Chapter I. Introduction, Concepts and Overview 130 results (showing 5 best matches)
- Accounting is the process of recording, classifying, and communicating financial information. Just as lawyers have cases and statutes (and nutshells) to look to, accountants have GAAP—Generally Accepted Accounting Principles. Financial statements are prepared according to GAAP. Under GAAP, just as under the law of business associations, a business association is treated as an entity.
- The real people who create a business association have a choice not only as to the form of business association but also as to the state in which they form the business association. And, the business association laws of the chosen state then control disputes concerning the internal affairs of the business association. Your professor may refer to this important rule as the
- The course is mainly about internal relationships within a business association. It covers a wide variety of relationships within several different forms of business associations. The course is also about how the money generated by the business is split up among the owners of the business, how the business is governed and the scope of the duties owed by the managers of business to the owners of and investors in the business association.
- Any person who is not an OWNER, MANAGER or EMPLOYEE in the eyes of the law of business associations is a THIRD PARTY. Third parties include customers, suppliers, persons injured by the business, persons to whom the business owes money, attorneys, accountants, etc. The law of business associations mainly concerns relationships among the persons involved in the business association with each other and with the business association itself. Relationships between the business association and third parties are mainly governed by other areas of the law—contracts, property, torts, etc.
- The law of business associations also deeply involves contract law. The basic concept of having the power to enter into voluntary agreements and having a legal remedy if those agreements are breached, is a fundamental principle of business associations. Generally, in large part, state statutes that govern business associations establish there is no contrary provision in any agreements of the business association. Another way of saying the same thing is to say that the real people who own and/or manage the business association can contract around most of the default rules in the state business association statutes.
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Chapter II. How to Select the Best Business Association for a Particular Business 102 results (showing 5 best matches)
- A business owned by a single owner is called a “sole proprietorship.” Sole proprietorships are not covered in this book (and usually are not covered in the course on business associations) for a very simple reason. A sole proprietorship does not fall within the definition of a “business association.” In the sole proprietorship there is no legal separation between the business and the person who owns and manages the business. There is no association and thus no internal relationships.
- State legislatures continue to invent new types of business associations, although the proliferation has slowed in recent years. Whatever the “new, new thing” in business associations turns out to be, a body of jurisprudence will undoubtedly develop around that business association. Development has been and is likely to remain mainly through analogy to both corporate and partnership principles from the past. The process of developing a body of jurisprudence around the newer forms of business associations has been a work in process by courts and legislatures since these newer forms of business associations came on the scene in the 1990s and that process likely will continue for years to come.
- means that the owners of the business association are for the debts or obligations of the business association. The business association, as a separate legal person, is liable for its debts. If the business fails the real people who own the business may lose some or all of the money they invested in the business. But, if the assets of the business association are not sufficient to satisfy the business associations’s obligations, creditors of the business association cannot reach the personal assets of the owners of the business, such as their home, cars or personal bank accounts.
- You should become familiar with the main attributes of each of these business associations, These attributes are discussed below in the context of selecting the most appropriate business association for a particular business. How these attributes play out in other contexts that arise in later stages of the life cycle of a business will be discussed later.
- In many respects the dramatic proliferation of new business associations in recent years has been confusing. The LLC is likely to become the dominant form of business association for closely held businesses in the future. Some scholars have suggested that one day there will be only two types of business associations in the United States—the C Corporation for publicly held businesses and the LLC for closely held businesses. Such a degree of logic and tidiness is more likely to remain a scholar’s dream rather than a practical reality.
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Chapter X. How Business Associations End (herein End Games) 109 results (showing 5 best matches)
- Business associations have a life cycle. As is the case with most relationships, at some point in time most business associations end. Some business associations end quickly; others last a very long time. The end games vary, as do the legal issues raised in connection with the end games. Most professors in the basic business course, at a minimum, touch on the fundamentals concepts of , the primary types of end games herein discussed. Your professor will likely expect you to understand the procedures employed in ending a business association. Often different options are available for accomplishing the desired result of ending a particular business association.
