1. Chapter 15 Entrepreneurship, Sole Proprietorships, and Partnerships
PowerPoint Slides to accompany The Legal Environment of Business and Online Commerce 5E, by Henry R. Cheeseman
Chapter 15
Entrepreneurship,
Sole Proprietorships,
and Partnerships
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2. Entrepreneurship
Entrepreneur – person who forms and operates a new business
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3. Entrepreneurial Forms of Conducting Business
Sole proprietorship
General partnership
Limited partnership
Limited liability partnership (LLP)
Limited liability company (LLC)
Corporation
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4. Advantages of Sole Proprietorship
Formation is easy.
Owner has the right to make all management decisions concerning the business.
Sole proprietor owns all of the business and has the right to receive all of the business’s profits.
Sole proprietorship can be easily transferred and sold at the owner’s discretion.
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5. Disadvantages of Sole Proprietorship
Sole proprietor’s access to capital is limited.
Sole proprietor has unlimited
personal liability.
Creditor may recover claims against the business from the sole proprietor’s personal assets.
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6. General Partnership Criteria for a general partnership:
A voluntary association of two or more persons
Carrying on a business
As co-owners
For profit
Receipt of profits is prima facie evidence of a partnership.
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7. Uniform Partnership Act (UPA)
Uniform act has been adopted as state law by 48 states.
UPA adopts the “entity” theory of partnership, which considers partnerships a separate legal entity.
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8. Characteristics of a General Partnership Under UPA
General partnership agreement
Right to participate in management
Right to an accounting
Right to share in profits
Joint and several tort liability
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9. Characteristics of a General Partnership Under UPA
Joint liability for contracts and debts
Right of indemnification
New partners are liable for existing debts at the time of their entry only to extent of their contribution.
Duration
Partnership for a term
Partnership at will
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10. Dissolution of Partnership
It is a wrongful dissolution of a partnership for a term if a partner leaves before the term of the partnership expires.
Notice of dissolution must be give to third parties.
Distribution of assets
Continuation after dissolution creates a new partnership.
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11. Limited Partnership
A type of partnership that has two types of partners
General partners
Invest capital
Manage the business
Are personally liable for partnership debts
Limited partners
Do not participate in partnership management
Are not personally liable for partnership debts
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12. Revised Uniform Limited Partnership Act (RULPA)
Limited partnerships must file a certificate of limited partnership with the secretary of state.
Certificate must include, among other information:
Name of limited partnership
Character of the business
Names of general and limited partners
Contributions by each partner
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13. Defective Formation Defective formation occurs when
The certificate is not properly filed.
There are defects in the certificate filed.
A statutory requirement for creating limited partnership is not met.
Limited partner liability
A limited partner may be liable as general partner to a third party under some circumstances.
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14. Limited Partnership Agreement
Partners may sign a separate partnership agreement.
Agreement should establish
Voting rights
Allocation of profits and losses
If there is no separate partnership agreement, the certificate serves as the articles of limited partnership.
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15. Dissolution and Distribution of Assets
Certificate of dissolution must be filed under RULPA.
After assets have been liquidated, the proceeds must be distributed.
Creditors, including partners who are also creditors
Partners
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