Business Structures Overview

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Questions and Answers

What is the primary advantage of an asset sale for a company?

  • The company acquires only the assets without any liabilities. (correct)
  • The company can negotiate better terms for liabilities.
  • The company assumes all liabilities from the seller.
  • The company gains partial ownership of the seller.

Which chapter of bankruptcy is primarily for reorganization of business entities?

  • Chapter 9
  • Chapter 13
  • Chapter 7
  • Chapter 11 (correct)

Which of the following is NOT a requirement for a valid contract?

  • Disclosure (correct)
  • Acceptance
  • Consideration
  • Offer

What action does promissory estoppel allow in legal terms?

<p>Drawing on promises made when it would be unjust not to. (B)</p> Signup and view all the answers

What is the main purpose of the Securities Act of 1933?

<p>Govern the initial issuance of securities. (C)</p> Signup and view all the answers

Which chapter of bankruptcy is designed for individual wage earners?

<p>Chapter 13 (C)</p> Signup and view all the answers

How is a stock sale characterized in business transactions?

<p>Shares are bought directly from the company's shareholders. (D)</p> Signup and view all the answers

In contract law, what does quasi-contract refer to?

<p>A contract that is defective but related to tangible items. (C)</p> Signup and view all the answers

What is the duration of protection for utility and plant patents?

<p>20 years (D)</p> Signup and view all the answers

Which of the following is a type of patent that protects novel inventions?

<p>Utility patent (D)</p> Signup and view all the answers

What does the First Sale Doctrine allow regarding copyrighted material?

<p>You can purchase and sell the material but not copy it. (C)</p> Signup and view all the answers

What is a key requirement for obtaining a patent?

<p>You must fill out a patent application. (C)</p> Signup and view all the answers

What is the purpose of OSHA?

<p>To protect employee safety and enforce regulations in the workplace. (C)</p> Signup and view all the answers

Under what condition can an employer fire an employee according to the Employment at Will doctrine?

<p>Without showing any reason, unless exceptions apply. (C)</p> Signup and view all the answers

What kind of patent does not protect naturally occurring phenomena?

<p>Utility patent (C)</p> Signup and view all the answers

What is considered a tort for workplace bullying?

<p>Intentional infliction of emotional distress (A)</p> Signup and view all the answers

What is the primary duty that a manager must adhere to when making decisions for a corporation?

<p>Duty of loyalty (B)</p> Signup and view all the answers

Which of the following terms describes the individual who receives official mailings or serves in lawsuits for a corporation or LLC?

<p>Registered agent (A)</p> Signup and view all the answers

Which type of voting allows shareholders to multiply their votes to gain more influence?

<p>Cumulative voting (D)</p> Signup and view all the answers

What is the term for the legal protection that shields individuals from liabilities connected to their business?

<p>Corporate veil (C)</p> Signup and view all the answers

Which of the following is NOT a requirement for forming a corporation or LLC?

<p>Having a public board meeting (D)</p> Signup and view all the answers

What role must a corporation have according to the formation requirements?

<p>President (C)</p> Signup and view all the answers

What occurs when a corporation has acted improperly, leading to personal liability for its owners?

<p>Piercing the corporate veil (D)</p> Signup and view all the answers

What is the maximum amount of stock a company can legally use called?

<p>Authorized stock (D)</p> Signup and view all the answers

What legal theory allows a car company to sue a minor under a defective agreement?

<p>Quasi contract (B)</p> Signup and view all the answers

Which of the following describes the 'mirror image rule' in contract law?

<p>Acceptance must match the offer exactly (D)</p> Signup and view all the answers

What is the effect of the mailbox rule?

<p>Acceptance is binding upon sending (B)</p> Signup and view all the answers

Which of the following is considered valid legal consideration?

<p>A peppercorn (C)</p> Signup and view all the answers

Which statement about preexisting duty is true?

<p>It cannot be relied upon to sue for additional payment (A)</p> Signup and view all the answers

What makes a contract defective if one party does not have a license?

<p>Illegality of subject matter (C)</p> Signup and view all the answers

What is the general enforceability status of noncompete agreements after recent changes?

