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Business Law II Test 1 Review Sheet & Study Guide

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Business Law II Test #1 Review Sheet Chapter 36: Business Organizations: ➔ Sole proprietorship ➔ LLP/LP ➔ LLC ➔ Corporation *Top of list: Individual *Bottom of list: Entity (separation of control from ownership) *Move down the list: Decrease in personal liability LLC: Limited liability company ➔ Law is not as well known Sole proprietorship: ➔ Owner is the business ◆ Sole proprietor can benefit in a lawsuit (business is indistinguishable from the owner) ➔ Receives all the profits and assumes all of the risk (burden of any losses or liabilities incurred by the business enterprise) ➔ Flexibility: Free to make decisions ➔ Business form with no formalities (adapt quickly) ➔ Total control, ease of formation, easy to transfer/sell (don’t need approval from anyone else) ➔ Flow through taxes (only pay personal income taxes) ◆ Taxes flow through the business to the individual ➔ Offsetting risks: ◆ Insurance (cover liabilities most of the time) ● Don’t cover fault of contractual obligation ● Liability can easily exceed policy limits ➔ Disadvantages: Unlimited personal liability, bare the entire risk of loss, business dies with the owner, raising capital (limited to his or her personal funds and funds from any loans) *Fraud: Prove with clear and convincing evidence (high standard) that the defendant acted intentionally and caused harm Franchise: ➔ License to operate under company name (owner of intellectual property licenses others to use it in t ...
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