Legal Forms Legal Forms of Business of Business

OrganizationOrganizationChapter 26.1Chapter 26.1

Basics of Law ApplicationsBasics of Law Applications Now that we have looked at the basis Now that we have looked at the basis

of law, as well as the legal elements of law, as well as the legal elements which make up a crime and tort, you which make up a crime and tort, you are to think about how they apply to are to think about how they apply to the rest of the course materialthe rest of the course material

I challenge you to think from a I challenge you to think from a lawyer’s perspective on how those lawyer’s perspective on how those concepts apply to the remaining concepts apply to the remaining course materialcourse material

Major Forms of Business Major Forms of Business OrganizationOrganization

Sole ProprietorshipSole Proprietorship

PartnershipPartnership

CorporationCorporation

There are variations of each of these There are variations of each of these that we will discuss in classthat we will discuss in class

Requirements for Organizational Requirements for Organizational Start-upStart-up

Sole Proprietorship: No requirements – Sole Proprietorship: No requirements – get a business license and register your business get a business license and register your business namename

Partnership: Agreement of the parties Partnership: Agreement of the parties (somewhat difficult) – create a partnership (somewhat difficult) – create a partnership agreement that both agree toagreement that both agree to

Corporation: Need assistance of legal counsel for Corporation: Need assistance of legal counsel for adhering to state charter and paying adhering to state charter and paying organizational fees – complicated processorganizational fees – complicated process

Dissolution/Duration of Dissolution/Duration of Business – When it endsBusiness – When it ends

Sole Proprietorship: Death or Sole Proprietorship: Death or disinterest of proprietordisinterest of proprietor

Partnership: Death, bankruptcy, or Partnership: Death, bankruptcy, or withdrawal of withdrawal of ANYANY partner partner

Corporation: Ends when charter is Corporation: Ends when charter is terminated – may last forever terminated – may last forever (perpetual)(perpetual)

Decision-Making AuthorityDecision-Making Authority Sole Proprietorship: owner has total Sole Proprietorship: owner has total

controlcontrol

Partnership: each partner has equal power Partnership: each partner has equal power unless specified in the agreementunless specified in the agreement

Corporation: directors commonly elected Corporation: directors commonly elected by shareholders (owners) set company by shareholders (owners) set company policy and appoint officers (CEO, CFO, etc.)policy and appoint officers (CEO, CFO, etc.)

Ability to Attract Professional Ability to Attract Professional Employees or FinancesEmployees or Finances

Sole Proprietorship: PoorSole Proprietorship: Poor

Partnership: ModeratePartnership: Moderate

Corporation: ExcellentCorporation: Excellent

Legal Status and LiabilityLegal Status and Liability Sole Proprietorship: Owner is the Sole Proprietorship: Owner is the

business from a legal perspectivebusiness from a legal perspective no separation of personal and business no separation of personal and business

assets, UNLIMITED liability for debtassets, UNLIMITED liability for debt

Partnership: Owners are the business Partnership: Owners are the business from a legal perspectivefrom a legal perspective typically no separation of assets, UNLIMITED typically no separation of assets, UNLIMITED

liability (except limited partners)liability (except limited partners)

Corporation: Business is own legal Corporation: Business is own legal entity, liability limited to each entity, liability limited to each shareholder’s investmentshareholder’s investment

BOOKWORK – Due FridayBOOKWORK – Due Friday Chapter 26.1 # 11-15, pg. 476Chapter 26.1 # 11-15, pg. 476