- Another possible end game for a corporation is some type of business combination. Business combinations impact various groups that have interests in or relationships with the corporations involved in the business combination. Business combinations can take a variety of forms. In fact, few legal transactions provide the participants with so many different options for achieving the same basic economic end result as business combinations (also known as “mergers and acquisition”). Most of the details regarding the various types of mergers and acquisitions are beyond the scope of the basic business course (and this book). However, you should be aware of certain basics which are often covered in the basic course in business associations. Almost all law schools offer an advanced course in Mergers and Acquisitions, which students having an interest in practicing business law should consider taking.
- Dissolution under the UPA means that the specific partnership entity ends. It does not mean that the business ends or is liquidated. The remaining partners can, and often do, decide to continue the business after dissolution, but the business is being continued by a new legal partnership (a new business association).
- The above examples illustrate the importance of some understanding of accounting concepts. The partnership statutes are written in a way that assumes a certain level of understanding (Perhaps a slightly higher level of understanding than most other areas of the basic course in business associations require) of basic accounting concepts and how those concepts play out in the context of the partnership capital accounts.
- For a number of business associations (for example, General Motors Corporation, a corporation many people thought might last forever) the end game is played in the
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Preface 7 results (showing 5 best matches)
- The book is organized along the lines of the life cycle of a business— . selecting the best form of business association for the particular business, forming the business entity, governing, operating and financing the business, getting money out of the business into the hands of the owners of the business, and ending the business association. Many legal issues arise along the way. This book covers a wide variety of issues that arise in each of the business associations covered by the book, both closely held and publicly held businesses.
- Beginning in the 1990s two new business associations, LLCs and LLPs, came on the scene. These unincorporated business associations possess limited liability similar to corporations, while offering tax and governance options superior to corporations. This made the newer forms of business associations more attractive to many closely-held businesses than corporations. Almost all publicly held businesses are organized as corporations. Accordingly, students in the basic business course, who intend to practice law in the 21st century need to develop a high level of understanding of the law of partnerships and LLCs, as well as the law of corporations.
- This book seeks to give students taking the basic business course a reliable overview of the major issues that arise in a business relationship. More specifically, we have tried to (1) arrange the material in a way that fosters understanding of how issues arise and are handled in each of the business associations covered in this book, (2) explain the basic concepts likely to be covered in class and (3) provide business and practice examples in which the basic concepts have been applied.
- For the first nine decades of the 20th Century the Corporation was the dominant form of business association and the entry-level basic business law course in almost all law schools was Corporations. 30 or 40 years ago most law schools also offered a course in Agency and Partnership, usually as part of the first year curriculum, but those courses have now largely disappeared. Thus many students are first exposed to the law of agency in business associations.
- Different law schools have different names for the course—“business associations,” “business enterprises,” “business organizations,” “corporations,” etc. This book uses these terms synonymously and sometimes refers to the course as the “basic business course.”
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Chapter VIII. How Businesses Raise Money 177 results (showing 5 best matches)
- . A business association may obtain money from persons who buy interests in the business. In consideration for the money these buyers invest in the business, they acquire interests in ( become the owners of) the business. These interest owners may be persons who will be active in managing the business, passive investors, seeking a return on their investment, or a combination of the two.
- The attributes of equity ownership are allocated differently in different types of business associations. Understanding the difference in the manner in which the “attributes of equity ownership” are bundled and allocated among the equity owners of the business is critical to understanding many basic concepts in business associations. When this concept is understood, the basic business course becomes significantly easier.
- This chapter provides a basic overview of a subject generally referred to as “
- This area is often confusing to students without a business background because many of the concepts are unfamiliar and much of the language is new. This book only touches on basics, which you may encounter in the business associations course. Deeper knowledge in this area must be deferred to more advanced courses. Students who may have an interest in practicing business law should consider taking advanced courses in corporate
- . The exemption from registration most often relied on by issuers is some form of the so called “private offering” exemption found in § 4(2). Since private placements are by far the most important class of exemptions relied on by business associations seeking to raise money without registration, many professors, to one degree or another, cover the private offering exemption in business associations. This is the one exemption we will discuss in depth.
