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Management 240 - Legal Business Environment - Terms and Concepts


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Chapter 1:
Administrative law
Consists of rules, orders, and decisions of administrative agencies.
When case is being appealed from original case. Appealing party is called appellant.
The party against whom the appeal is taken. Opposite of appellant.
Reference to a publication with legal authority such as statute or court decision.
Civil law,
Spells out the rights and duties between person to person and their government, and relief if rights are violated. In civil trial, party is suing another to make the other party comply or pay for damages.
Common law,
A body of general rules that applied throughout the entire English realm. Passed on to US.
Constitutional law,
The law that is expressed in the federal constitution and in the individual constitutions of the states.
Court of law,
The court that was responsible for awarding remedies to peoples wrongs back in the day.
Court of equity,
When no adequate remedy at law is available, this court was established examine of the claims were fair and award new and unique remedies.
A party being sued.
“Equity aids the vigilant, not those who rest on their rights” (equity will not help through who neglect their rights for an unreasonable period of time)
In equity proceedings, petitioner is the party which brings the lawsuit.
The suing party.
A decision which furnishes an example or authority for deciding similar cases.
Procedural law,
PL consists of all laws that explain the methods of enforcing the right established by substantive law. Ex. Laws which enforce the restriction on peeing in public.
Remedy at law,
Compensation in form of: 1 land 2 items of value 3 money. These were the 3 remedies given back in old England. Normally takes the form of money damage.
Remedy in equity,
Remedies from Court of Equity. Ex. Ordering a party to perform an agreement as promised.
Remedies from Court of Equity. Ex. Ordering a party to perform an agreement as promised.
Stare decisis,
Latin for “to stand on decided cases”. Sticking to the precedents.
Statutory law,
Laws enacted by a legislative body at any level of government. Includes local ordinances.
Substantive law.
Substantive law consists of all laws that define, describe, regulate, and create legal rights and obligations. Ex. Laws which restrict peeing in public.
Chapter 2:
The defendant response to a complaint. In the answer, the defendant either admits or denies each allegation and sets for defenses for the allegations. Any allegations not denied will be deemed by the court to be admitted.
Affirmative defense,
Admitting to truth of allegation but raising new facts to show he should not be held liable. Ex. The person accused of physical harm can raise self defense.
Filed with the court. Initial action of a lawsuit.
Default judgment,
If defendant does not respond in the proper time, default judgment is awarded and the plaintiff is awarded the damages alleged in her complaint.
The sworn testimony by a party of the lawsuit or by any witness, recorded by an authorized court official.
Process of obtaining information from the opposing party or from witnesses prior to trial is known as discovery. Includes gaining access to witnesses, documents, records, and other types of evidence.
Diversity of citizenship,
Federal courts can exercise rights to take a case, even if it doesn’t involve state law, if: 1. Plaintiff and defendant must resident in different states. 2. The dollar amount in controversy must exceed $75,000. Additionally, things to do with foreign countries.
Federal question,
When plaintiffs cause for action is based, even in part, on the US Constitution, federal question arises. The case can than be filed in federal court.
In personam jurisdiction,
A particular court can exercise this personal jurisdiction over any person or business which resides in a certain geographic area.
In rem jurisdiction,
A particular court can exercise this property jurisdiction over property located within its boundaries.
Written questions for which answers are prepared and then signed under oath. Are directed toward a party in a lawsuit.
Judicial review,
System of checks and balances. Judicial review enables the judicial branch to check the powers of the other branches.
“the power to speak the law”. The right to hear a case.
Long-arm statute,
Court exercise personal jurisdiction on out-of-state defendant concerning activities which took place within the state. Minimum contacts, within the state, must be demonstrated to exercise jurisdiction.
The complaint and the answer, together, are known as the pleadings. They notify each party of the claims of the other and the specific issues involved in the case.
Service of process,
Serving the defendant with a summons and a copy of complaint. Defendant must be notified before court can exercise jurisdiction.
Standing to sue,
Party must have standing to sue to being a lawsuit. Must have sufficient “stake” in the matter to justify relief from the court.
Notifies defendant that he must answer to complaint within a specified time period (20 days in federal court) or suffer default judgment.
