1.

Choice of entity
a. Forms of business entitys
b. Why choose one over the other
i. Shielding from liabitiy vs taxes
c. GP
d. LP
e. Corp
f. Different characteristics
2. Default form of business
a. General Partnership - Business starts w/o letters behind it / no registration
done
b. Default w/ one person: Sole proprietorship
c. Personal liability/ joint liability even if you/re not engaged in it
d. What happens when you inadvert has a partnership
e. Profits and losses
f. Kessler: services + money contribution
i. Agreements always control
ii. What kind of language creates
iii. Contributions must be repaid
iv. Losses follow profits
v. CA exception
1. No comp received and No agreement for comp = No out of
pocket expenses
3. Authority (runs across all entities) – Corp bound to K if:
a. Actual – after the fact/ acquiesce/ ratification
i. Between principal and agent
ii. Agent reasonably believes Principal has given authority
b. Is decision within scope?
i. Nature of the business
ii. Nature of K
iii. Corp bylaws can define
iv. Repeated behavior can make something reasonable
c. Has it been terminated via notice?
Apparent
i. Source
1. Prior dealings, nature of the business, custom
ii. Failure to act has allowed the impression to be created.
iii. Haven’t done enough to protect the instruments of the business.
Ratification
1. Something after the contract to suggest p has ratified the contract
2. Do something of failed to do something that ratified the contract
3. Hypos: Cupcake / Law firm ex
 4. Chickfila example
4. Fiduciary duties
a. Meinhard
i. Partners have fid duty
ii. How to demonstrate breach
5. Dissolution
a. What counts as dissolution event
i. When the partnership continues such that the genesis of new partnership
is based on the original partnership  continuation
b. Rights and obligations if dissolution event
i. Dissolution event but partnership continues on
1. Rights and obligations
a. Evaluation at dissolution
b. An election of interest/profits
6. Other bus forms
a. LLP / LP / LLC
b. LLP: extetion of part
c. LP: one gen and one limited
i. Liability: 303 rules
1. 1976 rule – 3 ways LP has liability
a. LP is also GP
b. LP’s participation is substantially the same as GP,
c. LPs participation is not substantially the same as GP but
persons have actual knowledge of participation (Actually
know, based on what you’ve done, that you are
participating in control)
i. Usually several interactions
2. 1985
a. LP is also a GP
b. Person’s reasonably believe, based on LP conduct that LP
is a GP.
i. No actual contact between parties and NOT GP 
cant hold LP liable here
Things that are considered okay/not crossing the line:
1. Obtained line of credit: that’s okay
2. Took part in meetings: that’s fine
3. Approving MAJOR decisions
4. Consulting, advising

THINGS CROSSING THE LINE OF LP TO GP:

1. All business decision have to be cleared by them
2. Approving all expenditures
 7. Parent = corporation that owns another corp. must own at least 50% or more of the
stock of the corporation
8. Corp owns 49% or less = subsidiary

9. Formation of corp
a. Shareholder directors managers
b. Shareholder agreements
i. Something outside of tradition realm  void with exceptions
10. Ultra Veirs: Voiding Contracts beyond scope of corp
Three groups that can bring an Ultra Veirs claim:
1. Shareholders can sue
2. Corporation can sue against officers and directors
3. Attorney general on behalf of the state
ii. Still applicable to charitable contributions
1. Both UV and Breach of Fid duty (waste) claim
iii. If Corp has paid creditors  satisfied all financial obligations  giving
money to charity NOT unreasonable

CORP Liability for actions not your own:

1. Promoters
a. ONLY AT PLAY WHEN CORP NOT FORMED YET / Helping set up bus.
b. Liability for promoter
i. Default: liable for pre-incorp contracts UNLESS agreement to look to
other entities
ii. 4 alternatives
1. Revocable offer:
a. Talking up the business
b. Promoter not affirmatively getting into any business dealings
c. Liability: promoter isn’t liable because assumes no contract.
2. Best efforts:
a. Talk to ppl about upcoming business, help them set up
b. Best effort to get business set up
c. Best effort to another business to get them to use said business
d. Liability: corp itself is not liable. Promoter needs to use best
effort, not guarantee, to work with certain business. If best
efforts not used  promoter on the hook.
3. Novation:
a. Talking up the business, placing orders for flour for cupcake
business, rent the storefront, I’ll take liability as promoter but
when the corporation sets up, they take over liability.
b. When business comes in, and they affirmatively agree to
the contracts, they take on liability.
c. WHAT NEEDS TO HAPPEN:
i. 1. Corp must come into existence
ii. Must do something to affirmatively accept
 d. Can be explicit or implicit
i. Explicit: adopt all the contracts, recreate the contracts,
sign them as the corp.
ii. Implicit: corp seems like they’ve adopted the contract
 it’s enough
e. Liability: Promoter agreeing to be on the hook until business
takes over. Liability cuts off when business comes in and takes
over
4. Guarantor/Surety:
a. Corp will be liable, but if they can’t pay, promoter will step in.

