BLAW 316 Exam 3 Mastery Pack :
Verified Q&A (A+ Grade) graded A+
What laws govern franchises?
Governed by contract law and state and federal statutory laws and agency laws.
What terms are generally found in a franchisor-franchisee contract?
1. Payment for the franchise: initial fee or lump-sum price for the franchise license.
2. Business Premises
3. Location of the franchisee
4. Quality Control
5. Pricing Arrangements.
What are the 8 rules of a partnership?
1. A partnership is created by agreement of the parties.
2. A partnership is treated an an entity for limited purposes.
3. Each partner pays a proportionate share of income taxes on the net profits of the partnership,
whether or not they are distributed.
4. Each partner has an equal voice in management unless the partnership agreement provides
otherwise.
5. In the absence of an agreement, partners share the profits equally and share the losses in the
same ratio as the profits.
6. The capital contribution of each partner is determined by agreement.
7. Partners have unlimited liability for partnership debts.
8. A partnership can be terminated by agreement or can be dissolved by action of the partners,
operation of law or court decree.
Who are the corporate personnel and what do they do?
The shareholders that own the corporation. They elect a board of directors to govern the
corporation. The board of directs hires corporate officers and other employees.
How are corporations taxed?
Corporations pay income taxes on net profits and shareholders pay income tax on disbursed
dividends that they receive. (Double-taxation)
How can corporations get into legal trouble with the law?
A corporation is liable for the torts committed by its agents or officers within the course and
scope of their employment.
What can a corporation be domestic, foreign and alien?
A corporation is referred to as domestic within its home state, as foreign by any state that is not
its home state, and as alien if it originates in another country but does business in the United
States.
What is the difference between public and private corporations?
A public corporation is formed by a government and a private corporation is formed wholly or in
part for private benefit.
What is a close corporation?
A corporation that is owned by a family or a relatively small number of individuals in which its
transfer of share is frequently restricted.
What is an S corporation?
,Small corporations that under Subchapter S of the Internal Revenue Code are taxed like
partnerships, thereby allowing shareholders to enjoy limited liability while avoiding double
taxation.
What are considered the promotion activities involved in the formation of a corporation?
Persons who enter contracts on behalf of the future corporation that are personally liable on all
pre-incorporation contracts until the corporation is formed and assumes the contracts by
novation.
What are the basic steps of incorporation?
1. Select a state of incorporation
2. Secure the corporate name
3. Prepare the articles of incorporation
4. File the articles with the secretary of state
What information must be found in the articles of incorporation?
Corporate name, the number of share of stock the corporation is authorized to issue, the
registered office and agent, and the names and addresses of the incorporators.
What is the main function of a corporations first organizational meeting?
When a corporation adopts the bylaws (internal rules of the corporation) and elects the board of
directors.
What is a De jure corporation?
A corporation that has substantially complied with all the requirements for incorporation.
What is a De facto corporation?
A corporation that was improperly formed, in some states.
What does it mean to be a "corporation by estoppel?"
When a firm is not incorporated but represents itself to be a corporation and is sued as such by a
third party.
What the express laws that govern corporations?
Powers that are granted by: the U.S. Constitution, state constitutions, state statutes, articles of
incorporation, and resolutions of the board of directors.
What are the implied powers of corporations?
Barring express constitutional, statutory, or other prohibitions, the corporation has power to
perform all acts that are reasonably appropriate and necessary to accomplish its corporate
purposes.
What is a limited liability company (LLC)?
A hybrid form of business enterprise that offers the limited liability of a corporation and the tax
advantages of a partnership.
How is an LLC formed?
Articles of organization must be filed with the appropriate state office -- usually the office of the
secretary of state -- setting forth the name of the business, its principal address, the names of the
owners, and other relevant information.
What the advantages of an LLC?
- Limited Liability
- Option to be taxed as a partnership or as a corporation
- Flexibility in deciding how the business will be managed and operated
What is the main disadvantage of an LLC?
The absence of uniformity in state LLC statues.
, How is an LLC operated and managed?
