Types of Business Organizations –Sole proprietorships –Partnerships General General Limited Limited –Corporations –Limited Liability Companies

General partnerships Created informally by agreement Created informally by agreement Each partner personally liable Each partner personally liable Partners owe fiduciary duty to partnership Partners owe fiduciary duty to partnership Act of any partner binds partnership Act of any partner binds partnership Unless changed by agreement, share profits/losses equally Unless changed by agreement, share profits/losses equally Dissolved by death/bankruptcy of a partner Dissolved by death/bankruptcy of a partner

Limited partnership Created by filing certificate with state Created by filing certificate with state Must have at least one general partner Must have at least one general partner Limited partners have no liability (beyond their investment) Limited partners have no liability (beyond their investment) Limited partners cannot manage or control the partnership Limited partners cannot manage or control the partnership

Corporations (general) Governed by state law (often Delaware) Governed by state law (often Delaware) Are considered legal “persons” Are considered legal “persons” –Can sue or be sued –Can enter into contracts –Can own property Can be publicly or closely held Can be publicly or closely held

Corporations: formation Must file articles of incorporation with state Must file articles of incorporation with state Must adopt bylaws Must adopt bylaws Must elect an initial board of directors Must elect an initial board of directors

Corporations: governance Shareholders Shareholders Directors Directors –Duty of care –Duty of loyalty Officers Officers

Corporations: lawsuits Direct lawsuits by shareholders Direct lawsuits by shareholders Shareholder derivative suits Shareholder derivative suits “Piercing the corporate veil” “Piercing the corporate veil” –Undercapitalization –Dummy corporations

Limited Liability Companies Partners have limited liability Partners have limited liability But can also engage in management and control But can also engage in management and control Can pass profits directly to partners (i.e., no corporate income tax) Can pass profits directly to partners (i.e., no corporate income tax)

Federal securities regulation The Securities Act of 1933 The Securities Act of 1933 The Securities Exchange Act of 1934 The Securities Exchange Act of 1934 –The Securities Exchange Commission –Rule 10b-5

Federal antitrust law restraints on trade restraints on trade Monopolies Monopolies Mergers and acquisitions Mergers and acquisitions

Other regulation of business Labor law Labor law Title VII of the Civil Rights Act of 1964 (banning employment discrimination) Title VII of the Civil Rights Act of 1964 (banning employment discrimination) –Enforced by EEOC –Disparate treatment –Disparate impact Sexual harassment Sexual harassment –Quid pro quo –Hostile environment Laws banning age and disability discrimination Laws banning age and disability discrimination