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Questions and Answers
What is the case Meinhard v. Salmon (1928) about?
What is the case Meinhard v. Salmon (1928) about?
It involves Salmon entering into a lease and joint venture with Meinhard, where Salmon violated his fiduciary duty to Meinhard by not including him in a new lease.
In Brennans restaurant case, Colbert could pierce the corporate veil because the family treated the business as their personal assets.
In Brennans restaurant case, Colbert could pierce the corporate veil because the family treated the business as their personal assets.
False (B)
What does 'double tax' refer to in the context of businesses?
What does 'double tax' refer to in the context of businesses?
It is considered good for pass-through entities but bad for corporations.
What does a lower individual tax rate imply?
What does a lower individual tax rate imply?
How are losses advantageous in business structures?
How are losses advantageous in business structures?
What is liquidity in business partnerships?
What is liquidity in business partnerships?
What is the impact of a higher individual tax bracket?
What is the impact of a higher individual tax bracket?
What are deductions beneficial for?
What are deductions beneficial for?
What was the outcome of the case Dewine v. Valley View Enterprise Inc.?
What was the outcome of the case Dewine v. Valley View Enterprise Inc.?
What type of partnership is formed when one partner has expertise but no funds?
What type of partnership is formed when one partner has expertise but no funds?
What is the main goal when a business requires more capital than assets available?
What is the main goal when a business requires more capital than assets available?
Why would a business avoid being a partnership if the production process can be dangerous?
Why would a business avoid being a partnership if the production process can be dangerous?
What is a potential benefit of forming a partnership for nationwide sales?
What is a potential benefit of forming a partnership for nationwide sales?
What tax implication arises when a loss is expected for the first several years in a business?
What tax implication arises when a loss is expected for the first several years in a business?
In Guth v. Loft Inc., what was the key issue?
In Guth v. Loft Inc., what was the key issue?
What are the requirements of the Dodd-Frank Act regarding executive compensation?
What are the requirements of the Dodd-Frank Act regarding executive compensation?
Define a security in legal terms.
Define a security in legal terms.
What was the significance of the Howey case?
What was the significance of the Howey case?
What is regulated by the Securities Act of 1933?
What is regulated by the Securities Act of 1933?
What is a liability concerning false material facts in a registration statement?
What is a liability concerning false material facts in a registration statement?
What type of defenses are available against liability for false material facts?
What type of defenses are available against liability for false material facts?
What was the primary issue in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund?
What was the primary issue in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund?
What does the Securities Exchange Act of 1934 regulate?
What does the Securities Exchange Act of 1934 regulate?
What does Section 10(b) of the Securities Exchange Act address?
What does Section 10(b) of the Securities Exchange Act address?
What is the burden of proof regarding buyer's damage in securities fraud?
What is the burden of proof regarding buyer's damage in securities fraud?
What did the Supreme Court rule in SEC v. Texas Gulf Sulphur Co. regarding insider trading?
What did the Supreme Court rule in SEC v. Texas Gulf Sulphur Co. regarding insider trading?
What was the outcome of the City of Livonia Employees' Retirement System v. Boeing Co. case?
What was the outcome of the City of Livonia Employees' Retirement System v. Boeing Co. case?
What was the ruling on United States v. O'Hagan?
What was the ruling on United States v. O'Hagan?
What is required under the Private Securities Litigation Reform Act of 1995?
What is required under the Private Securities Litigation Reform Act of 1995?
What are the key provisions of the Sarbanes-Oxley Act of 2002?
What are the key provisions of the Sarbanes-Oxley Act of 2002?
What is the Dodd-Frank Act's function regarding financial institutions?
What is the Dodd-Frank Act's function regarding financial institutions?
What do state blue sky laws signify?
What do state blue sky laws signify?
Flashcards
Fiduciary Duty in Joint Ventures (Meinhard v. Salmon)
Fiduciary Duty in Joint Ventures (Meinhard v. Salmon)
A legal principle where a partner in a business venture cannot secretly profit from a business opportunity that should have been offered to the other partners.
Piercing the Corporate Veil
Piercing the Corporate Veil
A court's decision that a corporation is not a separate entity from its owners, meaning the owners can be held personally liable for the corporation's debts.
Double Taxation of Corporations
Double Taxation of Corporations
A tax system where a corporation's profits are taxed twice: once at the corporate level and again when distributed to shareholders as dividends.
