revise the business law problem's answer(need professional blaw people)
sharry123
forms_of_organization.pptxFORMS OF BUSINESS ORGANIZATIONS
The Basics
The Options
Sole Proprietorship (one person)
Partnership (two or more entities or persons)
Limited Liability Partnership (LLP)
Limited Partnership
Corporation (Ltd./Limited/Incorporated/Inc.)
Joint Venture
Franchise
Trust
Unlimited Corporation
SOLE PROPRIETORSHIP
Small/startup
Inexpensive and simple/one person
Easy Registration
Never a corporation or trust
Personally entitled to profits
Unlimited personal liability v. separate business entity concept
Taxed on profits at individual rate
Losses can be off set from other income
Owner’s equity
PARTNERSHIP
Carrying on business in common with view of profit
Can be a corporation but not a SP
Courts will look behind labels
Must be an “active” business. Is a jointly owned investment a partnership?
Unlimited liability
Partnership Act
Partnership - Essential Characteristics
Sharing profits
co-owning property
all active in business
contributing money – capital
dividing profits
PARTNERSHIP (cont.)
Partner’s taxed at individual rates
Losses can be off set against other income
No separate legal personality
Instead of “owner’s equity” each partner has his/her own “capital account
PARTNERSHIP - creation
Two or more informally start a business
Partnership agreement but not always
Is it a partnership? Look behind arrangement
Allocation of profits
How do you allocate profits and equity?
Ownership of property
Relationship among partners:
Unlimited liability
“Fiduciary” duty to each – a duty of utmost good faith, honesty and loyalty
Agency and the doctrine of “apparent authority”
Joint liability
Contribution
Joint & Several Liability:
Joint: (example, breach of contract) all partners must be included in the original action – if the one with the assets is not included then it is too late
Several: however, for tortious conduct or breach of trust then also several liability – may still maintain the right to sue the other partners if the claim is not satisfied
No separate legal personality:
Eg. Income tax
But – partnership creditors have the first call against partnership assets before the personal creditors of an individual partner
In legal action can name partnership rather than individual partners – why better?
Law v. Accounting Principles
in accounting the business entity principle applied to sole proprietorships and partnerships (and corporations)
in law only a corporation is a separate legal entity
Partnership Agreements:
Allocation of profits
Buying in
Leaving
Management
Disability
Termination
PARTNERSHIP – termination
If not provided for in PA then if death, insolvency, bankruptcy
Notice by partner
By agreement
Limited Liability Partnership
Statutory
A partner is not individually liable for debts and obligations of the partnership or another partner that arise from the negligence or wrongful act or misconduct of another partner or employee or agent of partnership
LLPs continued
Exceptions:
Partner knew of negligence or conduct and failed to take reasonable steps to prevent it
Committed by another person for whom the partner was responsible in a supervisory role
Limited Partnerships:
Another statutory invention
General partners – involved in the management of the business (like regular partners) – unlimited liability
Limited partners – not involved – limited liability
LPs
General partners much more limited in their ability to bind limited partners
Extent of liability of limited partner is amount contributed or has agreed to contribute to LP
Generally, LPs have been used as flow-through investment vehicles for the limited partners to realize and capture losses of a start-up business in its first few years. They are beneficial structures because they give investors limited liability (so long as they are limited partners) while allowing losses to be directly attributable to the partners.
LPs
Not limited liability for LP if takes part in the control of the business (what if limited partner sues a general partner)
If dissolved, if $ left over, paid to limited partners first
If Act not strictly adhered to then general partners and limited partners considered regular partners (unlimited liability)
Joint Venture:
Association of two or more persons or corporations for specific projects
Joint Venture/Partnership
| FEATURE | Partnership | Joint Venture |
| Duration/ Purpose | Business for Forseeable future | Specific project over limited period |
| Terminology | Partners/ Partnership | Co-venturers Co-owners |
| Ownership | Belongs to the partnership | Co-venturers Retain ownership |
Partnership/JV compared (cont.)
| Contractual Obligations | Individual partners may enter into contracts and act on behalf of other partner | Co-venturers may not act as agent for others |
| Fiscal period | Has own fiscal period | Each co-venturer has own fiscal period |
| Income Determination | Net income is calculated at Partnership level and Allocated according to Partnership agreement | Revenues and Certain expenses are Allocated to individual venturers |
Corporations/Companies
Separate legal entity/personality
Liability attaches to company (not shareholders or officers) – Limited Liability
Perpetual existence
Transfer of ownership
Owners do not need to manage
No loyalty required
Unlimited Liability Corporation (ULCs)
Obscure section of NS Companies Act
Newish sections of Alberta and BC companies legislation
Unlimited liability for past and present shareholders (past in previous year)
Used for US takeovers to take advantage of US tax laws