<p>They are mostly unenforceable (D)</p> Signup and view all the answers

What is the purpose of exculpatory clauses in contracts?

<p>To transfer liability away from a party (A)</p> Signup and view all the answers

At what age are individuals protected from age discrimination?

<p>40 years (C)</p> Signup and view all the answers

In which circumstances is a contract considered invalid due to lack of understanding?

<p>If the person is intoxicated (A)</p> Signup and view all the answers

What rule states that a written contract is the only evidence used in case of a dispute?

<p>Parole evidence rule (C)</p> Signup and view all the answers

What does 'anticipatory breach' refer to in contract law?

<p>An announcement of intent to breach the agreement (B)</p> Signup and view all the answers

Which of the following is a requirement for a valid contract based on consent?

<p>Consent must be given freely (A)</p> Signup and view all the answers

What must occur before one party's duty to perform under a contract is triggered?

<p>A condition precedent must be met (B)</p> Signup and view all the answers

Which of the following accurately describes 'substantial performance' under a contract?

<p>The performance must be reasonably adequate (C)</p> Signup and view all the answers

In the context of third-party contracts, what is a 'third-party beneficiary'?

<p>A party who benefits from the contract but is not involved in it (B)</p> Signup and view all the answers

What does the COBRA program provide after employment termination?

<p>Health insurance for 18 months (B)</p> Signup and view all the answers

Which Act protects workers covered by private pension plans?

<p>ERISA (D)</p> Signup and view all the answers

What type of discrimination does the Age Discrimination Act prohibit?

<p>Discrimination against individuals over 40 (C)</p> Signup and view all the answers

Which of the following best describes 'quid pro quo' sexual harassment?

<p>An agreement where one job benefit is exchanged for sexual favors (C)</p> Signup and view all the answers

What does the Genetic Information Nondiscrimination Act protect employees from?

<p>Use of genetic information in hiring decisions (A)</p> Signup and view all the answers

Which of the following statements about joint ownership is accurate?

<p>It requires unanimous consent for selling the property. (B)</p> Signup and view all the answers

What does a life estate allow a person to do?

<p>Use the property for their lifetime, after which it reverts to another party. (A)</p> Signup and view all the answers

Affirmative action is best described as what type of tool?

<p>A measure to promote equal treatment in the workplace (D)</p> Signup and view all the answers

Which type of business entity provides the greatest protection against personal liability for its owners?

<p>Limited liability company (C), Corporation (D)</p> Signup and view all the answers

What is a key requirement for forming a corporation?

<p>The name of the corporation must include 'Inc.' or 'Corp.' (B)</p> Signup and view all the answers

What does the term 'piercing the corporate veil' refer to?

<p>Allowing creditors to pursue personal assets of shareholders (D)</p> Signup and view all the answers

Which entity structure allows for the most flexibility in management options?

<p>Limited liability company (C)</p> Signup and view all the answers

In a corporation, what individuals are primarily responsible for overseeing the company's direction?

<p>Directors (B)</p> Signup and view all the answers

What is the term for the maximum amount of stock a company is authorized to issue?

<p>Authorized stock (D)</p> Signup and view all the answers

Which duty requires a manager to act with a certain level of diligence when making decisions?

<p>Duty of care (D)</p> Signup and view all the answers

What is the purpose of the business judgment rule?

<p>To protect managers from liability for honest mistakes (A)</p> Signup and view all the answers

What occurs during a merger between two companies?

<p>All assets and liabilities are transferred to the surviving company. (A)</p> Signup and view all the answers

Which chapter of bankruptcy involves liquidation of the company's assets?

<p>Chapter 7 (C)</p> Signup and view all the answers

What is required for a contract to be considered valid?

<p>Offer, acceptance, and consideration. (B)</p> Signup and view all the answers

What does promissory estoppel protect against?

<p>A party's reliance on a promise that leads to injury. (C)</p> Signup and view all the answers

What is a primary function of the Securities Exchange Act of 1934?

<p>To oversee transactions involving previously issued securities. (B)</p> Signup and view all the answers

Which statement accurately describes an asset sale?

