May 22nd, 2012 
Alexander Glaser 
Forms of Businesses and Partner Formation
Types of Business
Sole proprietorship
- One owner
- Can go after personal assets
- Easy to form and cheap
- Default system
- Cannot be sued as a business, just person
Partnership
- 2 or more owners
- Profits are equally shared
- Personally liable
- 1040
- Losses deductible
- Default set up with multiple owners
LLP
- No personal liabilities for business obligations
- Partners individually liable for wrongful actions
- Form filed with SoS to form
Limited Partnership
- General partners and limited partners
- General partners are liable
- Limited have no direct liability
- Taxed as partnership or corp
- Ends if no general partner remains
- Cannot be a default
- No unlimited liability
- Losses are deductible
- Can contribute capital and avoid liability
Limited Liability Limited Partnership
- Filed with SoS
- All partners have generally no liability
- General partners have unlimited liability for any tort
Corporation
- Owned by shareholders
- Ran by board
- Limited liability by shareholders
- Company is legal entity and liable
- Taxes on profits
- Dividends
- No corporate losses deducted by shareholders
- S corp
- - no more than 100 shareholders
- - pass through taxes
Professional Corporation
- Filed with SoS
- Liable for malpractice
- Licensed caeers
LLC
-taxed like corporation or partnership
Lack of free transferability
- No limits on owners
Pg 897 breaks down all entities
How to Form a Partnership
Partnership Creation
No formalities needed
Articles of a partnership
Oral agreement allowed
Trade name must be filed by SoS
Written statement required for partnership lasting more than one year
No agreement leads to default under RUPA
Rupa
2 or more persons to carry on as co-owners
Voluntary
Carrying on a business
Co-ownership
Sharing of profits and sharing of management
Profits are not proof of partnership when:
- Payment of debt
- Interest on loan
- Wages to an employee or contractor
- Rent
- Annuity
- Sale of goodwill or property
- Sharing of management can overcome these exceptions
Must intend to make a profit
Must intend to be partners
Joint ventures vs partnerships
Venture is a single project
Southex exhibitions v rhode island builders –pg 901
Mining Partnership is a special class
- Joint ownership in mineral interest
- Joint operation of property
- Sharing of profits/losses
Creation of LLP’s
Must follow statute to create
SoS
May require insurance
Purported Partners
When someone thinks people are partners but they may not be, who is liable
Must have been misled someone is a partner to sue
Or only sue person directly liable
Must rely on misrepresentation
May appear to be one by being at the office a lot
May have same phone number
Share secretary
Palmer v Claydon pg 904
Partnership Capital
- Partner’s contribution
- Equity of the business
- Loans are liabilities
Partnership
Property
- Transferred to the partnership
- Transferred to any partner acting as a partner by a transfer document that names the partnership
- Transfers to any partner by a transfer document that indicates the partner’s status or the recognition of the existence of the partnership
Partner’s Partnership Interest
- Partner’s transferable interest
- Management and other rights
Partner’s Transferable Interest – partners share of profits and its right to receive these
- Transfer can be done to someone else receives these
- Charging order- rights given to other based on court ruling for payment
- Redeeming one means it is all paid off to remove the order
Effect of Agreement
Can restrict number of transfers in partnership agreement
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