Two courts may exercise jurisdiction over one case, but it may be more appropriate or convenient to hear the case in one court than in the other.
Voir dire.
Method in which jury is selected. Usually with questionnaire.
Chapter 3:
The settling of a dispute by an impartial third party (besides the court). 3rd party’s decision is legally binding.
Parties attempt to negotiate an agreement with assistance of neutral third party.
Parties come together informally, with or without attorneys, and try to reach a settlement.
Chapter 4:
The study of what constitutes right or wrong behavior. Focuses on morality and the way moral principles should be applied in one’s conduct of daily life.
“The greatest good for the greatest number.” Cost-benefit analysis.
Chapter 5:
Bill of Rights,
First 10 amendments of the C. Adopted in 1791.
Checks and balances,
System which the 3 government branches to supervise the others.
Commerce clause,
Greatest impact on commerce than any other provision on C. reserve right of trade and commerce among states to the national government. The CC provides the basis for the national government’s extensive regulation of state and even local affairs.
Due process clause,
Procedural and substantive.
Equal protection clause,
5th amendment. “deny to any person within its jurisdiction the equal protection of the law”. Applied to states through the 14th amendment.
Establishment clause,
1st amendment states that government may not establish or promote a religion. (over another)
Full faith and credit clause,
Refers to civil matters. Rights established under deeds, wills, and contracts will be honored by the other states.
Police powers,
The right of the states to regulate what occurs inside of its own borders. Seems in part from the 10th amendment. Any power not delegated to the national government is delegated to the states.
When states and federal gov have concurrent powers. Congress may choose to act exclusively in the area. When this occurs, a valid federal statute takes precedence over the conflicting state statute.
Privileges and immunities clause,
State must have substantial reason to treat a foreign state citizen differently from their own citizens.
Probable cause,
Trustworthy evident that would convince a reasonable person that a search or seizure is justified rather than not.
Search warrant,
Law enforcement must obtain a search warrant, order from judge or public official authorizing the search and seizure.
Supremacy clause
Article VI of C. Federal law supersedes state law. If conflict, national wins.
Chapter 6:
Enabling legislation,
To create an administrative agency, congress must pass enabling legislation which specifics the name, purpose, functions, and powers of the agency. Agency’s can only exercise those powers given to them in the enabling legislation.
A major function of administrative agencies is rulemaking. The making of regulatory rules.
Chapter 7:
Actus reus,
The guilty act in a criminal offense.
Willful and malicious burning of a building owned by another is arson. Designed to protect human life. Extended to cover all buildings regardless of ownership.
Beyond a reasonable doubt,
Government must prove beyond a reasonable doubt for jury to convince a person.
Breaking and entering in a dwelling. Or just entering. Building not required to be a dwelling.
Computer crime,
American Bar Association defined it as any act that is directed against computers and computer parts, that uses computers as instruments of crime, or that involve computers and constitutes abuse.
Wrong against society proclaimed in a statute and punishable by time or death.
Cyber crime,
Crime which occurs in cyberspace.
When a person entrusted in the property or funds of another fraudulently appropriates those funds or property. Occurs when people steal from employers (banks, ceo, accountants)
Serious crime punishable by death of imprisonment for one year or longer.
Fraudulent making or altering of any writing in a way that changes the legal rights and liabilities of another. Signing someone’s name.
Identity theft,
Occurs when wrongdoer steals ID information – name SS number – and uses the information to access the user’s financial resources. Has grown as of a result of the internet.
Individuals must be formally charged by issue of an indictment by a grand jury.
Grand jury’s usually called in serious crimes. In lesser crimes, individuals can be formally charged by information, or criminal compliant. Prosecutor determines if there is sufficient evidence to merit a trial in court.
Person who wrongfully or fraudulently takes and carries away another individual’s property. Including intent to deprive an owner permanently of property. Does not require the fear or force of robbery. Computer programs, natural gas, cell phone calls to obtain phone card numbers.
Mens rea,
The criminal intent. The wrongful mental state is typically required for criminal liability.
Punishable by a fine or imprisonment for up to a year.
Violent crime. Taking of money, personal property, or any other article of value from a person by means of force of fear.