<p>The buyer pays for assets without any liability transfer. (B)</p> Signup and view all the answers

What distinguishes Chapter 13 bankruptcy from Chapter 11 bankruptcy?

<p>It involves restructuring debts for individual wage earners. (C)</p> Signup and view all the answers

What role does the Uniform Commercial Code play in contracts?

<p>It governs commercial transactions and sales of goods. (B)</p> Signup and view all the answers

Why can a car company not sue a 17-year-old for breach of contract when purchasing a car?

<p>Because the minor lacks the legal capacity to enter into a contract (A)</p> Signup and view all the answers

Which of the following best describes the mailbox rule in contract law?

<p>An acceptance is binding the moment it is mailed, regardless of when it is received (D)</p> Signup and view all the answers

What requirement must be met for two parties to create a valid contract?

<p>Each party must provide something of value or consideration (A)</p> Signup and view all the answers

What is the primary effect of having a preexisting duty in contract law?

<p>It does not constitute valid consideration for a new contract (B)</p> Signup and view all the answers

What makes a noncompete agreement mostly unenforceable as of recent rulings?

<p>They are often seen as restricting employee rights unnecessarily (D)</p> Signup and view all the answers

What is the purpose of exculpatory clauses in business contracts?

<p>To protect one party from future liability to another (D)</p> Signup and view all the answers

Which statement accurately describes the mirror image rule in contract law?

<p>An acceptance must reflect the exact terms of the offer (D)</p> Signup and view all the answers

What happens if one party in a contract lacks the necessary license?

<p>The contract is considered defective and may be unenforceable (B)</p> Signup and view all the answers

What is the minimum age required for a contract to be valid?

<p>18 years (D)</p> Signup and view all the answers

What does 'substantial performance' under a contract imply?

<p>Performance should reflect a reasonable effort (C)</p> Signup and view all the answers

Which clause requires a strict adherence to deadlines in a contract?

<p>Time of the essence (C)</p> Signup and view all the answers

What defines a 'third-party beneficiary' in contract law?

<p>A person who gains benefits from the contract but is not a direct party (B)</p> Signup and view all the answers

What is the consequence of an anticipatory breach of contract?

<p>The other party's obligations are automatically voided (B)</p> Signup and view all the answers

Which type of contracts must generally be in writing to be enforceable?

<p>Contracts dealing with land (C)</p> Signup and view all the answers

What is required for consent to be considered valid in a contract?

<p>Consent must be freely given without fraud or undue influence (D)</p> Signup and view all the answers

What does the parole evidence rule state regarding disputes over contracts?

<p>The written contract is the sole evidence in disputes (C)</p> Signup and view all the answers

What is the primary purpose of the Equal Pay Act of 1963?

<p>To require equal pay for comparable work regardless of sex (D)</p> Signup and view all the answers

Which of the following describes a life estate?

<p>Ownership that lasts for the duration of a person's life (C)</p> Signup and view all the answers

Which Act requires employers to make reasonable accommodations for disabilities?

<p>Americans with Disabilities Act (D)</p> Signup and view all the answers

What does 'quid pro quo' harassment entail?

<p>Exchanging work favors for sexual advances (A)</p> Signup and view all the answers

What does the COBRA program allow after employment termination?

<p>Extension of health insurance coverage for a limited time (D)</p> Signup and view all the answers

Which of the following is a central requirement of Title VII of the Civil Rights Act of 1964?

<p>Prohibits employment discrimination based on race, color, or religion (B)</p> Signup and view all the answers

Which type of ownership interest allows for a tenant's rights during their lifetime?

<p>Life estate (C)</p> Signup and view all the answers

What does the Genetic Information Nondiscrimination Act protect against?

<p>The use of genetic information in employment decisions (D)</p> Signup and view all the answers

What is the main distinction between utility and design patents?

<p>Utility patents last for 20 years, while design patents last for 15 years. (A)</p> Signup and view all the answers

Which statement accurately describes the copyright protection process?

<p>Copyright protection is automatic upon creating a tangible expression of an idea. (D)</p> Signup and view all the answers

What does the Family and Medical Leave Act allow employees to do?

