Class 2 Takeaways

 The choice of business form affects:

o Formation
o Decision-making
o Liability
o Financing
o Compensation
o Taxes
o Termination
 Common business forms:
o Sole proprietorship
o General partnership
o Corporation
o Limited partnership (LP) and limited liability partnership (LLP)
o Limited liability company (LLC)
 General partnership: An association of two or more persons to carry on as co-owners a
business for profit
 Whether a partnership has been formed depends on the totality of the circumstances
o Partnership formation does not require intent
o Profit-sharing is prima facie evidence of a partnership (UPA Section 7 and
RUPA Section 202(3))
 Few exceptions such as wages paid to an employee
 Partnership agreements can “contract around” default rules but not mandatory rules
 As a default rule, ordinary partnership matters must be decided by a majority of the
partners (UPA Section 18(h) and RUPA Section 401(j))
o Applies to actions that change the status quo of the partnership