When the LLC is formed, in an operating agreement, members decide how the business will be
managed and what rules will apply. An LLC can be managed by members only, by some
nonmembers and some members, and by nonmembers only.
Define Ultra vires doctrine
Any act of a corporation that is beyond its express or implied powers.
What does it mean to "pierce the corporate veil?"
The action of a court to disregard the corporate entity and hold the shareholders personally liable
for corporate debts and obligations.
What are the factors that could lead to a judge piercing the corporate veil?
1. A party is tricked or misled into dealing with the corporation rather than the individual.
2. The corporation is set up never to make a profit or always to be insolvent, or is too thinly
capitalized.
3. The corporation is formed to evade an existing legal obligation.
4. Statutory corporate formalities, such as holding required corporation meetings, are not
followed.
5. Personal and corporate interests are mixed together or commingled, to such an extent that the
corporation has no separate identity.
What are corporations two main types of financing?
1. Bonds
2. Stocks
What are the qualifications and responsibilities of a corporate director?
- Very few qualifications. Can be a shareholder but not required.
- Responsible for all policy-making decisions necessary to the management of all corporate
affairs.
How are corporate directors elected?
The first board of directors is usually appointed by the incorporators. After that, directors are
elected by the shareholders. Usually serve one-year terms.
What is the general policy towards Board of Directors' meetings?
- Hold formal meetings with recorded minutes.
- Date of regular meetings is usually established in the corporate articles or bylaws.
- Special meetings can be called with notice sent to all directors.
- Quorum is a majority of the directors.
What are the rights of corporate directors?
Right of participation, inspection, and indemnification
Who hires and determines the contracts for corporate officers and executives?
The Board of directors
What are the duties of the Board of Directors to the corporation?
1. Duty of Care: act in good faith, use prudent business judgement & act in the corporations best
interests.
2. Duty of Loyalty: Directors and officers have a fiduciary to subordinate their own interests to
those of the corporation.
3. Conflicts of interest: must fully disclose to the best extent any possible conflicts between
personal interests and the corporations interests.
What powers do shareholders of a corporation have?
Verified Q&A (A+ Grade) graded A+
What laws govern franchises?
Governed by contract law and state and federal statutory laws and agency laws.
What terms are generally found in a franchisor-franchisee contract?
1. Payment for the franchise: initial fee or lump-sum price for the franchise license.
2. Business Premises
3. Location of the franchisee
4. Quality Control
5. Pricing Arrangements.
What are the 8 rules of a partnership?
1. A partnership is created by agreement of the parties.
2. A partnership is treated an an entity for limited purposes.
3. Each partner pays a proportionate share of income taxes on the net profits of the partnership,
whether or not they are distributed.
4. Each partner has an equal voice in management unless the partnership agreement provides
otherwise.
5. In the absence of an agreement, partners share the profits equally and share the losses in the
same ratio as the profits.
6. The capital contribution of each partner is determined by agreement.
7. Partners have unlimited liability for partnership debts.
8. A partnership can be terminated by agreement or can be dissolved by action of the partners,
operation of law or court decree.
Who are the corporate personnel and what do they do?
The shareholders that own the corporation. They elect a board of directors to govern the
corporation. The board of directs hires corporate officers and other employees.
How are corporations taxed?
Corporations pay income taxes on net profits and shareholders pay income tax on disbursed
dividends that they receive. (Double-taxation)
How can corporations get into legal trouble with the law?
A corporation is liable for the torts committed by its agents or officers within the course and
scope of their employment.
What can a corporation be domestic, foreign and alien?
A corporation is referred to as domestic within its home state, as foreign by any state that is not
its home state, and as alien if it originates in another country but does business in the United
States.
What is the difference between public and private corporations?
A public corporation is formed by a government and a private corporation is formed wholly or in
part for private benefit.
What is a close corporation?
A corporation that is owned by a family or a relatively small number of individuals in which its
transfer of share is frequently restricted.
What is an S corporation?
,Small corporations that under Subchapter S of the Internal Revenue Code are taxed like
partnerships, thereby allowing shareholders to enjoy limited liability while avoiding double
taxation.