2. Piercing corp veil --

a. P can pierce to get to indv behind veil (Board) When obligation corp has taken on
and not enough asset to pay it
b. Ct looks at a list of factors
i. Undercapitalization of the the corp at the time of formation
1. the corporation had to have adjusted when the
environment/number of accidents changes. Failure to enhance
insurance is the proximate cause of the injury.
ii. Disregard for corp formalities (regular meetings/record keeping/mtg
minutes)
iii. Use of corp assets as shareholder’s own assets
iv. Siphoning corp funds/stripping corp assets
v. Shareholder’s impermissible control/domination over corp
vi. Self-dealing with corp/co-mingling (All money in one personal accnt)
c. All things being equally, when it is a close call, usually pierce in favor of tort
victim

1. Public offerings
Three Stages involved with Public Offering
2. Prefiling Period
a. Cant makes offers without first filing some document with SEC
b. What can you before filing but you know that you’re going public
c. You cant condition the market in any way prior to going public
d. Communication within 30 days of filing, you cant do any
offers/sales/conditioning of the market
e. Conditioning the market:
i. Getting ppl excited about the company
ii. EX: Advertising the “Twitter is the largest social media company”
iii. Changes in advertising / new campaign as you think about making a
public offering = not regularly released info  conditioning market
iv. If changes result in increased interest in company  cts will say that is
enough to condition the market
v. Can’t announce the offering to your employees
 1. No sending email to employees
f. Safe harbors exist for:
i. Regular release of factual info
ii. Certain companies that are large enough that everyone follows
g. Period: 30 days before you file your registration statement
h. IF THERE’S AN OFFER IN THIS PERIOD: VIOLATION OF SECTION 5  ALL OF
THOSE PEOPLE HAVE AN AUTOMATIC RESCISSION RIGHTS
i. Covers the company and the underwriters
ii. When there’s a major public offering, the SEC’s enforcement division
will go back and analyze what’s happening in/around those transaction
for compliance
3. Waiting Period
a. SEC Comments
i. File first registration with SEC
1. SEC will comment on your registration, amending document
2. SEC does not have to comment
b. Road Show/Book Building
i. No sales or acceptances by the company
ii. CAN MAKE OFFERS BUT YOU CANT CONSUMPATE THOSE OFFERS
iii. Underwriters and the company have a “road show” to solicit offers to
people
iv. Can get indications of interest
c. You initial filing  file the Red which means it is not final
d. Suppose to be 20 day-waiting period but every prospectus has a delaying
amendment which allows company to choose a date to decide when to sell
shares
e. Once the waiting period is over  you can sell your shares  must provide most
up to date info to ppl you sell your shares to
4. Post-Effective period
a. Exemptions: offer to pub, must be registered , if not: private

5. Securities fraud
a. Insider trading rules
b. Rule 10b5
i. Mat
ii. Nonpub
iii. Duty
1. Tradition
2. Misappropotion
3. What is trust and confidence
a. Relationships with company
b. Spouses
c. Family members
d. Ppl who make agreements
 e. When ct says works/doesn’t work and why
i. Married but a gossip
ii. Don’t tell but responds with smiley face
f. After Chestman, ct changed rules about family
g. Cuban – reflects disagreement about proving relationship
h. WHAT CT SAYS DOES NOT WORK
i. Ppl who expect you to trade
iv. Breach
1. Primary violation
2. Tipee – knew or should’ve known about breach
v. Someone can be both a tipee and primary violator
1. End of train
a. Traded on material, non publc info: primary violator
b. Tipee – find the tipper
c. 14e3 – takeover, traded or passed  liability
d. Intentionally pass for personal benefit
i. If about both reputation and doing something good  wont work
ii. Gifts will work
1. Doesn’t have to be related to stock/transaction to work
6. Tippee
a. What tippee must know to be liable
i. Know about specific benefit
ii. Know that some benefit was received
b. Know is their tipper
i. Go back up the chain, everyone behind them is a potential tipper
c. Can only escape liability if they did not know about the chain above
7. Tipper:
a. Both that they have a relationship with someone that creates a duty AND
b. Passed for a personal benefit