Business Organizations and Corporate Law
Choosing the Entity
Know how sole proprietorships, general partnerships, limited partnerships, LLPs, LLCs, and corporations differ in liability, taxation, management, and formation formalities. A general partnership can arise by conduct with no filing, and partners are jointly and severally liable; each partner is an agent of the partnership with apparent authority to bind it in the ordinary course. An LLP shields partners from certain partnership obligations. An LLC is formed by filing articles of organization, is governed by an operating agreement, may be member-managed or manager-managed, and a charging order is typically the exclusive remedy of a judgment creditor against a member interest.
Corporations
A corporation comes into existence when articles of incorporation are filed with the state; the bylaws are adopted internally and govern day-to-day operation. Shareholders elect directors, directors set policy and appoint officers, officers run daily operations. Directors and officers owe duties of care and loyalty. Promoters may be personally liable on pre-incorporation contracts unless the corporation adopts and novates them.
Governance and Liability
Shareholders vote on fundamental changes, and questions often test quorum, cumulative voting, preemptive rights, inspection rights, and derivative suits (which require demand on the board or futility). Piercing the corporate veil is exceptional and typically requires commingling, undercapitalization, or alter-ego use plus injustice.
Traps
Do not confuse a general partnership (no filing, full personal liability) with an LLP. A defectively formed corporation may still be treated as a de facto corporation or a corporation by estoppel. A charging order does not give the creditor management rights.
Worked Example
Two people orally agree to share profits from a food truck and never file anything. That is a general partnership by operation of law; both are personally liable for partnership debts, and a third party who dealt with one partner in the ordinary course may enforce the contract against the partnership.