<p>Take up to 12 weeks of unpaid leave for specific family or medical circumstances. (B)</p> Signup and view all the answers

Which of the following statements about OSHA is true?

<p>OSHA is a federal agency that protects employee safety and enforces regulations. (C)</p> Signup and view all the answers

What is a key aspect of the Employment at Will doctrine?

<p>Employers can terminate employees without providing a reason, but this has exceptions. (C)</p> Signup and view all the answers

Which law prohibits workplace discrimination based on age?

<p>Age Discrimination Act (A)</p> Signup and view all the answers

What does the First Sale Doctrine enable a person to do?

<p>Sell purchased copyrighted material but not make copies. (A)</p> Signup and view all the answers

Which type of patent provides protection for new biological inventions?

<p>Utility patent (A)</p> Signup and view all the answers

What must a corporation have according to its formation requirements?

<p>A president and secretary (C)</p> Signup and view all the answers

Which factor differentiates sole proprietorships from limited liability companies in terms of personal liability?

<p>Personal assets of sole proprietors can be seized for business debts. (B), LLC members are liable for the company's obligations only up to their investment. (D)</p> Signup and view all the answers

What is the primary focus of the duty of loyalty that managers must uphold?

<p>Improving the company's overall benefits. (A)</p> Signup and view all the answers

What is the term used for the legal protection that prevents individuals associated with a corporation from being personally liable for the corporation's debts?

<p>Corporate veil (D)</p> Signup and view all the answers

In what scenario can the corporate veil be pierced, exposing owners to personal liability?

<p>When the corporation engages in wrongful conduct. (B)</p> Signup and view all the answers

Which of the following accurately describes the roles of shareholders in a corporation?

<p>Shareholders own the corporation and have voting rights. (B)</p> Signup and view all the answers

What are the three options for management of a limited liability company (LLC) mentioned?

<p>Member-managed, manager-managed, and employee-managed (D)</p> Signup and view all the answers

What does the term 'authorized stock' refer to in corporate terminology?

<p>The maximum amount of stock a company can legally use. (C)</p> Signup and view all the answers

What is a primary characteristic of an asset sale compared to other types of sales?

<p>The buyer only acquires specific assets without liabilities (A)</p> Signup and view all the answers

Which chapter of bankruptcy allows a company to remain operational and reorganize its debt?

<p>Chapter 11 (B)</p> Signup and view all the answers

Which of the following components is NOT necessary for a valid contract?

<p>Witness signatures (A)</p> Signup and view all the answers

The Securities Exchange Act of 1934 primarily regulates which aspect of the securities market?

<p>Subsequent buying and selling of securities (B)</p> Signup and view all the answers

Which contract type is specifically intended for individuals, allowing for debt reorganization?

<p>Chapter 13 (A)</p> Signup and view all the answers

What does quasi-contract pertain to in a legal context?

<p>A situation with a defective contract requiring restitution (A)</p> Signup and view all the answers

Which of the following statements accurately describes the purpose of the Securities Act of 1933?

<p>To govern and regulate the initial offerings of securities (B)</p> Signup and view all the answers

At what age does an individual gain protection against age discrimination?

<p>40 years (C)</p> Signup and view all the answers

What is required for a contract to be considered valid regarding understanding?

<p>All parties must understand the nature of the agreement (A)</p> Signup and view all the answers

What is the key feature of a 'condition precedent' in a contract?

<p>A condition that must occur before one party's duty is triggered (B)</p> Signup and view all the answers

Under the parole evidence rule, what can be used to resolve disputes?

<p>Only the written contract (A)</p> Signup and view all the answers

What does 'substantial performance' imply in contract law?

<p>Performance should show a good faith effort (A)</p> Signup and view all the answers

What does an anticipatory breach allow the non-breaching party to do?

<p>Terminate the contract immediately (A)</p> Signup and view all the answers

In a bailment situation, what is the nature of the relationship?

<p>Temporary custody without ownership transfer (C)</p> Signup and view all the answers

What is required for a valid assignment of rights in a contract situation?

<p>Written consent from all parties (C)</p> Signup and view all the answers

What legal principle allows a car company to initiate a lawsuit under specific circumstances involving a minor?

