Podcast
Questions and Answers
What is a key consideration for business proprietors when selecting a form of entity?
What is a key consideration for business proprietors when selecting a form of entity?
- Limitation of liability (correct)
- Number of employees
- Size of the target market
- Location of business premises
Which term is commonly used in civil law countries for both partnerships and limited companies?
Which term is commonly used in civil law countries for both partnerships and limited companies?
- Enterpreneurship
- Société (correct)
- Corporation
- Sole proprietorship
In the context of business structures, what does 'société en nom collectif' refer to?
In the context of business structures, what does 'société en nom collectif' refer to?
- Limited liability company
- General partnership (correct)
- Public corporation
- Sole proprietorship
What aspect do the laws of most countries recognize when categorizing forms of business organisations?
What aspect do the laws of most countries recognize when categorizing forms of business organisations?
What is a common characteristic of various types of companies with limited liability?
What is a common characteristic of various types of companies with limited liability?
What factor is typically NOT a consideration for business proprietors when selecting a form of structure?
What factor is typically NOT a consideration for business proprietors when selecting a form of structure?
What is the main characteristic of a sole proprietorship?
What is the main characteristic of a sole proprietorship?
Which of the following is a disadvantage of a sole proprietorship?
Which of the following is a disadvantage of a sole proprietorship?
In a sole proprietorship, who bears the losses and lawsuits of the business?
In a sole proprietorship, who bears the losses and lawsuits of the business?
What is a key advantage of a sole proprietorship in terms of tax?
What is a key advantage of a sole proprietorship in terms of tax?
Why may a sole proprietorship lack continuity?
Why may a sole proprietorship lack continuity?
Which form of business organization has both easy formalities and cost-effectiveness as advantages?
Which form of business organization has both easy formalities and cost-effectiveness as advantages?
What is a characteristic of a general partnership?
What is a characteristic of a general partnership?
Under UK and US law, how can a partnership be created?
Under UK and US law, how can a partnership be created?
What is a disadvantage of a general partnership?
What is a disadvantage of a general partnership?
In the scenario provided, what would likely indicate a partnership between X and Y?
In the scenario provided, what would likely indicate a partnership between X and Y?
Why is it advisable to have a written partnership agreement under French law?
Why is it advisable to have a written partnership agreement under French law?
What distinguishes partnerships from companies in terms of formalities required for creation?
What distinguishes partnerships from companies in terms of formalities required for creation?
What is the central feature common to all types of limited companies?
What is the central feature common to all types of limited companies?
Which feature of a limited company allows it to make contracts on its own behalf?
Which feature of a limited company allows it to make contracts on its own behalf?
What is the consequence of a company having rights and obligations under the law?
What is the consequence of a company having rights and obligations under the law?
Why do individual members of a limited company have their personal liability limited?
Why do individual members of a limited company have their personal liability limited?
Which aspect of a limited company ensures that individual members are not held responsible for the company's debts beyond their investment?
Which aspect of a limited company ensures that individual members are not held responsible for the company's debts beyond their investment?
How does the limited liability feature of a company benefit its members when company assets are insufficient to cover liabilities?
How does the limited liability feature of a company benefit its members when company assets are insufficient to cover liabilities?
What is the main difference between a branch and a subsidiary?
What is the main difference between a branch and a subsidiary?
What is the consequence for the parent company in terms of liability for debts and liabilities?
What is the consequence for the parent company in terms of liability for debts and liabilities?
In which type of company are shares freely transferable unless stated otherwise in the bylaws?
In which type of company are shares freely transferable unless stated otherwise in the bylaws?
What approval is required for the transfer of shares to a third party in most cases?
What approval is required for the transfer of shares to a third party in most cases?
Which type of company has an obligation to hold an annual meeting each year to approve the annual accounts?
Which type of company has an obligation to hold an annual meeting each year to approve the annual accounts?
In what type of company are legal challenges related to shareholders' meetings mentioned?
In what type of company are legal challenges related to shareholders' meetings mentioned?
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Study Notes
Types of Business Organizations
- A business must be structured within a defined legal framework, which varies by jurisdiction.
- The law provides multiple options for business structures, and proprietors choose the form that best suits their needs.
Sole Proprietorship
- Simplest form of business organization.
- No legal distinction between owner and the business.
- Advantages: • Proprietor owns the business and receives all profits. • Easy and cost-effective to set up, with simple formalities. • Only personal income tax is paid.
- Disadvantages: • Unlimited personal liability for the proprietor. • Creditors can pursue the owner's personal assets. • Limited capacity to raise funds. • Business may cease to exist if the owner dies or becomes incapacitated.
General Partnership
- Recognized in both common law and civil law jurisdictions.
- Involves two or more persons jointly pursuing a business purpose and sharing profits and losses.
- Examples of general partnerships: • France: Société en nom collectif (SNC). • UK: No special formalities required to create a partnership. • US: Partnership agreement can be expressed or implied.
- Advantages: • No special formalities required to create a partnership. • Partners have flexibility in determining how the business is run.
- Disadvantages: • Unlimited liability of partners for the business's debts and legal obligations.
Company with Limited Liability
- Most widely used form of business organization.
- Two central features: • The company has a legal personality distinct from its human members. • Members have limited personal liability, limited to the amount they invested.
- Characteristics: • The company has rights and obligations under the law. • The company has contractual capacity and can make contracts on its own behalf. • The company can own property in its own right. • The company can sue and be sued in its own name.
Branch and Subsidiary
- Key differences: • A branch is a mere emanation of the parent company, with no legal existence or distinct assets or liabilities. • A subsidiary is an independent entity with its own legal existence, bylaws, and capital contributions.
- Consequences: • The parent company has unlimited liability for any debts and liabilities incurred by the branch. • The parent company has limited liability for the debts and liabilities incurred by its subsidiary in case it becomes insolvent.
Transfer of Shares
- Key differences between SAS, SARL, and SA: • SAS: Shares are freely transferable, unless otherwise provided in the bylaws. • SARL: The transfer of shares to a third party is subject to the prior approval of the majority of shareholders. • SA: Shares are freely transferable, unless otherwise provided in the bylaws.
Shareholders Meetings
- Requirements for SAS, SARL, and SA: • Obligation to hold an annual meeting each year to approve the annual accounts.
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