Types of Business Organizations

1. Types of Business Organizations • Sole proprietorships • Partnerships • General • Limited • Corporations • Limited Liability Companies

2. General partnerships • Created informally by agreement • Each partner personally liable • Partners owe fiduciary duty to partnership • Act of any partner binds partnership • Unless changed by agreement, share profits/losses equally • Dissolved by death/bankruptcy of a partner

3. Limited partnership • Created by filing certificate with state • Must have at least one general partner • Limited partners have no liability (beyond their investment) • Limited partners cannot manage or control the partnership

4. Corporations (general) • Governed by state law (often Delaware) • Are considered legal “persons” • Can sue or be sued • Can enter into contracts • Can own property • Can be publicly or closely held

5. Corporations: formation • Must file articles of incorporation with state • Must adopt bylaws • Must elect an initial board of directors

6. Corporations: governance • Shareholders • Directors • Duty of care • Duty of loyalty • Officers

7. Corporations: lawsuits • Direct lawsuits by shareholders • Shareholder derivative suits • “Piercing the corporate veil” • Undercapitalization • Dummy corporations

8. Limited Liability Companies • Partners have limited liability • But can also engage in management and control • Can pass profits directly to partners (i.e., no corporate income tax)

9. Federal securities regulation • The Securities Act of 1933 • The Securities Exchange Act of 1934 • The Securities Exchange Commission • Rule 10b-5

10. Federal antitrust law • restraints on trade • Monopolies • Mergers and acquisitions

11. Other regulation of business • Labor law • Title VII of the Civil Rights Act of 1964 (banning employment discrimination) • Enforced by EEOC • Disparate treatment • Disparate impact • Sexual harassment • Quid pro quo • Hostile environment • Laws banning age and disability discrimination