorporator; only job is to execute articles and arrange to have them delivered to the state for ﬁling by SOS ofﬁce.
Paper: usually called articles of incorporation;
important bc it essentially forms corp. MBCA 4 things required: (1) name of corp (must have one of the magic words - corp, co., inc. or lmt.), (2)
name & address of each incorporator, (3) name and address of registered agent & address of registered ofﬁce (must be in state of incorp.), (4)
info about stock - must tell state # of shares corp.is authorized to sell/issue.
Acts that must be taken: incorporator will sign articles & have them notarized & then delivered is effective on the date and at the time of its ﬁling by the SOS
Agency is the ﬁduciary relationship that arises when one person (a "principal") manifests assent to another person (an "agent") that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.
adopt initial bylaws & other important business such as authorize selling of stock.
It's a sequence, one person takes the initiative (the principal) and indicates to the other person
(manifests assent) that they shall act on the principal's behalf; there is only one person with control in the relationship (the principal); the agent must then consent to act. Then we have an agency; the agency is created.
initial BOD, most states can to appropriate state agency (usually SOS), must also appoint ofﬁcers &
pay ﬁling fee; ofﬁce will accept check & look at adopt bylaws or let initial articles to make sure everything is in order and directors do that.
stamp it; when articles ﬁled, at that moment corp is formed.
Agency is a ﬁduciary relationship between the agent and the principal. In general,
an agent must act loyally and carefully.
A ﬁduciary is one who acts primarily for the beneﬁt of another.
Agency = the law of delegation
Agency determines whether or not someone works for a partnership.
3 Elements of Agency
Control of Principal
Consent of both Principal and Agent
By statute, each partner is an agent of the partnership.
Once the partnership is created the partnership itself is a separate entity from the biological persons who created it.
The partners are agents are in the partnership; the principal is the partnership
General ordinary partnership acts through agents (the partnership itself is the principal)
Act on behalf of Principal
Question that commonly arises from the fact pattern involving agent A's contracting with third party T is whether the agent himself is liable to T on the contract. The key word in answering questions about the agent's liability is "disclosed."
If T had reason to know that A was acting as P's agent, then use the word "disclosed" and conclude that A is not liable on the contract he made with T.
If, on the other hand, T did not know that A was acting as an agent, then use the word "undisclosed" and conclude that A
If T knew that A was acting as an agent but did not know that
A was acting as agent for P, use the words "partly disclosed"
and conclude that A is liable on the contract.
The existence of the relationship can be based on an express agreement or an inference of such an agreement based on the surrounding facts
The existence of the relationship need not be known to third parties,
although the principal's actions and words vis-à-vis third parties can by itself create apparent authority.
TYPES OF AGENCY
agency created by contract; The agent is not a party contracting with the third party, the contract is between the principal and the third party.
a principal for whom the agent is acting if the other party has notice that the agent is or may be acting for a principal but has no notice of the principal's identity.
does this prevent the contract from being enforce? No. as long as the agent and the principal have their own contract proving that the principal authorized the agent to act and sign on the principal's behalf.
It is well established in the law that an agency relationship cannot be recognized without an existing principal. The principal must have a valid existence in order for an agency relationship to exist.
principal for whom the agent is acting,
if at the time of a transaction conducted by an agent, the other party thereto has notice that the agent is acting for a principal and of the principal's identity.
it is inferred in such cases that the agent is a party to the contract.
i.e. ﬂoor of a stock exchange. Business operating the
NY stock exchange and the company contracting to be able to sell securities in the stock exchange. Then the agencies selling the shares are only selling them because of the company that owns them and hired the agency to sell them a person for whom the agent acts, if "the other party has no notice that the agent is acting for a principal.
question of whether the agent acted on behalf of the principal is resolved by determining the agent's intent at the time the contract was formed.
Fraud requires proof of concealment
Need proof that the existence of the principal was concealed
Within the context of an agency relationship, there are a number of ways in which the principal may be held accountable for the words, acts, or deeds of the agent. The ﬁve legal theories for binding a principal are as follows: (1) actual authority, (2)
apparent authority, (3)
respondeat superior, (4)
estoppel, and (5) ratiﬁcation.
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