Lengua Iii - Primera Parte

Language III: Make-up Examination (First Term)


*Business Organizations: USA

• Unit 36: Sole Proprietorships and Partnerships

> Sole proprietorship: It is a form of business ownership in which only one individual acquires all the benefits and risks of running an enterprise. In a sole-proprietorship there is no legal distinction between the assets and liabilities of a business andthose of its owner. It is by far the most popular business structure for startups.
- Advantages: The owner has complete control over the business; he may keep all of the profits made by the sole proprietorship; this business is simple to begin and end; the record keeping requirements are minimal; owners avoid double taxation.
- Disadvantages: The business existence depends entirely upon thelife of the sole proprietor: his personal properties may have to be used to pay for expenses arising out of business activities; owners of sole proprietorships often find it difficult to raise a huge amount of capital quickly for expansion purposes; venture capitalists and banks generally do not lend money to sole proprietors.

> Partnerships: The Uniform Partnership Act (UPA) defines partnershipas “an association of two or more persons to carry on as co-owners of a business for profit.” The sharing of profits is considered prima facie evidence of the existence of a partnership. Partners also share losses. Unlimited liability characterizes partnerships, but it is possible to stipulate in a given contract that non-partnership property will never be used to satisfy a debt arising out of acertain agreement.
There exist two theories which have tried to define the existence of partnerships: on the one hand, the Entity Theory describes a partnership as an individual unit with its own identity (“a partnership is an entity distinct from its partners, RUPA, article 2, section 201(a)”); on the other hand, according to the Aggregate Theory, the partnership is simply an assembly orcollection of partners who do business together.

Partnerships can be formed by contract (which is called “articles of partnership” or “partnership agreement”): There must be a written agreement establishing the partnership. The contents of such agreement must be the name and nature of the partnership, its duration, amount of capital, amount of reserve funds, location and withdrawal; duties ofthe partners, location of accessibility of a full and accurate account of partnership transactions, times and amounts each partner is entitled to withdraw from partnership earnings, provisions for the preparation of an annual balance sheet and income statement and the distribution of net profits or net losses between partners, limitations on partners, and termination on notice procedure.Partnerships by estoppel are legally binding partnerships that may arise where, in fact, no formal partnership agreement is in effect in order to defend innocent third parties. A person who by conduct or words represents, or allows himself to be represented, as a partner in a firm is liable for the credit or loans obtained by firm on the basis of such representation.
Partnerships by proof ofexistence: If a party claims that a partnership exists and the other party denies its existence, the court will look at a series of elements to solve the problem. A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment of a debt, as wages to an employee, for services as an independent contractor, of rent to alandlord, as an annuity, interest on a loan, as consideration for the sale of goodwill, etcetera.


Acquisition of partnership property: Capital contributions are sums contributed by the partners as permanent investments and that the partners are entitled to have returned when the partnership is dissolved.
A capital contribution is a contribution of capital, in the form of money or...