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Chapter VI. The Legal Duties of the Decision Makers and how those Duties are Enforced (herein Fiduciary Duties) 269 results (showing 5 best matches)
- In the last chapter we identified the real people who make decisions for business associations. With legal power goes legal responsibility. The decision makers for a business association, whether the business is structured as a corporation, a partnership or an LLC are said to have “
- The word “fiduciary” comes from the law of trusts and, broadly speaking, involves acting for the benefit of someone else. However, fiduciary is a context oriented word which defies explicit definition and applies to a variety of relationships. Just as trustees owe fiduciary duties to beneficiaries and agents owe fiduciary duties to their principals, directors and officers of a corporation owe fiduciary duties to their corporations. The individuals who govern the other types of business associations also owe fiduciary duties to those business associations.
- In addition, the court held that this deal also failed the fair price prong of the entire fairness test. This part of the decision was based on evaluation issues which are outside the scope of the basic business association course (and this book). On remand the Delaware Court of Chancery awarded plaintiff an additional $1 per share for the shares acquired by Signal.
- in companies that have taken money under TARP and has appointed a “pay czar” to review the pay of certain executives of companies who have outstanding TARP loans. In addition bills have been proposed in Congress which would impact executive compensation. At present executive pay is something of a political football, which is likely to be discussed in your business associations class.
- This chapter explores the nature and scope of the fiduciary duties owed by the decision makers in the various types of business associations. The chapter also explores the manner in which fiduciary duties are enforced.
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Chapter IX. How The Owners of a Business Make Money 100 results (showing 5 best matches)
- Generally, the owners of a business, regardless of the form of business association, can make money in three ways: (1) by being paid a salary by the business, (2) by receiving distributions of all or part of the profits from the business or (3) by selling all or part of their interest in the business at a profit.
- Many of the answers to the issues discussed in this chapter are governed by areas of the law other than the law of business associations— ., contract law, tax law, etc. However, the type of business association and the governing statutes have a significant impact on how the owners of the business make money.
- Prior to the mid–1990s, the overwhelming majority of closely held businesses in the United States were organized as corporations. The reason was simple. The corporation was the only form of business association which provided for the owners of the business. Even though for reasons discussed earlier, the corporation was often not the ideal form of business association for many small businesses, faced by closely held business under the corporate statutes. One significant negative to operating as an LLC was that businesses organized as LLCs would likely be subject to double taxation.
- Furthermore, shareholders in closely held corporations only recourse for the lack of liquidity problem has been vague and uncertain common law remedies such as actions for oppression and/or forced buyouts crafted by the courts. More than any other single issue, this has caused many firms to abandon the close corporation in favor of business associations better suited to closely held businesses.
- Under the “check the box” regulation, an elective option of taxation adopted in 1997, except for publicly traded partnerships, the vast majority of partnerships (and other unincorporated business associations) can choose to be taxed either as partnerships or corporations on an elective basis simply by checking the appropriate box, the first time they file a tax return. As previously noted in Chapter II, generally partners get to keep a greater share of the money made by the business by electing to be taxed as partnerships and almost all general
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Chapter III. How Business Associations are Formed 71 results (showing 5 best matches)
- The general partnership is the “default form” of business association in businesses owned by two or more
- Flexibility of management, coupled with pass-through taxation and limited liability of members, in the words of the court, combines “the best of both worlds.” In recent years the LLC has become the business association of choice for thousands of closely held businesses in the United States, both businesses owned by individuals and subsidiaries owned by corporations.
- Today a growing amount of case law and scholarly writing is creating a body of jurisprudence around the LLC. The questions regarding tax treatment that dominated the early days of the LLC have been put to rest by the check the box tax regulations. At this point in time the main generalizations that can be made are that: (1) the LLC provides more management flexibility than any other form of business association and (2) the rules governing LLCs are drawn more from contract law than business associations law.
- Despite the simplicity of the modern process of incorporation, people sometimes do not get it right. For example, the party whose job was to file the articles may simply have forgotten to do so. In this situation, the persons who own the corporation, which was never formed, can be held personally liable for debts incurred by the business under agency principles or under specific provisions contained in some corporate statutes. It is likely that such persons may be held liable as partners. If two or more parties are carrying on a business for profit as co-owners and that business is not a corporation, what is it? As we learned in Chapter II, it is a general partnership—the default form of business association. One of the main consequences of partnership status is, of course, joint and several personal liability.
