1. ease of creation
2. the liability of owners
3. tax considerations
4. the need for capital

1. sole proprietorship
2. partnership
3. corporation

• receives all the profits (assumes alll the risks)
• flexibility in decision making
• only pays personal income taxes

• owner bears burden of losses or liabilities
• lacks continuity when business dies

Types of Franchises

(ex of each)

• Distributorship (Automobile dealership)
• Chain style business operation (McDonald's)
• Manufacturing or Processing Plant (Coca - Cola)

governed by contract law

- franchise relationship is a contractual relationship

What do franchises emphasize?

Franchise relationships emphasize the importance of good faith and fair dealing

agreement between two or more people to carry on business for a profit

Uniform Partnership Agreement

(UPA)

1. a sharing or profits and losses
2. a joint ownership of the company
3. an equal right to participate in the management of the business

duration of the partnership

• Duty of care - partner is not liable to the partnership for simple negligence or honest errors, but liable for gross negligence/reckless conduct
• Duty of Loyalty - requires a partner to account to the partnership for any property, profit, benefit derived by the partner in conduct of the partnership
• Breach and Waiver of Fiduciary Duties - partner may pursue own interests if has disclosed interests to other partners

- when a partner is carrying on partnership business both partner and firm share liability

Authorized Action - if partner acts within scope of authority, partnership is bound

Unauthorizd action - if partner acts outside scope of authority, partnerhsi is not bound

- partners are liable for debts of the partnership

- a form of a partnership that allows professionals to enjoy the tax benefits of a partnership while limiting their personal liability for the malpractice of other partners

- is an LLC in which the majority of partners are related to each other (farms)

- a partnership consisting of one or more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable only to the extent of their contributions)

Limited Liability Company

(LLC)

• members not personally liable for the debts or obligations of the entity, risk of loss is limited to the amount of investment 
• Will not die with death of members
• with two or more members, can decide to be taxed as corp or partnership, with 1 member taxed as sole proprietor

LLC statutes are not uniform

• businesses that operate in multiple states will not receive consistent treatment

Member managed - all members participate in management, decisions made by majority vote, unless stated LLC is assumed to be member managed

Management Managed - designated group to run firm

Special Business Forms

- business forms used to organize a business

1. Joint Venture 
2. Syndicate
3. Cooperative

- a relationship in which two or more persons or business entities combine their efforts or their property for a single project

• share profits and losses
• taxed like a pertnership
• only for one project, partnership is ongoing

• created and recognized by state law
• liability of its actions are separate from shareholders

Corporations can do one of two tings with corporate profits

1. retain profits
2. pass profits on to shareholders in form of dividends, shareholders taxed

- recognized under state and fed law as a "person"

• can be sued or sue
• cannot claim 5th amendment

- liable for torts committed by its agents within scope of employment, follows respondent superior

- could be held liable for criminal acts against agents

- crimes committed by corporate employees are white collar crimes

- if corporation makes substantial steps to prevent, investigate, and punish wrongdoing, a court may impose less serious crimes

1. Domestic 
2. Foreign 
3. Alien 
4. Public
5. Privite
6. Non-Profit
7. Close 
8. S Corp
9. Professional

- based on numbers not size, one whose shares are held by members of a family or by relatively few persons

- must meet requirements in Sub Chapter S of IRC

- with such status it can avoid income taxes at corporate level while having limited liability 

- cannot be a foreign entity

• no more than 100 shareholders
• who can be members

1. Select a state of incorporation
2. Select a name
3. Prepare articles of incorporation
4. File articles with Secretary of State

1. name
2. number of shares
3. name and address of registered agent
4. name and address of incorporators

- when owners use a corporate entity to carry out fraud, the oucrt will ignore corportate structure hold shareholders liable

- when corporation used for personal benefit, shareholder and entity no longer separate 

1. Tricking
2. Commingling funds
3. Too thinly capitalized
4. Corporate formalities not followed

How is a director removed from position?

1. Authorize corporate policy decisions
2. Select officers
3. Make financial decisions

1. Right to Participation
2. Right to Investigation
3. Right to Indemnification

1. Duty of Care
2. Duty of Loyalty
3. Conflict of Interest

- must act in good faith in making decisions in the benefit of the company

1. Duty to make informed and reasonable decisions
2. Duty to exercise reasonable supervision
3. Dissenting directors

- directors and officers will not be held liable for hnest mistakes of judgement, it will apply if director and officer:

1. took reasonable steps to become informed of matter
2. had rational basis for decision
3. no conflict of interest

1. Disclosure requirements
2. Corporation with common directors

1. Meetings must occur at least annually
2. Proxies

Partnership

1. LLP
2. Joint Venture

Corporations

C Corps

Sole Proprietor

Single Member LLC

LLC files articles of organization with secretary of state

Partnership files partnership agreement

Corporation files articles of incorporation with Secretary of State