Business Management Law: Partnerships, Corporations, and Securities, Summaries of Business Finance

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R. W. Emerson,

Business management law

LLP Must have a managing partner that is liable for the actions of the partnership LLC cannot sue to recover personal assets if business can’t pay. Pass through taxation Charging order company shield against torts, only need to pay distribution (may not distribute) Member Dissociation Death. Appoint a guardian over their affairs. Court declaring you incompetent. Bankruptcy. Expulsion. Having a charging order filed against transferable interest. Harmed the business. Breached operating agreement. Gets assets when dissolved Partners Dissociation L & G L Death, withdrawal, expulsion. No right to vote or exercise any other partner’s powers, but does have the right to receive distributions from the limited partnership and has the right to receive the liquidation value of her transferable interest at the termination of the limited partnership G Mentally or physically unable to care for himself. If he is a debtor in bankruptcy, assigns his assets for the benefit of creditors, or has a custodian appointed over his property. May be expelled by a vote of all the other partners or by a court for the same grounds that limited partners may be expelled. A general partner who has wrongfully dissociated is liable to the limited partnership and other partners for damages caused by his dissociation. Corporations +Limited liability. Corporation is legally separate from you +Attracting investors +Shareholder Protection Tax liability – double taxation, shareholders profits and capital gains also taxed Takes time and money to incorporate Must file separate income and business taxes. Can’t deduct business loses on your tax S corporations + Protected from liability + Pass through taxation+ easy to transfer ownership via sale merger Less flexibility dividing profit and loss Increased IRS formalities Stock restrictions Minority Oppres.

• Consolidation corporations is the union of corporations in one, and create a new Inc.
• Freeze out Mergers majority forms new Inc. w/old BOD. New eats old comp. majority get stock minority get cash.
• Total Fairness test disclose your intent to freeze, change to negotiate. Consider all factors, value it by how business is doing and will do later on, no speculations.
• Mergers A swallows B, A & B disappear into C, A takes B shares and becomes parent Domestic Corporation - Incorporated in a given state and do business in same state Foreign Corporation- doing business in a state, incorporated in another state Alien Corporation - doing business in a given state, incorporated in another country Balancing Test- any judicial test in which the jurists weigh the importance of multiple factors in a legal case. Straight Voting- each share has one vote for each new director to be elected 15 candidates. 5 positions 100 shares- 100 votes for 5 people each Cumulative Voting- multiply # of shares by # of directors, spread votes as you wish. Quorum- min # to conduct business at board meeting. Need a majority present. Piercing the Corporate Veil - Pierces veil, allows the shareholders to be held personally liable. Requirements of pierce- 1. Domination- Shareholder makes the company do as they wish. 2. Don’t observe corporate formalities- looting, defrauding creditors, circumventing a statute, or avoiding duty Promoters- jointly & severally liable. Incorporate, liable until the corporation adopts liabilities. Or the preliminary agreements have been rescinded.

Securities Investment of $. Common enterprise. Expecting $$ w/others efforts. Must be registered or exempted. Registration agreement type of security, type of company, & all other information a potential investor would like to know. Effective after 20 days 1.pre filing period 2. Waiting period 3. Post effective period. Underwriters say all good things, use or proceeds, risk experts standby underwriting, the underwriters obtain subscriptions from prospective investors, but the issuer sells the securities only if there is sufficient investor interest in the securities best efforts underwriting, the underwriters are merely agents making their best efforts to sell the issuer’s securities. firm commitment underwriting forms an underwriting group and a selling group. The under- writing group agrees to purchase the securities from the issuer at a discount from the public offering price prospectus is the basic selling document of an offering registered under the 1933 Act info about Inc. Exemptions 1. Securities issued or guaranteed by any government in the United States and its territories. 2. A note or draft that has a maturity date not more than nine months after its date of issuance. 3. A security issued by a nonprofit religious, charitable, educational, benevolent, or fraternal organization. 4. Securities issued by banks and by savings and loan associations. 5. An insurance policy or an annuity contract. Debenture long term secured securities. 10> years. Contains an indenture Indenture a contract that states the rights of the debenture holders. Transaction Exemptions – Interstate offering of securities solely to investors in one state by an issuer resident and doing business in that state Private offering to a small number of purchasers who can protect themselves because they are wealthy Rule 506 Reg D accredited (banks etc.), no more than 35 uncredited. Small offering Rule 505 sell ^ $5 m. w/o registration no more than 35 unacred. They can sell stock for 6-12 months Rule 504 allows to sell up to 1 mil. Only to accredit. Every resale must be to an accredit. Insider trading 10b51 joe trades w/info available to public. Joe trades w/info people don’t know about but not a factor. 10b52 misappropriation theory-trust if broken liable for fraud/insider trade Sec. Act. ’34 must make periodic discloses about company position. Every ¼ file unaudited 10Q Annually file 10K audited. Material events file a 8K must file w/in 4 days Howey an investment contract if 1. Invest $ 2. Expect $ 3. Common enterprise 4. No pers. effort

Respondent superior 1. Agent=employee 2. must act within scope of employment while committing the tort Direct liability 1. Principal intends&directs agent intentional tort, recklessness, negligence 2. Principal is negligent regarding hiring or training agent Torts of nonemployee Agents 1. principal not liable 2. Exceptions exist for direct liability and nondelegable duties Misrepresentation 1. direct liability 2. Vicarious liability when agent has authority to make true staetments on the subject of misrepresentation 3. An exculpatory clause may eliminate the principal’s tort liability, but the third party still can rescind the contract Unemploy insur. comp. unless you were fired w/good cause-sexual harassment, quit, embezzlement Workers comp. doesnt cover contracts, recover damages work injury, w/o having to sue 1.while

2. Cause of the job ERISA ensures pensions expected will be paid FLSA overtime, min wage, can’t be fired for complaint, Exempt (no OT), no child labor, NLRA Collective bargaining unin. Don’t negotiate salary, overtime Title IIV race, religion, nationality, color, sex Disparate treatment treating equals unequally Disparate impact actions have a discriminatory impact Prima facie 1. Protected class 2. Qualified for the job 3. Past over 4. Employer hired x doesn’t resemble plaintiff Sex Harrasment Quid pro quo-hostile work wont work cause scared Fam. Leave 12 weeks. Birth, adopt, sick fam, sick you cancer Defense. BonaFOQ here a certain gender, religion, or nationality needed. Seniority Short swing profit rule prevents insider. Cant sell securities less than 6 months Actual Authority agents power to act on behalf of a principal, b/c power was expressed or implied Expressed authority agents power to act granted by an agreement