- The LLC is a relatively new form of business association, which came into widespread use in the 1990s. It is neither a corporation nor a partnership, but has attributes drawn from both of the older form of business associations. Today all states have enabling statutes which authorize the creation and use of LLCs. The LLC statutes of the several states contain much greater variations than the states’ corporate or partnership statutes. Despite these statutory variations, there are two important similarities in the state LLC statutes.
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Chapter IV. The Limits of Limited Liability 80 results (showing 5 best matches)
- As previously discussed, in the 1990s the state legislatures in all states passed enabling statutes which authorized the creation of two types of unincorporated business associations (the LLC and LLP). LLCs and LLPs both provide limited liability for the owners, allow pass through taxation for the business association and allow the owners to freely participate in the management of the business. Among the many major questions raised by the creation of these relatively new types of business associations was the question of whether the concept of “piercing the veil” applied to LLPs and LLCs?
- Limited liability, one of the main factors considered in selecting a business association, also plays a key role in operating, financing and managing the business. Historically, until the 1990s limited liability was only available to owners of corporations and limited partners of limited partnerships. Today, however limited liability is also readily available to the owners of unincorporated business associations such as LLCs and LLPs. While the shield of limited liability, is broad, it is not absolute. This chapter focuses on two questions:
- Historically, the fundamental attribute that distinguished unincorporated business associations such as the traditional general partnership from corporations was the limited personal liability provided owners of corporations. However, today, legislatures in all states have created three unincorporated business associations which . While limited partnerships have been around since the early part of the 19th century, LLCs and LLPs did not come on the scene in a significant way until the 1990s. In this subsection we will discusses the scope of the limited liability provided by unincorporated business associations.
- From the early 1900s, when the first limited partnership statutes were passed until the 1990s, when LLCs and LLPs came on the scene the LP was the only business association that allowed investors to acquire equity positions in business enterprises without risking unlimited personal liability. But the conceptual foundation was a trade-off—in return for limited personal liability the limited partners had to be passive investors with no power to manage or control the business.
- The policy behind the notion of limited liability is clear and, when fully understood, helps to define the scope of the limitation. If the courts routinely looked behind the separate entity status of the corporation (or other business association offering protection from unlimited personal liability) and routinely held shareholders personally liable for obligations of the corporation, the free enterprise, capitalistic system as we know it, would not exist. Business associations with limited liability are critical to capital raising, risk-taking, diversification and other aspects of our economic system. For example, how many people would buy stock in companies such as Microsoft, IBM or General Electric (much less the start-ups, which might be the Microsofts of tomorrow), if they knew that they might face liability in excess of their investment ( ., if, not just their investment in a particular company, but their home, bank account, and personal savings were at risk). Thus, the concept...
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Chapter V. Who Decides What as to How Businesses Operate (Governance) 255 results (showing 5 best matches)
- Today, the use of LPs is declining while the use of LLCs is rapidly increasing. The LLC is becoming the business association of choice for many business ventures that used to be organized as LPs. In the 21st century the LP has become mostly a nitch type business association. LPs, today, are still extensively used in three areas: (1) tax sheltered investments ( . oil and gas drilling deals and real estate ventures), (2) deals put together by leveraged buy-out firms and venture capital firms, and (3) as an estate planing tool (
- Recall we previously introduced you to a form of business association called the “LLC,” which came into wide spread use in the 1990s. LLCs (and another type of business association, LLPs) arose out of a desire of the owners of the business to limit their personal liability, while at the same time retaining pass-through taxation. Today all 50 states have LLC enabling statutes, most of which were passed in the 1990s.
- The issues and rules relating to a general partner’s management of a limited partnership are the same as a general partner’s management of a general partnership. Today, the general partner of many limited partnerships is a corporation (or other limited liability entity such as an LLC). The practical effect of combining business associations in this way provides everyone in the venture with a significant degree of limited liability protection.
- In all of the situations in which LPs are still used the desire for limited liability of the limited partners (usually the persons funding the transaction), pass through taxation and strong central management are of paramount importance. Some experts believe that the newer forms of business associations (i.e. LLCs and LLPs) will eventually totally replace the LP. But this is not likely to happen immediately because there are still a lot of old business men and old lawyers who prefer to use LPs. For students this is not a bad thing, because a lot can be learned about the law of LLCs and LLPs, which is still developing, through studying LP law.