SD can be used to protection one’s dwelling, protect property, and prevention of a crime. Non deadly force can be used to prevent the imminent use of criminal forces. Deadly force is likely to result in death of serious bodily harm. It cannot be used unless reasonable belief that imminent death or grievous bodily harm will result otherwise.
Chapter 9:
Voluntary act by offeree that shows assent (agreement) to the terms of the offer. Must be unequivocal and must be communicated to the offeror. Unequivocal is the mirror image rule.
Value (such as cash) given in return for a promise (such as promise to sell stamps on receipt of payment). Bargained for exchange. Distinguishes between gifts and contracts.
Legal binding contract between two or more parties who agree to perform or refrain from performing some act now or in future.
Genuineness of assent,
Voluntary consent. Can be used as defense to make contract unenforceable. Can be mistake, misrepresentation, undue influence, or duress. No true “meeting of minds”
Mailbox rule,
An acceptance is effective immediately when it is dispatched by mail, even if offeror never receives it.
Mirror image rule,
In accepting an offer, it must be mirrored by the offeree. It changed at all, it constitutes a rejection and a counteroffer.
Mutual assent,
The agreement. The reason why I established the contract is because of my mutual assent of contract.
Offer is a promise or commitment to do or refrain from doing something specified in the future.1. Offeror must have serious intention to become bound by the offer. 2. The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract. 3. The offer must be communicated by the offeror to the offeree, resulting in the offeree’s knowledge of the offer. If offeree is accepted, agreement is formed and contract arises if other essential elements are present.
Persons assurance that the person will or will not do something. Basically all contracts are promises. Some are moral (I will take you to lunch) some are legal binding (contracts).
Promissory estoppel,
The promisor (offeror) is barred from revoking the offer because the offeree had detrimentally relied on the promise.
The offeror’s act of withdrawing an offer. Is successful if offer was revocable, and is communicated to the offeree before they accepted. Effective when offeree receive notice. To revoke public offer, store must revoke in all the newspapers it had posted offer in.
Statute of Frauds
List of acts which need to be in writing. 1. Contracts involving interest in land. 1. Contract that cannot by their terms be performed within one year from the date of formation. 3. Collateral, or secondary, contracts, such as promises to answer for the debt or duty of another. 4. Promises made in consideration of marriage. 5. Under the UCC, contracts for the sale of goods priced at $5000 or more. (as of 2003 amend.)
Chapter 10:
Breach of contract,
Is the nonperformance of a contractual duty.
A possible future event which would trigger the performance of a legal obligation or terminate an existing obligation.
Consequential damages,
Foreseeable damages that result from breach. Special damages. As a consequence of you not selling me the product (which you knew I was going to resell) I lost out on profit, that is consequential damages. I can get that from you.
To terminate the contractual duties. Encompasses any time of termination.
Liquidated damages,
A provision in the contract which specifies that a certain dollar amount is to be paid in the event of a future default of breach.
Mitigation of damages,
When breach of contract occurs. MoD occurs it is duty of innocent injured party to mitigate (reduce) the damages they suffer. Finding a new similar job immediately after wrongful termination.
When both parties of contract agree to substitute a third party for one of the original parties. 1. A previous valid obligation. 2. An agreement by all the parties to a new contract. 3. The extinguishing of the old obligation (discharge of the prior party). 4. A new contract that is valid.
The performance laid forth in the contract. Must be completed to discharge a contract.
Returning of goods, property, funds previously conveyed in order to rescind a contract by both parties. Can also occur as result of breach or tort.
Specific performance.
Requiring the breaching party to perform exactly as called for in the contract. Granted with inadequate remedy or unique. Never granted in personal service contract.
Chapter 12:
An intentional, unexcused act creating in another person a reasonable apprehension or fear of immediate harmful or offensive contact (e.g., pointing a gun at someone).
Assumption of the risk,
A plaintiff who voluntarily enters a risky situation, knowing the risk involved, may not recover from the alleged tortfeasor.
Intentional, unexcused and harmful or offensive contact (e.g., firing the gun).
Causation in fact,
An act or omission without which the plaintiff’s injury would not have occurred.