<p>Quasi-contract (D)</p> Signup and view all the answers

Which statement accurately reflects the mailbox rule in contract law?

<p>An acceptance is binding upon mailing, regardless of receipt. (C)</p> Signup and view all the answers

What is the significance of the mirror image rule in contract acceptance?

<p>It requires the acceptance to exactly match the terms of the offer. (C)</p> Signup and view all the answers

Which element is crucial for a contract to be considered valid in terms of consideration?

<p>Preexisting duties cannot serve as consideration (D)</p> Signup and view all the answers

Which of the following accurately describes the legality requirement for contracts?

<p>Subject matter must be legal for a contract to be valid. (A)</p> Signup and view all the answers

What role do exculpatory clauses play in business contracts?

<p>They aim to relieve a party from any future liabilities. (D)</p> Signup and view all the answers

Which situation exemplifies the concept of 'noncompete agreement' and its challenges?

<p>An employee is restricted from entering similar employment for a certain period. (C)</p> Signup and view all the answers

What does the peppercorn theory suggest regarding contract consideration?

<p>Minimal consideration is sufficient to validate a contract. (D)</p> Signup and view all the answers

What does the Equal Pay Act of 1963 specifically require?

<p>Equal pay for comparable work, irrespective of gender (A)</p> Signup and view all the answers

What is a key characteristic of the Americans with Disabilities Act?

<p>It obligates employers to make reasonable accommodations for employees with disabilities (D)</p> Signup and view all the answers

Which of the following best defines 'quid pro quo' in the context of sexual harassment?

<p>Providing promotions in exchange for sexual favors (C)</p> Signup and view all the answers

Under the National Labor Relations Act, what is prohibited regarding union activities?

<p>Threatening employees for union participation (B)</p> Signup and view all the answers

What is a primary feature of the Genetic Information Nondiscrimination Act?

<p>Protection against the use of genetic information in employment decisions (C)</p> Signup and view all the answers

What defines a fee simple absolute ownership interest in real property?

<p>Complete ownership without any limitations (D)</p> Signup and view all the answers

What is meant by reverse discrimination?

<p>Discrimination faced by non-minority individuals in favor of minorities (D)</p> Signup and view all the answers

What distinguishes a design patent from other types of patents?

<p>It covers the unique visual qualities of a manufactured product. (B)</p> Signup and view all the answers

Which legal doctrine allows for the termination of an employee without just cause?

<p>Employment at Will doctrine (C)</p> Signup and view all the answers

What is the primary focus of the Digital Millennium Copyright Act?

<p>To increase penalties for online copyright infringement. (A)</p> Signup and view all the answers

Under what condition can an employer legally prohibit employees from bringing firearms to work?

<p>If the state laws allow it. (B)</p> Signup and view all the answers

What does the first sale doctrine allow a buyer to do with copyrighted material?

<p>Sell the original material without further reproduction. (A)</p> Signup and view all the answers

Which type of patent requires the applicant to demonstrate that the invention is completely new?

<p>Utility patent (A)</p> Signup and view all the answers

Which of the following options best describes the concept of 'intentional infliction of emotional distress' in the workplace?

<p>An act of workplace harassment that leads to emotional trauma. (C)</p> Signup and view all the answers

What protection does the Family and Medical Leave Act provide to employees?

<p>A right to 12 weeks of unpaid leave for specific family and medical reasons. (B)</p> Signup and view all the answers

Flashcards

Sole Proprietorship Liability

The owner is personally liable for all business debts and obligations.

Limited Liability Company (LLC) Liability

Owners (members) of an LLC have limited liability; their personal assets are protected from business debts.

Corporate Veil

A legal protection shielding company owners from personal liability for business debts.

Piercing the Corporate Veil

When a court removes the corporate protection, making owners personally liable for business debts.

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Business Judgment Rule

A rule protecting managers from liability for bad business decisions, as long as they acted in good faith.

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Corporate Opportunity Doctrine

Managers can't take business opportunities away from their companies.

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Registration Agent (Corp/LLC)

The person designated to receive legal notices and documents for a corporation or LLC.