Pass-Through Entities
Pass-Through Entities
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Tax Treatment of Losses in Pass-Through Entities
Tax Treatment of Losses in Pass-Through Entities
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Liquidity
Liquidity
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General Partnership
General Partnership
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Corporation
Corporation
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Limited Partnership
Limited Partnership
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Fiduciary Duty of Loyalty
Fiduciary Duty of Loyalty
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Insider Trading
Insider Trading
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Howey Test
Howey Test
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Securities Act of 1933
Securities Act of 1933
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Securities Exchange Act of 1934
Securities Exchange Act of 1934
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Buyers' Damages in Securities Fraud
Buyers' Damages in Securities Fraud
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Private Securities Litigation Reform Act of 1995
Private Securities Litigation Reform Act of 1995
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Sarbanes-Oxley Act of 2002
Sarbanes-Oxley Act of 2002
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Dodd-Frank Act
Dodd-Frank Act
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Blue Sky Laws
Blue Sky Laws
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Corporate Veil
Corporate Veil
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Study Notes
Meinhard v. Salmon (1928)
- Involved a joint venture for remodeling a hotel into shops and offices.
- Salmon unilaterally signed a new lease without informing Meinhard, his partner.
- Court ruled Salmon violated fiduciary duty; awarded Meinhard half the lease's value.
Colbert's Legal Work for Brennan's Restaurant
- Colbert provided legal services; family promised invoice payment.
- Family did not hold regular shareholder meetings and paid bills from a personal account.
- Court found no basis to pierce the corporate veil; business treated separately from personal assets.
Double Taxation
- Generally unfavorable for corporations, but beneficial for pass-through entities.
Lower Individual Tax Rate
- Favorable for pass-through entities and detrimental for corporations.
Losses
- More favorable tax treatment for pass-through entities regarding losses.
Liquidity
- Importance of ensuring partners maintain sufficient funds; personal liability may arise.
Higher Individual Tax Bracket
- Unfavorable for pass-through entities, although corporations can benefit.
Deductions
- Corporations benefit from deductions; advantageous tax implications.
Dewine v. Valley View Enterprises, Inc.
- Valley View failed to obtain necessary permits for a golf club and estates in Ohio.
- Court upheld liability of Joseph Ferrara, who acted as a general partner, despite being a corporate officer.
Limited Partnership Dynamics
- Barbara, the furniture expert, needs Albert's investment; limited partnership structure protects Albert from management liabilities.
Capital Requirements
- If a business requires more capital than available, a corporation is preferred to maintain control while addressing financial needs.
Liability Concerns
- Dangerous production processes necessitate a corporate structure to limit liability.
Nationwide Sales
- A partnership avoids the registration requirement in each state, enabling quicker setup.
Expected Losses
- Structures with pass-through tax benefits, like LLCs or partnerships, preferred when initial losses are anticipated.
Guth v. Loft Inc.
- Guth misused Loft Inc.'s resources for personal gain, breaching fiduciary duty of loyalty.
- Court ruled in favor of Loft for breach of fiduciary responsibility.
Richard Fuld and Lehman Brothers
- Fuld engaged in accounting manipulations that led to Lehman's historic bankruptcy while the board was deemed not at fault.
Dodd-Frank Act on Executives
- Introduces stockholder votes on executive compensation; requires disclosure of performance-related pay.
Legal Definition of Security
- Defined as an investment of money in a common enterprise with profits coming primarily from others' efforts.
Howey Test
- Found that investment contracts exist when an investor relies on a party for management of the investment.
Securities Act of 1933
- Mandates disclosure of financial information in initial securities sales; prohibits using mail or interstate communication to sell undisclosed securities.
Liability for Securities Registration
- Signers and directors bear civil liability for false statements; no proof of reliance or intent needed by plaintiffs.
Defenses Against Liability
- Includes materiality, expert reliance, due diligence, and statute of limitations.
Omnicare, Inc. v. Laborers District Council
- Examined if a statement of opinion could be misleading; context is key in determining potential liability.
Securities Exchange Act of 1934
- Regulates the transfer of publicly held securities; ensures brokers and dealers are registered.
Proving Securities Fraud
- Requires showing material misrepresentation, causation, and damages resulting from the fraud.
Buyers' Damages
- Defined as out-of-pocket losses, calculated by evaluating the difference between purchase price and value received.
Insider Trading Case: SEC v. Texas Gulf Sulphur
- Executives traded stock based on undisclosed mineral site value; SEC's victory highlighted insider trading violations.
City of Livonia Employees' Retirement System v. Boeing Co.
- Class action asserted securities fraud after false assurances about a plane's test results; resulting stock drop raised liability questions.
United States v. O'Hagan
- Established that attorneys using nonpublic information from their firm for personal gain breach fiduciary duty.
Private Securities Litigation Reform Act of 1995
- Elevated standards for pleading fraud, limited recovery for private plaintiffs, and restricted attorney fees.
Sarbanes-Oxley Act of 2002
- Introduced accounting reforms; mandates rigorous oversight and transparency for corporate financial practices, enhancing audit procedures.
Dodd-Frank Act Regulatory Framework
- Mandates comprehensive monitoring of major financial firms and regulatory measures to curb predatory lending.
State Blue Sky Laws
- Federal securities laws do not preempt state regulations, leading to diverse registration requirements across states.
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