Comparative negligence,
More popular today than contributory negligence, a comparative negligence scheme permits plaintiff to recover only for the percentage of his or her injury or loss that was not caused by plaintiff’s own negligence. Some jurisdictions will not award damage if plaintiff is more than 50% responsible.
Contributory negligence,
No matter how insignificant the plaintiff’s own negligence is when compared to that of the defendant, in a minority of jurisdictions any negligence on the part of the plaintiff that contributed in any way to the injury of which plaintiff complains will bar the plaintiff from recovering damages from defendant.
Taking, using, selling, or retaining possession of personal property that belongs to another without the other’s permission or legal authorization. Excused under necessity (follow a law)
Anything published or publicly spoken that injures another’s character, reputation, or good name.
Cyber tort,
Online defamation and spam. OD hard because of ISP are absolved. Spam is unsolicited emails or newsgroup posting.
Duty of care,
The duty of all persons to exercise reasonable care in their dealings with others. The degree of care expected of a hypothetical “reasonable person”; not necessarily how a reasonable person would act, rather how a reasonable person should act.
Intentional tort,
A wrongful act committed knowingly and with the intent to commit the act (not necessarily with the intent to do harm).
Defamation in written form.
Failing to exercise the standard of care that a reasonable person would exercise in similar circumstances.
Negligence per se,
An act or omission in violation of a statutory duty or obligation. Negligence per se often arises where the tortfeasor both violates a criminal statute or ordinance and causes injury to another party.
Proximate cause,
Exists when the connection between an act and an injury is direct enough to impose liability. A common and critical element of proximate cause is foreseeability – if the consequence of the act or omission or the victim who is harmed by the act or omission is unforeseeable, no proximate cause exists.
Punitive damages,
Designed to punish the tortfeasor for particularly egregious conduct and to deter similar conduct in the future.
Reasonable person standard,
Tort law presumes that the reasonable person will be, at a minimum: (1)attentive, (2)aware of his or her environs, (3)careful, (4)conscientious, (5)even tempered, and (6)honest.
Res ipsa loquitur,
A doctrine under which negligence may be inferred to have caused an injury or loss if the event resulting in the injury or loss would not occur in the absence of negligence.
Defamation in oral form.
A civil wrong, not arising from a breach of contract or other agreement. A breach of a legal duty that proximately causes another person harm or injury.
Trespass to land,
Entry onto, above, or below the surface of land without the owner’s permission or legal authorization. If entering land to do illegal act, deemed trespass by law. If not, owner must establish that, 1. Ignored no trespassing sign, or 2. Ignored request to leave the property.
Trespass to personal property.
Taking or harming another’s personal property, in such a way as to interfere with the other person’s right to exclusive possession of his personal property, without the owner’s permission or legal authorization.
Chapter 13:
Strict liability,
Product liability,
Market-share liability,
plaintiffs have been permitted to sue any or all manufacturers of an allegedly defective product, even if the plaintiff does not know which of those manufacturers made the product that caused the plaintiff’s injuries. In these cases, all of the product’s manufacturers (and, in some cases, distributors) may be held liable in proportion to each firm’s respective share of the market.
Privity of contract,
Product misuse,
Statute of repose,
Unreasonably dangerous product.
A product so defective as to threaten a consumer’s health and safety either because (1) the product is dangerous beyond the expectation of the ordinary consumer, or (2) the manufacturer failed to produce an economically feasible, less dangerous alternative. Falls in following categories: 1. Manufacturing Flaw: The manufacturer failed to exercise due care in the manufacture, assembly, or testing of the product; 2. Design Defect: The product, even if manufactured perfectly, is unreasonably dangerous as designed – often because an economically feasible, less dangerous alternative was not available to the manufacturer; and 3. Inadequate Warning: The product, even if designed and manufactured perfectly, lacks adequate warnings or instructions for the consumer or other end user.
Chapter 14:
Intellectual property,
Property resulting from intellectual, creative processes. Patents, trademarks, and copyrights are examples of IP.