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Authorized Stock

The maximum number of shares a company can legally issue.

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Quasi Contract

A legal theory allowing recovery, even without a formal contract, when one party benefits from another's work.

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Mirror Image Rule

Acceptance must exactly match the offer; any change makes it a counteroffer.

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Mailbox Rule

Acceptance is effective when sent, not when received.

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Consideration

Something of value exchanged by each party in a contract.

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Preexisting Duty

A promise to do something a person is already legally obligated to do is not valid consideration.

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Licensing Requirement

A contract involving an unlicensed individual is often unenforceable.

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Non-compete Agreement

Contracts restricting an employee's ability to work with competitors.

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Exculpatory Clause

Attempts to release a party from future liability for their actions.

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Asset Sale

Buying only the assets of a company, not its liabilities.

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Merger

Combining two companies into one, inheriting both assets and liabilities

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Stock Sale

Buying ownership shares (stock) directly from shareholders.

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Chapter 7 Bankruptcy

Liquidating a company's assets to resolve debts. Everything is sold, money divided among creditors.

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Chapter 11 Bankruptcy

Reorganization of a business to manage debt and stay in operation, with bankruptcy court assistance.

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Promissory Estoppel

Legal principle, preventing a party from reneging on a promise that caused reliance.

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Uniform Commercial Code (UCC)

A body of laws regulating contracts specifically for the sale of goods. This is a statute creating contracts.

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Design Patent

A patent that protects the unique design of an object, like the appearance of a product or its shape.

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Utility Patent

A patent that protects a new and useful invention or process. It's for something completely new.

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Plant Patent

A patent that protects a new and distinct variety of plant.

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Copyright

A legal right that protects the original expression of an idea (like writings, music, or art), but not the idea itself.

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First Sale Doctrine

A copyright law principle that allows someone who legally purchases a copyrighted work to resell it but not to make copies of it.

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Parody

An exception to the First Sale Doctrine, where someone can use copyrighted material to make a parody (a humorous or satirical imitation) without infringing copyright.

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Trademark

A symbol, design, or phrase legally registered to represent a company or product, used to identify and distinguish it from its competitors.

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Employment at Will Doctrine

A legal principle that allows employers to hire and fire employees at any time without having to give a reason.

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COBRA

Allows employees to continue their health insurance for 18 months after job loss, but they must pay premiums themselves.

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Social Security Act

An entitlement program providing benefits for retirement, unemployment, and disability.

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ERISA

Protects workers covered by private pension plans, ensuring they receive retirement benefits.

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National Labor Relations Act

Protects workers' right to form unions and participate in collective bargaining.

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14th Amendment & Workplace Discrimination

The 14th Amendment prohibits government entities from discriminating in the workplace, as it violates equal protection.

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Equal Pay Act of 1963

A federal law requiring equal pay for comparable work, regardless of gender.

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Title VII of the Civil Rights Act of 1964

Prohibits discrimination in employment based on race, color, religion, sex, or national origin.

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Fee Simple Absolute

Complete ownership of land with all rights, including surface, subsurface, and airspace.

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Bailment Relationships

An arrangement where one party (the bailor) entrusts personal property to another party (the bailee) for a specific purpose, like leaving clothes in a gym locker.

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Contract Age of Validity

A contract is typically voidable if a party is under 18 years old, meaning they can choose to be bound by the agreement or void it.

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Consent in a Contract

Valid contracts require freely given consent. If consent is obtained through fraud, mistake, or undue influence, it's not valid.

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Contracts in Writing

Some contracts need to be written to be legally enforceable, such as those dealing with land.

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Parole Evidence Rule

A written contract is the primary source of evidence in disputes. Oral agreements outside the written contract can't be used to contradict or modify its terms.

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Third Party Beneficiary

A person who benefits from a contract even though they're not directly involved in the agreement, like a subcontractor on a construction project.

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Condition Precedent

A condition in a contract that must be met before one party's obligation kicks in, like the buyer's duty to purchase being contingent on financing approval.

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Time of the Essence Clauses

Contract clauses stating that deadlines are strictly enforced, and any delay can be considered a breach.

