Business Entity: Operation

Question 1

Business Entity
Operations
Sole Proprietorships

Answer 1

Sole Proprietorships

- owner makes all decisions or delegates

Question 2

Business Entity
Operations
General Partnerships

Answer 2

General Partnerships

• absent any agreement, all partners have equal rights in management and conducting affairs
• absent any agreement, majority vote covers all decisions
• unanimity needed for anything contrary to agreement or that is extraordinary
  
  • Admitting new partner
  • Assigning partnership property
  • Disposing of goodwill
  • Any other act that would make business impossible

Question 3

Business Entity
Operations
Limited Partnerships, LLP’s, and LLLP’s

Answer 3

Limited Partnerships, LLP’s, and LLLP’s

• one+ general partners make management decisions
• if limited partners leave sidelines, no longer limited liability

Question 4

Business Entity
Operations
Corporations

Answer 4

• shareholders elect directors, directors elect officers, and officers make day-to-day decisions
• can be the same people
• Piercing the Corporate Veil
  
  • small closely held corporations
    
    • commingling funds is bad
    • diversion of use of corporate assets
    • failure to maintain formalities
    • failure to adequately capitalize
    • use as shell or conduit
    • no separate corporate assets
    • formation to assume existing liabilities of a person

Question 5

Business Entity
Operations
Limited Liability Companies

Answer 5

Limited Liability Companies

• owner managed or manager managed
• set forth in operating agreement filed with state
• LLC law is not uniform throughout the states
• no prohibition against single person LLC