Certification mark,
A mark used by one or more persons, other than the owner, to certify the regions, materials, mode of manufacture, quality, or accuracy of the owner’s good or services. When used by members of a cooperative, association, or other organization, such as a mark referred to as a collective mark. Examples are “Good Housekeeping seal of approval” and “UL Tested”.
Collective mark,
A mark used by members of a cooperative, association, or other organization to cetify the regions, materials, mode of manufacture, quality, or accuracy of the owner’s good or services. Examples of CM include the labor unions marks found on tags of certain products and the credits of movies, which indicate the various associations and organizations that participated in the making of the movies.
Exclusive rights of authors to publish, print, or sell an IP for a statutory period of time. A copyright has the same monopolistic nature as a patent or trademark, but it differs in that it applies exclusively to works of art, literature, and other works of authorship, including computer programs.
Act of registering a domain name that is the same as, or confusingly similar to, the trademark of another then offering to sell that domain back to the trademark owner.
cyber mark,
A trademark in cyberspace.
With respect to trademarks, a doctrine under which distinctive or famous trademarks are protect from certain unauthorized uses of the mark regardless of a showing of competition or a likelihood of confusion. Congress created a federal cause for action for dilution in 1995 with the passge of the federal trademark dilution act.
Distributed network,
A network that can be used by persons located (distributed) around the country or the globe to share computer files.
Domain name,
The series of letters and symbols used to identify site operators on the internet.
Meta tag,
Words inserted into a websites keywords to increase appearance in search engines.
A gov’n grant that gives an inventor the exclusive right or privilege to make, use, or sell his invention for a limited time period. The word patent usually refers to some invention and designates either the instrument by which patent righst are evidenced or the patent itself.
Service mark,
Mark used in the sale or advert of service. Used to distinguish the services from others. Titles, character names, and other distinctive features of radio and tv programming may be registered as service marks.
Trade dress,
Image and overall appearance of product. The menu décor style of restaurant. Subject to same protection as trademark.
Trade name,
Term used to indicate part of all of business name and is directly related to reputation and goodwill of business. Subject to same protection as trademark.
Trade secret,
Information or a process that gives a business an advantage over competitors who do not know the information or process.
Mark, motto, device, or implement that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they may be identified on the market and their origins made known. Once TM is established, the owner is entitled to it’s exclusive right.
Chapter 15:
A person to whom a debt is owed by another person.
A person who owes a debt to another.
Adequate protection doctrine,
In bankruptcy law, protects secured creditors from losing their security as a result of an automatic stay on legal proceedings by creditors against the debtor once the debtor petitions for bk relief. In some cases, the bk court may provide adequate protection by requiring the debtor or trustee to pay the creditor or provide additional guaranties to protect the creditor against the losses suffered by the creditor as a result of a stay.
Artisan's lien,
A possessory lien given to a person who has made improvements and added valu to another person’s personal property as security for payment for the services preformed.
In the context of judicial liens, a court-ordered seizure and taking into custody of property prior to securing of a judgment for a past-due debt.
Automatic stay,
In bk proceedings, the suspension of virtually all litigation and other actions by creditors against the debtor or the debtor’s property; the stay is effective the moment the debtors files a petition in bk.
Cram-down provision,
Allows court to confirm debtors chapter 11 reorganization plan even though only one class of creditors has accepted it. The court must demonstrate that the plan does not discriminate unfairly against any creditors and is fair and equitable.
Creditor's composition agreement,
Formed between a debtor and his creditors in which the creditors agree to accept a lesser sum that that owed by the debtor in full satisfaction of the debt.
Debtor in possession,
Chap 11 bk proceedings, a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations.
The failure to observe a promise or discharge an obligation. The term is commonly used to mean the failure to pay a debt when it is due.
Equity of redemption,
The right of the mortgagor who has breached the mortgage agreement to redeem or purchase the property prior to foreclosure proceedings.
A legal process used by a creditor to collect a debt by seizing property of the debtor (such as wages) that is being held by a third party (such as employer).
A person who agrees to satisfy the debt of another only after the principal debtor defaults; a guarantor’s liability is thus secondary.
Homestead exemption,
Law permitting a debtor to retain the family home, either in it’s entirety or up to a specified dollar amount, free from the claims of unsecure creditors or trustees in bk.