- The Delaware Supreme Court held yes. The agreement was not void as against public policy. The court reasoned the voting agreement was analogous to a proxy coupled with an interest. That is true under the law of business associations. But the same result would be supported by basic contract law—
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Copyright Page 4 results
- Nutshell Series, In a Nutshell
- © West, a Thomson business, 2003, 2006
- Thomson Reuters created this publication to provide you with accurate and authoritative information concerning the subject matter covered. However, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. Thomson Reuters does not render legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
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Outline 81 results (showing 5 best matches)
- A. WHAT THE COURSE IN BUSINESS ASSOCIATIONS IS ABOUT
- CHAPTER II. HOW TO SELECT THE BEST BUSINESS ASSOCIATION FOR A PARTICULAR BUSINESS
- F. THE EVOLUTION OF BUSINESS ASSOCIATIONS (A LITTLE HISTORY AND A SHORT LOOK AT THE FUTURE)
- B. MATTERS COMMON TO ALL BUSINESS ASSOCIATIONS
- 1. Business Associations and Separate “Legal” Persons
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Index 17 results (showing 5 best matches)
Chapter VII. Protection the Law Gives to Persons who Buy or Sell Securities (herein Rule 10b–5) 202 results (showing 5 best matches)
- Rule 10b–5 transcends the specialized body of jurisprudence called “securities law” and is part of a more general body of jurisprudence called “general corporate law.” As you know, business associations are mainly governed by state law. However, questions arising under Rule 10b–5 are governed by federal law. The body of jurisprudence developed around Rule 10b–5 by the federal courts has probably had more impact on corporate conduct during the last 50 years than any other single rule of law.
- While Rule 10b–5 has been applied in a vast variety of factual contexts, the two most common applications of Rule 10b–5 (the only applications covered in this book or likely to be covered in the basic business course) are so called (1) securities fraud cases and (2) insider trading cases.
- The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company’s stock is determined by the available information regarding the company and its business…. Misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements…. The causal connection between the defendants’ fraud and the plaintiffs’ purchase of stock in such a case is no less significant than in a case of direct reliance….”
- The telephone call or letter does not have to cross state lines; nor does the actual offer to buy or sell securities have to be by mail or telephone. For example, the buyer and seller can work in the same building and the offer and sale can be in a face to face conversation in that building. But if one party calls the other to arrange the meeting or to clarify some detail or if a check or stock certificate is transmitted by mail, the requirement has been satisfied. See, 511 F.2d 641 (5th Cir. 1975), a case in which phone calls between two brothers in the same apartment complex in New Orleans, negotiating the sale of an interest in a closely held family business, were enough to satisfy the jurisdictional means.
- In 2000, the SEC adopted . This is a rule you might study in detail in Securities Regulation. While beyond the scope of the basic business course, you should be generally aware of this rule. Basically this rule creates a procedure, which allows these types of insiders to buy or sell securities even though they might be aware of material inside information when they buy or sell. Rule 10b5–1 allows these people to create written pre-determined plans with brokers to sell a specified number of shares of their companies every month, quarter or other period they choose at either the market price or some predetermined price level.
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Note Regarding Statutory Citations 2 results
- The law of business associations is primarily statutory nonuniform state law supplemented by an increasing amount of Federal law. The governing state statutes are not identical but are similar. Most state partnership state partnership statutes are modeled on either the Uniform Partnership Act or the Revised Uniform Partnership Act. Most state corporation statutes are modeled on the Model Business Corporation Act or the Delaware General Corporation Law. This book contains numerous references to those statutes as well as the other statutes listed below. To save space we have included the statutory references by referring to the abbreviations to the statutes set forth below followed by section number (
- MCBA—Model Business Corporation Act
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- Publication Date: December 3rd, 2009
- ISBN: 9780314208514
- Subject: Business Organizations
- Series: Nutshells
- Type: Overviews
- Description: This book gives students in an introductory course in business associations a succinct but reliable overview of the principle legal issues that arise in business relationships over the life cycle of the business. It explains the basic concepts that govern these relationships and provides specific examples of how they apply. It also explains similarities and dissimilarities in the business associations covered. The book is intended to help students understand the course whether their background is in accounting or music.