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Chapter 34 Legal Env. of Business

a person who forms and operates a new business either by himself or herself or with others
Major forms for conducting businesses and professions
1. sole proprietorship 2. general partnership 3. limited partnership 4. limited liability partnership 5. limited liability company 6. corporation
Sole proprietorship
a form of business in which the owner is actually the business; the business is not a separate legal entity
Sole Proprietor
the owner of a sole proprietorship
Advantages of Sole Proprietorship
1. easy and does not cost a lot
2. the owner has the right to make all management decisions
3.sole proprietor has the rights to all profits
4. can be easily transferred or sold if and when the owner desires to do so
Disadvantages of Sole Proprietorship
1. access to capital is limited
2. legally responsible for all contracts and torts he or the employees commit
3. unlimited personal liability of the sole proprietorship
General Partnership
an association of two or more persons to carry on as co owners of a business for profit
Uniform Partnership Act (UPA)
a model act that codifies partnership law
4 Criteria to Qualify as a General Partnership
1. must be an association of two or more persons
2. carrying on a business as co owners and for a profit
General Partnership Agreement
a written agreement that partners sign to form a general partnership
Rights of General Partners
1. right to participate in management
equal vote on partnership matters
2. right to share in profits
share earnings from the investment of capital
3. right to compensation
income earned is given to partners
4. right ti indemnification
right to be reimbursed for expenditures incurred on partners behalf
5. right to return of loans
6. right to return of capital
7. right to information
Duties of General Partners
1. duty of loyalty
2. duty of care
ex: not a persons fault if suv sales drop because of something that happens outside their control
3. duty to inform
ex: ted knows a piece of property has toxic waste but doesn’t tell partner
4. duty of obedience
losses of 100,000 by himself when it was supposed to be a collective loss so he is held liable for it
5. right to an accounting
if a partner feels the need to sue they can do this in order to rightfully collect what is theirs
Breaches of Loyalty
1. self dealing
partner tries to handle things on their own such as buying or selling goods
2. usurping a partnership opportunity
cannot take an opportunity without consenting the partner
3. making secret profits
4. competing with the partner
tort liability of general partners
joint and several liability-a plaintiff can sue one or more partners separately and if they are successful the plaintiff can recover the entire amount of the judgement from the defendant partners found liable

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