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Reviewing Important Points

1. A corporation can be created only by government grant— available routinely under incorporation statutes in all states.

2. In most states, corporate existence begins when properly prepared articles of incorporation are filed in the office of the Secretary of State. (In some states, certificates of incorporation are issued.)

3. Corporations are favored as a form of business organization because of advantages of

a) perpetual life,

b) limited liability,

c) transferability of shares,

d) access to capital, and

e) professional management.

4. Shareholders have a right to:

a. receive a properly executed stock certificate (share),

b. transfer their shares,

c. attend shareholder meetings, and vote if they hold voting stock,

d. maintain their ownership percentage by buying an appropriate portion of new stock issues, if there is a preemptive right,

e. receive a proportionate share of the profits,

f. share in distributions of capital, and

g. inspect the corporate books, subject to reasonable restrictions.

5. Certain classes of shares may be nonvoting. If preferred, they have priority in the distribution of dividends, and capital upon termination.

6. The directors can enter into any contract necessary to promote the business for which the corporation was formed. They are liable only for willful or negligent acts, which injure the corporation. They must act with a high degree of good faith and in the best interests of the corporation.

7. Officers of a corporation must also act with good faith for the best interests of the corporation. They, too, are liable only for willful or negligent acts, which injure the corporation, and are not liable for honest mistakes of judgment.

8. The powers of a corporation include those granted by law, and those incidental to corporate existence, as well as those listed in the articles of incorporation.

9. A corporation's existence may be ended by

a) agreement (i.e., vote) of the shareholders,

b) forfeiture of the charter,

c) consolidation or merger,

d) bankruptcy, or

e) court order.

 

Read the problems and give your solutions:

 

PROBLEM 1: Brinkiey, Chapman, and Dodge orally agreed to become partners in a road-paving, company. Nothing was said about profits or losses. Brinkiey contributed $100,000 in working capital. Chapman contributed used construction equipment with a resale, value of $200,000. Dodge, a brilliant civil engineer contributed no capital. By agreement, Brinkiey did no work for the firm, but Chapman and Dodge devoted, full-time to the business.

a) A profit of $120,000 was earned during the; first, year. How-should the profit be divided?

b) After, ten years, business declines and the firm is dissolved. During the winding-up period, all assets are liquidated. Before the return of invested capital ($300,000) there is only $210,000 in cash. How is the $90,000 loss divided?

 

PROBLEM 2: Freeman and Bingham were partners in a wholesale drug company. Their agreement required arbitration of all disputes between the partners. While Freeman was away on a cruise, Stuart, a creditor of the firm, threatened to sue over a disputed supply contract. To save time and money for all concerned, Stuart proposed to avoid litigation by submitting the claim to arbitration. Can Bingham agree, to arbitrate without Freeman's approval?

 

PROBLEM 3: Jones and Schmidt entered into a partnership for five years to conduct a catering business. It proved to be very successful. However, after two years, Schmidt's husband was promoted and transferred by his employer to corporate headquarters in Los Angeles, 2,000 miles away. Schmidt therefore wanted to move,

a) Could she sell out to Topper, a trustworthy, well-qualified assistant, transferring all duties and assigning all her rights, title, and interest in the firm?

b) Could she simply assign her interest to Topper?

 

PROBLEM 4: The written agreement of a professional partnership stated that, during the first year of operations, no partner could draw more than $100 earnings per week, and that no partner could take a vacation. All members would have to rely on personal savings and credit if they needed more funds. The business prospered beyond expectations. After six months, four of the five partners agreed to increase the permitted draw to $200 a week, and three of the five voted to permit up to one week of vacation without pay. Are these modifications legal and binding?

PROBLEM 5: Hull organized a corporation to manufacture antibiotics for cattle. She owned most of the capital stock. All went well until a faulty batch of drugs caused the serious illness or death of more than 3,000 cows. After a series of lawsuits, the corporation was forced into bankruptcy with some $200.000 in debts unpaid. Could Hull be held personally liable for these debts?

 

PROBLEM 6: In a discussion with friends, Forsythe insisted that a director of a corporation could not also serve as an officer because this would be “a conflict of interest”. “Directors select officers,” she argued, “and could keep themselves on the payroll as officers this way.” Was Forsythe right?

 

PROBLEM 7: Plush Play Products, Ltd., produced toy animals and dolls. A new doll called “Tootsie Twins” proved to be so popular that the factory could not meet the demand. The dolls were commanding premium prices in toy stores. Shortly before Christmas, the board of directors of Plush Play Products voted a dividend which was to include one pair of the “Twins” — valued at the low $10 cost of production — for each stockholder. All shareholders with more than one share would receive the balance of their dividends in cash. Lane, a stockholder, sued the directors to prohibit the doll distribution. He claimed that the corporation could earn more by selling the dolls. Should the injunction be issued?

 

PROBLEM 8: Cox and Cook had an idea for a natural aqua park. They planned to build a small dam and then to release water for the slide as needed. Keeping their plans secret to be certain that the needed stream would be available, they bought a 2,000-acre tract of land for their corporation soon to be formed,

a. At this time, are Cox and Cook liable on the contract?

b. Two months later they organized the corporation. Is the corporation now liable on the contract?

 

PROBLEM 9: Simon wants to open a sporting goods' store. She hesitates because she thinks the expenses would be prohibitive. She lists the costs of renting or buying a store, hiring help, buying a computer to keep records, buying a large inventory, obtaining a charter from the state, and paying for licenses and legal fees. Are her fears justified?

 

PROBLEM 10: Ward and Chang organized and operated the Cinema Theater. They agreed to share profits and losses equally after paying all expenses. The land was leased from Alien for rent which was to be 6 percent of the gross revenue. Chalmer was hired as manager for $1,000 a month plus 3 percent of the net profits. Are all four partners in the business?

 

PROBLEM 11: Avery invested $100,000 as a limited partner in a partnership organized to operate an amusement park. On opening day, an accident severely injured 17 people. The damages awarded to the accident victims totaled nearly $7 million. That amount far exceeded the value of the partnership's assets and insurance coverage. Will Avery be held liable for unpaid liability claims against the partnership?

 

PROBLEM 12: Palm, a partner in the Bobbin Cork Bait Shops, normally purchased the inventory for the business. Unknown to her, the other three partners voted to no longer deal with Trout Attractions, Inc., one of their main suppliers. Before finding out about their decision, Palm contracted for $1,000 worth of lures from Trout. Is the partnership bound by the contract?

 

PROBLEM 13: Adams, Starnes, and Williams were partners in a burglar and fire alarm service. Adams would mount his own camper cabin on the back of one of the company's pickup trucks every weekend and drive it into the country on overnight fishing trips. Starnes would take the company's computer home every weekend to work on her «novel» On weekends Williams used the company's Xerox to make copies of the weekly bulletins for his church. No partner was aware of any other partner’s action. Did each have a legal right to borrow the firm’s equipment?

 

PROBLEM 14: Aki, Degas, and Kline were partners in an air-conditioning business. They obtained a $275,000 contract to install units in a candy factory. Long before the job was finished, Kline accepted the final payment of $100,000 and absconded with the money. Must Aki and Degas absorb the loss and complete the job for the $175,000 already paid to them, without being paid an additional $100,000 by the candy factory?

 

PROBLEM 15: Parnell and Cotter were in the business of buying and selling used farm equipment. They had privately agreed that Cotter would do all the buying because he was a better judge of value. Nevertheless, one day Parnell had a golden opportunity to buy all the equipment of an elderly farmer who was retiring. Parnell and the farmer agreed on, a price and completed the sale. Is the firm bound?

 

ЛІТЕРАТУРА:

 

1. Gillian D. Brown, Sally Rice. Professional English in Use. Law. Cambridge University Press, 2007.-128p.

2. Gordon W. Brown, Paul A. Sukys.Understanding Business and Personal Law. McGraw-Hill Companies, Inc. 2006. – 849p.

3. Business law—2nd ed— Cavendish Publishing Limited, 2002 -147p..

4. William R. McKay, Helen E. Charlton. Legal English. How to understand and master legal terms. Pearson Education Limited, 2005. – 188p.

5. Джерело в Інтернет-мережі: ubpl.glencoe.com Understanding Business and Personal Law.

 




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Отладка одного или нескольких процессов MPI в кластере | Advantages of a Sole Proprietorship | A PARTNERSHIP | THE KINDS OF PARTNERSHIPS AND PARTNERS | TEXT 6. | DISSOLVING A PARTNERSHIP | TYPES OF CORPORATIONS | FORMING A CORPORATION | SHARES OF STOCK | The Right to Attend Shareholder Meetings and, in Some Cases, to Vote |


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