Legal Forms of Business Organization Chapter 26.1

Basics of Law Applications Now that we have looked at the basis of law, as well as the legal elements which make up a crime and tort, you are to think about how they apply to the rest of the course material Now that we have looked at the basis of law, as well as the legal elements which make up a crime and tort, you are to think about how they apply to the rest of the course material I challenge you to think from a lawyer’s perspective on how those concepts apply to the remaining course material I challenge you to think from a lawyer’s perspective on how those concepts apply to the remaining course material

Major Forms of Business Organization Sole Proprietorship Sole Proprietorship Partnership Partnership Corporation Corporation There are variations of each of these that we will discuss in class

Requirements for Organizational Start-up Sole Proprietorship: No requirements – Sole Proprietorship: No requirements – get a business license and register your business name Partnership: Agreement of the parties (somewhat difficult) – create a partnership agreement that both agree to Partnership: Agreement of the parties (somewhat difficult) – create a partnership agreement that both agree to Corporation: Need assistance of legal counsel for adhering to state charter and paying organizational fees – complicated process Corporation: Need assistance of legal counsel for adhering to state charter and paying organizational fees – complicated process

Dissolution/Duration of Business – When it ends Sole Proprietorship: Death or disinterest of proprietor Sole Proprietorship: Death or disinterest of proprietor Partnership: Death, bankruptcy, or withdrawal of ANY partner Partnership: Death, bankruptcy, or withdrawal of ANY partner Corporation: Ends when charter is terminated – may last forever (perpetual) Corporation: Ends when charter is terminated – may last forever (perpetual)

Decision-Making Authority Sole Proprietorship: owner has total control Sole Proprietorship: owner has total control Partnership: each partner has equal power unless specified in the agreement Partnership: each partner has equal power unless specified in the agreement Corporation: directors commonly elected by shareholders (owners) set company policy and appoint officers (CEO, CFO, etc.) Corporation: directors commonly elected by shareholders (owners) set company policy and appoint officers (CEO, CFO, etc.)

Ability to Attract Professional Employees or Finances Sole Proprietorship: Poor Sole Proprietorship: Poor Partnership: Moderate Partnership: Moderate Corporation: Excellent Corporation: Excellent

Legal Status and Liability Sole Proprietorship: Owner is the business from a legal perspective Sole Proprietorship: Owner is the business from a legal perspective no separation of personal and business assets, UNLIMITED liability for debt no separation of personal and business assets, UNLIMITED liability for debt Partnership: Owners are the business from a legal perspective Partnership: Owners are the business from a legal perspective typically no separation of assets, UNLIMITED liability (except limited partners) typically no separation of assets, UNLIMITED liability (except limited partners) Corporation: Business is own legal entity, liability limited to each shareholder’s investment Corporation: Business is own legal entity, liability limited to each shareholder’s investment

BOOKWORK – Due Friday Chapter 26.1 # 11-15, pg. 476 Chapter 26.1 # 11-15, pg. 476