BUSINESS LAW 1

Sole Proprietorship

The owner is the business

Advantages of Sole Proprietorship (6)

-Proprietor gets all profits
-Easier and less costly than starting any other kind of business
-Can sell or transfer all or part of the business to another party at any time and does not need approval from anyone else
-Only pays income tax
-can establish t

Disadvantages of Sole Proprietorship

-Unlimited liability
-Lacking continuity on the death of the proprietor (when owner dies so does business)
-Limited to personal funds

Franchise

An arrangement in which the owner of a trademark, a trade name or a copyright licenses other to use the trademark, trade name or copyright in the selling of goods or services
-Use state law of the state of the headquarters

Types of Franchises

-Distributorship
-Chain Store
-Manufacturing or Processing Plant

Distributorship

Manufacturer licenses a dealer to sell its product.

Example of Distributorship

Car Dealerships or Beer Dealerships

Chain-Style Business Operation

Franchise operates under a franchisors trade names and is identified as a member of a select group of dealers that engage in the franchisors business.

Manufacturing Arrangement

Franchisor transmits to the franchisee the essential ingredients or formula to make a particular product. The franchisee then markets the product either at whole-sale or at retail in accordance with the franchisors standards.

When buying a franchise

-Ask for financial statements
-Check out contract
-Clear understanding of all fees you must pay
-Ask about territory

Automobile

Protects automobile dealership franchisees whose franchisors impose unreasonable demands and then terminate the franchise because of the dealer's failure to satisfy them

Petroleum Marketing Practices Act

Prescribes the grounds and conditions under which a franchisor may terminate or decline to renew a gas stations franchise

Franchise Rule

Requires franchisors to disclose material facts that a prospective franchisee needs in order to make an informed decision whether to purchase a franchise

Payment for Franchise

Initial fee and % of sales and may hav eot pay for a % of advertising

Termination of Franchise

Most agreements provide that the franchisor may termiante a franchisee before end of duration only for cause (death, bankruptcy, breach) BUT ONLY WITH PRIOR NOTICE

Opportunity to Cure

A grant given to a franchisee to cure an ordinary, curable breach within a reasonable time after the franchisors notice.

Wrongful Termination

Because the franchisee makes a substantial investment to use the trademark both statutory and case law emphasize the franchisors duty to act in good faith

Partnership

An association of two or more persons who carry on, as co-owners a business in which they share profits and losses, jointly own the business and enjoy equal management rights

Uniform Partnership Act

Provides that a corporation may be "person" for purposes of a partnership although some states partnership statutes exclude corporations from owning partnership interests

Partnership by Estoppel

Not truly partners even though customer may truly believe that they were

Draw

Pulling money out of contracts because partners get paid on profits which is sometimes end of year

Pass Through Entity

A business entity that has no tax liability as the income is passed through to the owners of the entity who pay taxes.

Partnership Agreement

A written agreement that sets forth the rights and obligations of each partner with respect to the partnership

Partnership for a term

A partnership whose term is limited = any dissolution withouth consent of parnters will leave partner personally liable for resulting losses

Partnership at Will

A partnership agreement silent to duration = dissolution can happen at any time

Partnership Management and Voting

-All partners have equal management rights
-Each partner has equal vote regardless of relative size of capital contribution

Partnership Decision Requiring Unanimous Vote (5)

-Altering the essential nature of the partnership business or entering a wholly new business
-Admitting new partners or altering the capital structure
-Assigning partnership property into a trust for the benefit of creditors, disposing of the partnerships

Partnership Interest

-Entitled to share of profits earned
-No salary
-Paid share of profits plus return on investment upon termination

Partnership Books

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