A corporate officer or director, or other employee or agent, with access to confidential information and a duty not to disclose that information in violation of the insider-trading law.
An encumbrance on a property to satisfy a debt or protect a claim for payment of the debt.
In bk, the sale of all nonexempt assets of the debtor and the distribution of the proceeds to the creditors. Chap 7
Mechanic's lien,
A statutory lien on the real property of another, created ton ensure payment for work performed an materials furnished in the repair or improvement of real property, such as a building.
A written instrument giving a creditor (mortgagee) an interest in (a lien on) the debtors (mortgagor) property as security for the debt.
The creditor who gives the money.
The debtor who owes the money.
Order for relief,
Court grant of assistance to a complainant. In bk, the order relieves the debtor of the immediate obligation to pay the debt listed in the bk petition.
Petition in bankruptcy,
Filed with bk court to start proceedings. The official forms required for the petition in bk must be completed accurately, sworn to under oath, and signed by the debtor.
In bk proceedings, property transfer or payments made by the debtor that favor (give preference to) one creditor over others. The bk trustee is allowed to recover payments made both voluntarily and involuntarily to one creditor in preference over another.
Preferred creditor,
In the context of bk, a creditor who has received a preferential transfer from a debtor.
Reaffirmation agreement,
Between creditor and debtor, debtor reaffirms debt and promises to pay. To be enforceable must be made prior to discharge of debt by bk court.
Right of contribution,
The right of a co-surety who pays more than his proportionate share on the debtors default to recover the excess paid from the other co-sureties.
Right of reimbursement,
Legal right of person to be restored, repaid, or indemnified for costs, expenses, or loses incurred or expended on behalf of another.
Right of subrogation,
The right of person to stand in the place of (substitute) another, giving the sub party the same legal rights that the original party had.
Statutory period of redemption,
Time where you can redeem your land after the foreclosure or judicial sale.
A person, such as a cosigner on a note, who agrees to primarily responsible for the debt or another.
Express contract in which a third party to a debtor-creditor relationship promises to be primary responsible for debtors obligation.
One who holds title to property for the uses or benefit of another.
U.S Trustee,
A government official who performs certain administrative tasks that a bk judge would otherwise have to perform.
Out of court payment plan between debtor and creditor to work for discharge.
Writ of attachment,
Court order to direct sheriff or so to seize none exempt property.
Writ of execution.
Seizing after shit goes down
Chapter 16:
Articles of partnership,
A written agreement that sets forth the rights and obligations of each partner with respect to the partnership.
Buyout agreement,
Charging order,
Confession of judgment,
A partner may cease being associated with the partnership’s business, inter alia: (1)by notifying her partners that she wishes to withdraw, (2)due to an event specified in the partnership agreement, (3)by unanimous vote of the other partners under one or more of the circumstances set forth in UPA § 601, (4)by judicial (or arbitral) order, or (5)due to death, incapacity, bankruptcy, or assigning her partnership interest for the benefit of creditors.
The formal disbanding of a partnership, which can be brought about by⬝ (1)The terms of the partnership agreement, (2)voluntary or involuntary withdrawal, (3)the addition of one or more new partners, (4)death of a partner, (5)bankruptcy of a partner or of the partnership, or (6)judicial decree.
A relationship where the owner of a trademark, trade name, or copyright (the franchisor) allows another person or entity (the franchisee) to use that trademark, trade name, or copyright, under specified conditions or subject to particular limitations, in selling goods or services.
Information return,
Joint and several liability,
A third party may sue one or more individual partners, without suing all of the partners, and hold any partners sued fully liable for any judgment.
Joint liability,
If a third party sues an individual partner for, e.g., a partnership debt, the partner sued has the right to insist that her other partners be joined as defendants (and share the burden of any judgment).
An agreement by two or more persons to carry on, as co-owners, a business for profit.
Partnership by estoppel,
Whenever a third party has reasonably and detrimentally relied on the representation, by a partner, that a non-partner was part of the partnership, the non-partner is deemed to be the partnership’s agent and the partnership is liable for his acts.
Sole proprietorship,
A business owned by a single person or family.
Winding up.