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Offer

A proposal to enter into a contract. It must be specific enough to be considered a real offer, not just a general advertisement.

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What's Not Consideration?

A promise to do something you're already legally obligated to do is NOT valid consideration. If you're already required to do something, promising to do it doesn't create new value.

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Contract with Unlicensed Person

If someone enters into a contract without the required license, the contract may be defective and unenforceable.

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Contractual Age of Validity

Individuals under the age of 18 usually can't enter into valid contracts.

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Condition Precedent in Contracts

Something that must happen before a party's obligation in a contract starts. Like the buyer's duty to purchase a house could depend on getting financing.

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Wrongful Discharge

A legal claim an employee can make if they were fired without a valid reason, like due to discrimination or violating a contract.

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Quid pro quo Sexual Harassment

A type of sexual harassment where someone offers a job benefit (like a promotion) in exchange for sexual favors.

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Hostile Work Environment Sexual Harassment

A type of sexual harassment that creates an intimidating, hostile, or offensive work environment, often through unwanted sexual advances, jokes, or behaviors.

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Americans with Disabilities Act

A law requiring employers to make reasonable accommodations for individuals with disabilities.

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General Partnership Liability

Each partner is personally liable for all business debts and obligations, including those of other partners.

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Corporation Liability

Shareholders have limited liability, meaning their personal assets are protected from business debts.

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What is authorized stock?

The maximum number of shares a company can legally issue. This sets a limit on how much money it can raise by selling stock.

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What is the role of a registration agent for a corporation or LLC?

A designated individual or entity responsible for receiving official mailings and legal documents on behalf of the corporation or LLC.

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What is the 'corporate veil'?

A legal concept protecting individuals associated with a business from personal liability for business debts.

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What is 'piercing the corporate veil'?

A legal action where a court removes the protection of the corporate veil, making individuals liable for business debts.

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What is a sole proprietorship?

A business owned and run by one person, with no legal distinction between the owner and the business. The owner has complete control and is personally liable for all debts and obligations.

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What is a general partnership?

A business owned and run by two or more individuals, who share profits, losses, and liabilities. Each partner has personal liability for all business debts, even if they were not directly involved in the activity that caused the debt.

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What is a corporation?

A legal entity separate from its owners (shareholders), formed under state law. Owners have limited liability, meaning their personal assets are protected from business debts. Corporations are usually more complex to create and operate.

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What is a limited liability company (LLC)?

A hybrid business structure, combining features of partnerships and corporations. Owners (members) have limited liability, similar to corporations, but often enjoy simpler tax treatment, similar to partnerships.

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Duty of loyalty (corporate)

A legal obligation of corporate managers to prioritize the company's interests over their own personal gain. Always act in the best interests of the company.

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Duty of care (corporate)

A legal obligation of corporate managers to make informed and reasonable decisions in the best interests of the company, avoiding negligence or recklessness.

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Anticipatory Breach

Where a party announces ahead of time that they're going to break the contract, it discharges the other party from any duty to perform.

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Peppercorn Theory

Even something of little value can be considered valid consideration in a contract.

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Study Notes

Business Structures

  • Sole Proprietorship: A single individual runs the business, not a separate legal entity. The owner is personally liable for all business debts. Management is by the owner. Income is taxed to the owner. Continuity of the business ends with the owner's death or cessation. Simple and inexpensive to form.
  • General Partnership: Two or more individuals share in business management, profits, and losses. Each partner is jointly and severally liable for the debts of the partnership. Management is shared among the partners. Income passes through to the partners and is taxed to them. The partnership itself is not taxed. Typically ends with a partner's death/withdrawal unless the partnership agreement specifies otherwise.
  • Limited Partnership: Has general partners who manage and are liable, and limited partners who invest but have limited liability and no active management role. Management is by the general partners. Income passes through to the partners. The partnership itself is not taxed. Limited liability for the limited partners.
  • Corporation: A separate legal entity owned by shareholders, run by a board of directors and officers. Shareholders, officers, and directors are typically not personally liable for the corporation's debts. Management by a board of directors, taxed at the corporate level; dividends to shareholders are taxed again. The business survives beyond the death or transfer of ownership. More complex to form than other structures. Annual reports, franchise/excise taxes, and specific requirements are needed.
  • Limited Liability Company (LLC): A hybrid entity combining aspects of corporations and partnerships. Members (owners) are not usually personally liable for business debts. Member(s) or managers manage the business. It can be taxed as a partnership or a corporation. Flexibility in management structures. A legal document, Articles of Organization, must be filed. Annual reports and taxes are required.

