Bài giảng Business Law - Chapter 37: Introduction to Forms of Business and Formation of Partnerships

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin9Introduction to Forms of Business and Formation of PartnershipsOperation of Partnerships and Related FormsPartners’ Dissociation and Partnerships’ Dissolution and Winding UpLimited Liability Companies, Limited Partnerships, and Limited Liability Limited PartnershipsPartnershipsPARTIntroduction to Forms of Business and Formation of Partnerships PAETRHC37I wanted to be an editor or a journalist. I wasn't really interested in being an entrepreneur, but I soon found I had to become an entrepreneur in order to keep my magazine going. Sir Richard Branson, EntrepreneurLearning ObjectivesChoose an appropriate form of business for a particular enterprise and list characteristics of each formDescribe creation and risks of being a partner or purported partnerIdentify partnership capital, property, and interestsSole proprietorshipPartnershipGeneral, limited, limited liability, or limited liability limited partnershipCorporationRegular “C”, Subchapter “S”, nonprofit, professionalLimited liability companyIncluding professional form Basic FormsA sole proprietorship has only one owner and is an extension of its ownerIt is not a legal entity and cannot sue or be sued, so creditors/claimants sue the ownerAdvantages: no formalities, taxes flow to owner, owner takes all profit and controlDisadvantage: owner bears all risk of lossSole ProprietorshipA partnership has two or more owners or partners and takes several forms: general, limited (LP), limited liability (LLP), limited liability limited (LLLP), or professionalA partnership is a legal entity but not a federal tax-paying entity; thus all income or loss must be reported on an individual partner’s federal income tax return whether or not distributed or allocated to the partnersPartnershipAdvantages: relatively easy to create, has a legal entity but individual taxation, partners control the business, partners take all gain, flexible structureDisadvantages: partners bear all risk of loss jointly and severally, different levels of liability to partners depending on sub-form, may be created as a general partnership by default (unintentionally) PartnershipA corporation is owned by shareholders who elect a board of directors to manage the business, thus ownership & management of a corporation may be separateShareholders have limited liability for the obligations of the corporationThe corporation is a legal and tax-paying entity for federal income tax purposesException: Subchapter S corporationsCorporationAdvantages: shareholders enjoy limited liability for corporate obligations, perpetual existence, ability to raise large amounts of capitalDisadvantages: greater formality required for formation and operation, double-taxation, complexity of structureCorporationA limited liability company (LLC) combines the nontax advantages of corporations with favorable tax treatment of partnershipsAn LLC is owned by members, who may manage themselves or retain a manager to run the businessMembers have limited liability for the obligations of the LLCLimited Liability CompanyEvery state has enacted partnership lawsThe Revised Uniform Partnership Act (RUPA) of 1994, with 1997 amendments, is a model partnership statuteRUPA defines partnership as an “association of two or more persons to carry on as co-owners a business for profit.”Partners share profit and lossThe General PartnershipGenerally, partnership law applies to joint ventures, but a court may distinguish the two if the business purpose is limited to a single project rather than series of related transactionsReason: joint venturers usually held to have less implied and apparent authority than partners due to limited scope of the enterprise Partnership or Joint Venture?Unlike an ordinary partnership, creating a limited liability partnership (LLP) must comply with a state’s limited liability partnership statuteFormation of an LLP requires filing a form with the secretary of state, paying an annual fee, and using proper terminologyRegistered Limited Liability Partnership, RLLP, Limited Liability Partnership, LLPPartnership Creation – The LLPIf a third person deals with two or more people who seem to be partners and is harmed, the third person may sue to recover damages from both of the apparent partnersHowever, doctrine of purported partners holds that if third party proves that one apparent partner misled him to believe that the people were partners, the third party may sue partner that caused deception for damagesNon-Partners Generally Not Liable to Third PartiesWhen a partnership or limited liability partnership is formed, partners contribute cash or other property – partnership capital – to the partnershipBelongs to partnership as an entityTangible and intangible property acquired by a partnership presumptively belongs to the partnership as an entity rather than individual partnersPartners and OwnershipAs owner of a partnership or LLP, a partner has an ownership interest in the partnershipThe partnership interest includes partner’s: Transferable interestPartner’s share of profits and losses and right to receive partnership distributionsManagement and other rightsA Partner’s Partnership InterestThought QuestionsDo you want to start a business? If you wanted to start a business (snowboards, for example), would you choose partnership as the form of business?