What are considered the promotion activities involved in the formation of a corporation?
Persons who enter contracts on behalf of the future corporation that are personally liable on all
pre-incorporation contracts until the corporation is formed and assumes the contracts by
novation.
What are the basic steps of incorporation?
1. Select a state of incorporation
2. Secure the corporate name
3. Prepare the articles of incorporation
4. File the articles with the secretary of state
What information must be found in the articles of incorporation?
Corporate name, the number of share of stock the corporation is authorized to issue, the
registered office and agent, and the names and addresses of the incorporators.
What is the main function of a corporations first organizational meeting?
When a corporation adopts the bylaws (internal rules of the corporation) and elects the board of
directors.
What is a De jure corporation?
A corporation that has substantially complied with all the requirements for incorporation.
What is a De facto corporation?
A corporation that was improperly formed, in some states.
What does it mean to be a "corporation by estoppel?"
When a firm is not incorporated but represents itself to be a corporation and is sued as such by a
third party.
What the express laws that govern corporations?
Powers that are granted by: the U.S. Constitution, state constitutions, state statutes, articles of
incorporation, and resolutions of the board of directors.
What are the implied powers of corporations?
Barring express constitutional, statutory, or other prohibitions, the corporation has power to
perform all acts that are reasonably appropriate and necessary to accomplish its corporate
purposes.
What is a limited liability company (LLC)?
A hybrid form of business enterprise that offers the limited liability of a corporation and the tax
advantages of a partnership.
How is an LLC formed?
Articles of organization must be filed with the appropriate state office -- usually the office of the
secretary of state -- setting forth the name of the business, its principal address, the names of the
owners, and other relevant information.
What the advantages of an LLC?
- Limited Liability
- Option to be taxed as a partnership or as a corporation
- Flexibility in deciding how the business will be managed and operated
What is the main disadvantage of an LLC?
The absence of uniformity in state LLC statues.
, How is an LLC operated and managed?
When the LLC is formed, in an operating agreement, members decide how the business will be
managed and what rules will apply. An LLC can be managed by members only, by some
nonmembers and some members, and by nonmembers only.
Define Ultra vires doctrine
Any act of a corporation that is beyond its express or implied powers.
What does it mean to "pierce the corporate veil?"
The action of a court to disregard the corporate entity and hold the shareholders personally liable
for corporate debts and obligations.
What are the factors that could lead to a judge piercing the corporate veil?
1. A party is tricked or misled into dealing with the corporation rather than the individual.
2. The corporation is set up never to make a profit or always to be insolvent, or is too thinly
capitalized.
3. The corporation is formed to evade an existing legal obligation.
4. Statutory corporate formalities, such as holding required corporation meetings, are not
followed.
5. Personal and corporate interests are mixed together or commingled, to such an extent that the
corporation has no separate identity.
What are corporations two main types of financing?
1. Bonds
2. Stocks
What are the qualifications and responsibilities of a corporate director?
- Very few qualifications. Can be a shareholder but not required.
- Responsible for all policy-making decisions necessary to the management of all corporate
affairs.
How are corporate directors elected?
The first board of directors is usually appointed by the incorporators. After that, directors are
elected by the shareholders. Usually serve one-year terms.
What is the general policy towards Board of Directors' meetings?
- Hold formal meetings with recorded minutes.
- Date of regular meetings is usually established in the corporate articles or bylaws.
- Special meetings can be called with notice sent to all directors.
- Quorum is a majority of the directors.
What are the rights of corporate directors?
Right of participation, inspection, and indemnification
Who hires and determines the contracts for corporate officers and executives?
The Board of directors
What are the duties of the Board of Directors to the corporation?
1. Duty of Care: act in good faith, use prudent business judgement & act in the corporations best
interests.
2. Duty of Loyalty: Directors and officers have a fiduciary to subordinate their own interests to
those of the corporation.
3. Conflicts of interest: must fully disclose to the best extent any possible conflicts between
personal interests and the corporations interests.
What powers do shareholders of a corporation have?