Corporation Terminology

  • Shareholders: Own a portion of the corporation.
  • Directors: Govern the corporation's overall direction and policies.
  • Officers (e.g., President, Secretary): Manage daily operations of the corporation.

Additional Concepts

  • Corporate Veil Piercing: A legal concept allowing courts to hold corporate officers, directors, or shareholders personally liable for the company's debts if the corporate structure is misused or there's wrongdoing.
  • Authorized Stock: The maximum amount of stock a company can legally issue.
  • Voting: Different procedures like straight voting and cumulative voting determine how shareholders can vote on the matters of the corporation.
  • Business Judgment Rule: Protects managers from liability for mistakes made in good faith in managing the company
  • Corporate Opportunity Doctrine: If a manager takes an opportunity that belongs to the company, this doctrine would be used for legal action.

Contract Law

  • Valid Contract Elements: Offer, acceptance, consideration, legality, capacity, and consent are required to form a valid contract.
  • Promissory Estoppel: A promise made that would induce a reasonable reliance is a valid promise, even without formal contract.
  • Quasi-Contract: An implied contract imposed by a court to prevent unjust enrichment, useful when a contract is flawed or defective.
  • Offer and Acceptance: A clear and definite offer and the unqualified acceptance create a contract for sale or services.
  • Consideration: An exchange of value between parties is needed for a contract.
  • Mirror Image Rule: Acceptance must be a mirror image of the offer; it can't include modifications.
  • Mailbox Rule: A contract is created when the acceptance of an offer is sent and not necessarily when it is received provided it's sent the proper way as agreed.
  • Capacity: The legal ability to enter a contract (like being of legal age).
  • Legality: A contract must not violate any laws or public policy.
  • Written Contracts: Certain types of contracts require written documentation.
  • Parole Evidence Rule: If a contract is written, prior agreements aren't usually legally enforceable.

Special Business Law Concepts

  • Breach of Contract: A party's failure to fulfill agreed-upon obligations in a contract.
  • Remedies for Breach of Contract: Damages, specific performance, or restitution may result from the contract violation.
  • Damages: Monetary compensation awarded to a wronged party.
  • Defenses for a Contract: Invalidity clauses, mistakes, and duress
  • Types of Damages: Direct, consequential, and incidental.
  • Employment at Will: Employees generally can be terminated by employers for any reason except for reasons prohibited by law.
  • Wrongful Discharge: An employee can legally sue an employer when the employee was improperly terminated for reasons outside of those stated in employment at-will.
  • Chapter 7 Bankruptcy: liquidation (usually for businesses).
  • Chapter 13 Bankruptcy: Reorganization (usually for individuals).

Intellectual Property

  • Patents: Legal protection for inventions. (design, utility, plant)
  • Copyrights: Legal protection for creative works.
  • Trademarks: Distinctive marks used to identify goods and services.
  • Copyright and Patents: Ownership of ideas in tangible form. You get copyright rights immediately upon creation (with some exceptions in the U.S. and elsewhere). Filing for a patent is required; the length of patent protections (and how they differ by type) is important to know.

Employment Law

  • Employment Laws: Laws to ensure worker protections and rights
  • OSHA: Workplace safety protections.
  • Discrimination Laws: Federal laws to prevent workplace discrimination (equal pay, gender, race, age)

Property Law

  • Real Property: Land and ownership interests in land.
  • Fee Simple: The most complete form of land ownership.
  • Defeasible Fee: Fee simple interest that has a condition.
  • Other Property Rights: Easements, profits, licenses
  • Adverse Possession: Acquiring property by continuous, open, and hostile possession.
  • Tenancy (types): Tenancy for years, periodic, at-will, and at sufferance, which determine the length of a lease.

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