PART I: AGENCY: THE AGENT’S DUTY OF LOYALTY PART II. UNINCORPORATED BUSINESS ORGANIZATIONS I. GENERAL PARTNERSHIPS A. Generally – Characteristics: 1. Aggregate status 2. Unlimited liability 3. Transferability of interests: a partner may assign her interest in the partnership but partner cannot make a transferee a member of the partnership. 4. Duration and dissolution: a partnership cannot have perpetual existence. 5. Management and control: absent a contrary agreement, every partner has right to participate equally in the partnership management. 6. Authority: each partner, as an agent of the partnership, may bind the partnership by acts done for the carrying on, in the usual way, the business of the partnership. 7. Ownership of property: title may be held in the name of the partnership but the property is owned by the individual partners as tenants in partnership (but see RUPA). 8. Capacity to sue and be sued: lawsuit must be brought by or against individual partners, rather than the partnership; partners are jointly and severally liable for wrongful acts and breaches of trust; they are only jointly liable for debts and obligations of the partnership (but see statutory reforms and RUPA). B. Partnership Formation: C. The Legal Nature of Partnership: D. The Management of Partnership: E. Capital Contributions and Capital Accounts: F. The Authority of a Partner: G. Liability for Partnership Obligations H. Partnership Interests and Partnership Property: I. Dissolution:
II. LIMITED PARTNERSHIPS A. Taxation – this is one of the key reasons to chose a partnership form: III. LIMITED LIABILITY COMPANIES A. Advantages – LLCs combine: 1. Partnership taxation; WITH 2. Almost complete freedom in structuring ownership interests and management; WITH 3. Limited liability for both owners and managers; WITH 4. No limits on number of nature of owners.
PART III. CORPORATIONS I. INTRODUCTION A. Formation a Corporation: 1. Characteristics: a. Free transferability of Ownership Interests - Ownership (or equity) interests in corporations represented by shares of stocks - are freely transferable. b. Limited Liability - Shareholders liability is limited to their investment. Further, managers of a corporation are not normally liable for corporate obligations. c. Continuity of existence - The legal existence of a Corporation is perpetual, unless a shorter term is stated in the certificate of incorporation. d. Centralized management - A corporation is usually managed by or under, the direction of a board of directors, and a SH, as such, has no right to participate in management. A SH, has no power to bind the corporation to a contract or to place the corporation under other types of obligation. e. Entity Status - Corporations have the status of legal persons. f. TAX STATUS - a corporation is normally taxed as an entity, that is, a corporations income is usually taxed to the corporation rather than the SHs. If the corporation's after-tax income is later distributed as a dividend, the dividend is taxed to the SHs as part of their income. 1) C Corporation - taxed at both entity and individual levels as described above. 2) S Corporation - treated the same as any other corporation at the state level, but treated like a partnership (conduit) for federal tax purposes. For a corporation to qualify for this status, it must: a) Request S Corp status b) have no more than 35 SHs c) have no more than 1 class of stock d) all SHs must be individuals or qualified estates or trusts. (no corp can be a SH) e) no SH may be a non resident alien. f) The corporation may not be a member of an affiliated group of corporations (refers primarily to corporations in a parent- subsidiary relationship where the parent possesses 80% of the voting power and the stock value of the subsidiary). B. Social Responsibility of a Corporation: II. CORPORATE STRUCTURE A. Shareholders: B. The Allocation of Legal Power b/w Management and SHs: C. Formalities Required for Board Action: D. The Authority of Corporate Officers: E. Formalities Required for Shareholder Action: F. Cumulative voting:
G. Limited Liability of Shareholders - Piercing the Corporate Veil: PART IV. SHAREHOLDER INFORMATION RIGHTS AND PROXY VOTING A. Shareholder Information Rights Under State Law: B. Shareholder Information Rights Under Federal Law - Period Reports:
C. Shareholder Information Rights Under Federal Law - Proxy Rules: D. Shareholder Proposals: PART V. CLOSE CORPORATIONS A. Introduction: B. Shareholder Vote Pooling Agreements, Voting Trusts, Classified Stock: C. Agreements Controlling Board Discretion: D. Supermajority Provisions: E. Restrictions on Alienability (Transferability) of Stocks: F. Fiduciary Duties of SHs: G. Freeze Outs: H. Dissolution: PART VI. FIDICIARY DUTIES: THE DUTY OF CARE A. The Duty of Care: B. The Duty of Care and the Business Judgment Rule: C. The Duty to Monitor: D. Limitations on DIR Liability and D&O Insurance, Indemnification: E. Duty to Act Lawfully: PART VII. FIDICIARY DUTIES: THE DUTY OF LOYALTY A. Self-Interested Transactions: B. Statutory Approaches to Self-Dealing: C. Compensation and Duty of Loyalty: D. Use of Corporate Assets and the Corporate Opportunity Doctrine: E. Duties of Controlling Shareholders: F. Sale of Corporate Control: