MISCELLANEOUS LEGAL TERMS

Used in business – domestic and foreign

• CORPORATIONS – Under State Law Corporations Are Considered Legal Persons Separate and Distinct From their Shareholders. Officers, Directors and Shareholders are not liable for Corporate Actions

• There are many Classifications of Corporations in the U.S.”• General Business Corporations• Not-for-Profit Corporations – This doesn’t mean they

don’t make a profit – they simply have no shareholders• Closely Held Corporations• Professional Corporations – All shareholders must be

licensed members of the particular profession – doctors, lawyers, engineers, accountants, actuaries, etc.

Domestic business forms - CORPORATE

• A “C” Corporation is a regular domestic business corporation. For tax purposes, there is a tax on the corporation and a tax on the shareholders when they receive dividends from the Corporation. Dividends paid to shareholders are NOT deductible by the Corporation (Tax Form is 1120)

• Subchapter S Corporations – Sometimes called Small Business Corporations – There is No Tax at the Corporate Level – All taxes are at the Shareholder Level (Tax Form is 1120 S)

TAX ATTRIBUTES OF DOMESTIC CORPORATIONS

• Limited Liability Company (LLC) – These organizations have MEMBERS instead of Shareholders. Members are not personally responsible for the actions of the Company. Limited Liability Companies may be taxed as Partnerships or as Corporations – Often it is said these companies have the “best of both worlds.”

• Partnerships – These are organizations which have no legal existence separate from their partners. Partners are each personally liable and the liability is joint and several so any partner may be held liable for the actions of the partnership but each partner held liable would have a right of contribution from the other partners for any personal liability

Other domestic business forms

• LIMITED LIABILITY PARTNERSHIP – Partnerships formed under State Law in such a way as to eliminate personal liability of each partner separately. Often Law Firms are formed as LIMITED LIABILITY PARTNERSHIPS - Tax Form: 1120 S or 1065

• JOINT VENTURES – These are simply an aggregate of individuals or companies that have allied themselves for a particular purpose. Their relationship is set forth in an agreement known as a “Joint Venture Agreement”

• SOLE PROPRIETORSHIPS – These are exactly what the name implies – a person simply doing business in his/her own name. The business owner may elect to use a FICTITIOUS NAME and this name is registered with the State so that the public is on notice as to the true owner of the business. Example : John Doe has established a Pest Control Business and he has decided the name of his company is TRAVEL AGENT FOR ROACHES – He will file this as a fictitious name with the State – “John Doe d/b/a Travel Agent for Roaches” These companies use “Schedule C” to report Business Earnings

More domestic business forms

• In Civil Law States Such as France and Germany, Every form of business organization is a “Company”• In France These are Called “Societe Anonyme”• In Germany These are Called “Gesellschaft”• These Organizations Must Register With the State

(Country)• In France, all companies are regarded as being

“juridical entities” meaning they have a legal existence separate from their owners.

• In Germany, as in the United States, Corporations are “Juridical Entities” but Partnerships are NOT

• Partnerships (In the U.S. and Germany) are made up of members who are each liable to the full extent of personal assets for partnership debts

BUSINESS FORMS IN CIVIL LAW STATES (France and Germany)

CIVIL LAW CORPORATIONS

There are Two Kinds of Civil Law Corporations: Stock Corporations and Limited Liability Companies Limited Liability Companies are often used in setting up subsidiaries

The Stock Corporation (Societe Anonyme in France and the Aktiengesellschaft or AG in Germany) is the only Civil Law Company that Can Raise Money in the Public Marketplace

These are formed in a way similar to the way U.S. Corporations are formed by Filing Articles of Incorporation

In France These Are Called “Societe en nom collectif or SNC” They have SEPARATE legal existence

In Germany These are Called “Offene Handelsgesellshaft”

These are companies of two or more persons to carry on a business – If a partnership, once created is reduced to one person it may continue (Not in U.S. or France where Winding Down Begins)

In Germany if one person purchases a partnership he or she may continue to conduct business by himself/herself indefinitely

CIVIL LAW PARTNERSHIPS

In France these are called “Societe en Commandite Simple – SCS”

In Germany these are called “Kommanditgesellschaft – KG”

At least one Partner must be a General Partner

Limited Partners Have limited Personal Liability

Limited Partners may Invest only Cash or Property (as in the U.S.) In Germany Services are Recognized as A contribution of Capital

CIVIL LAW COUNTRIES – LIMITED PARTNERSHIPS

In Germany (as in the United States) partners are taxed individually

In France Partnerships May Elect to Be Taxed as an entity OR have partners taxed individually – This Would be Similar to an LLC in the United States

TAXATION OF PARTNERSHIPS IN CIVIL LAW COUNTRIES

Partnerships Generally Involve the Sharing of Profits and Losses

In Some Countries, the Partnership Agreement May Include a “Leonine Clause” which excludes a particular partner from sharing in losses.

In France a “Leonine Clause” is VOID

LEONINE CLAUSES