Once dissolution is formalized and notice has been given to all partners and all affected third parties, the partners are only authorized to (1) complete transactions begun, but not completed, as of the date of dissolution, and (2) wind up the partnership’s affairs (i.e., collect and preserve partnership assets, pay partnership debts, and account to each partner for the value of his interest in the partnership).
Chapter 17:
Articles of organization,
Articles of Organization require: Name of Business. Principal Address. Name and Address of Registered Agent. Names of the Owners; and How the LLC will be managed.
Certificate of limited partnership,
Forming a Limited Partnership requires complying with relevant statutes and preparing a certificate of limited partnership and filing it with the appropriate authorities.
Family limited liability partnership (FLLP),
An LLP in which the majority of the partners are persons related by blood or marriage or fiduciaries of persons so related. All of the partners must be natural persons.
General partner,
Partner who manage the business and are personally liable for the partnerships debts. Have fiduciary obligation to LP’s
Limited liability company (LLC),
A hybrid form of business, which is taxed like a partnership while offering owners the limited liability of a corporation.
Limited liability limited partnership (LLLP),
An LP in which the liability of the general partner, as well as the limited partners, is limited to the amount of his investment in the firm.
Limited liability partnership (LLP),
An LLP, which allows its members to enjoy the tax benefits of partnership, is designed for professionals who historically have done business as partners (e.g., accountants, attorneys) but who want to limit their liability for their partners’ (but not the partnership’s or their own) misdeeds.
Limited partner,
Partner who contribute only assets and do not participate in the management of the business. Can be liable of 3rd party if they believe, based on conduct, that LP is GP.
Limited partnership (LP),
A partnership consisting of one or more general partners, who manage the business and are personally liable for the partnerships debts, and one or more limited partners, who contribute only assets and do not participate in the management of the business.
Owners of LLCs are called members.
Operating agreement.
An agreement, usually written, among the members of an LLC, addressing management, profit-sharing, transfer of ownership, dissolution, and other important issues. The operating agreement may also include provisions governing decision making procedures, voting rights, members’ meetings, and the like.
Chapter 18:
Articles of incorporation,
The primary document needed to incorporate; the articles of incorporation include basic information about the corporation and will serve as a reference for future business organization and operations.
Business judgment rule,
Directors and officers are immune from personal liability for actions that result in harm to the corporation as long as (1)the directors and officers acted (a)in good faith, (b)in the best interest of the corporation, and (c)with the care that ordinarily prudent persons in a similar position would exercise in similar circumstances, and (2)the actions taken were within (a)the corporation’s power to act, and (b)the directors’ and officers’ authority.
Certificate of incorporation,
Once the articles have been executed by the incorporators, they are sent to the appropriate state official, along with a filing fee, in return for which a certificate of incorporation will be issued by the state of incorporation evidencing the corporation’s legal existence.
Close corporation,
(a.k.a. “closely-held corporation”): A privately-held corporation with a small number of shareholders, often members of the same family. Management resembles that of sole proprietorship or partnership. Sometimes require more than simple majority for votes, and transfer restrictions outlined in AoC. Right of first refusal.
Corporate charter,
A legal entity formed in compliance with the statutory requirements of its state of incorporation, owned by shareholders whose liability is limited to their investment in the corporation, and managed by (i) a board of directors elected by the shareholders and (ii) officers employed by the board of directors.
Corporate profits distributed to shareholders in proportion to their shares held.
No-par share,
Par-value share,
Corporation must have a value equal to the total value of the shares.
Pierce the corporate veil,
Disregard the corporate entity and its attendant limitations on personal liability – and sue the wrongdoers individually for actions they took as owners, officers, or directors of the corporation. Can occur
A person who takes the preliminary steps in organizing a corporation.
a document required by federal or state securities laws that describes the financial operations of the proposed corporation sufficiently to enable prospective investors (subscribers) to make an informed decision;
In order for votes recorded at a shareholders’ meeting to be effective, there must be a quorum present – that is, there must be enough shareholders and others holding proxies present to represent at least 50 percent of the corporation’s voting stock.
Retained earnings,
Corporate profits not distributed to shareholders. Can be used for R&D.

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