The Legal Environment of Business: Text and Cases
9th Edition
ISBN: 9781305764460
Author: Frank B Cross/ Roger LeRoy Miller
Publisher: CENGAGE C
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Chapter 16, Problem 7BCP
Summary Introduction
Case summary: The
To find : The notice of the tax sale is sufficient.
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Explain limited-liability company (LLC).
Klinicki and Lundgren, both furloughed Pan Am pilots stationed in West Germany, decided to start their own charter airline company. They formed Berlinair, Inc., a closely held Oregon corporation. Lundgren was president and a director in charge of developing the business. Klinicki was vice president and a director in charge of operations and maintenance. Klinicki, Lundgren, and Lelco, Inc. (Lundgren’s family business), each owned one-third of the stock. Klinicki and Lundgren, as representatives of Berlinair, met with BFR, a consortium of Berlin travel agents, to negotiate a lucrative air transportation contract. When Lundgren learned of the likelihood of actually obtaining the BFR contract, he formed his own solely owned company, Air Berlin Charter Company (ABC). Although he continued to negotiate for the BFR contract, he did so on behalf of ABC, not Berlinair. Eventually BFR awarded the contract to ABC. Klinicki commenced a derivative action on behalf of Berlinair and a suit against…
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The Legal Environment of Business: Text and Cases
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- The following statements are true, except * -A limited partner is liable for partnership debts up to the extent of his capital contribution -An industrial partner can also be a capitalist partner at the same time. -An industrial partner who engages in business for himself can be excluded from the partnership. -A capitalist partner may engage in the same line of business as that of the partnership -answer not given The following partnership accounts represent a liability of a partner to the partnership, except * -Receivable from partner -Loan to partner -Due from partner -all of the above -answer not given A partner’s capital account is credited for the following transactions, except * -Share in net income -loan from the partner -Original and additional investment -both A and C -answer not givenarrow_forwardJoseph, a shareholder, wishes to sell his shares and has received an offer from Peter, who is not a shareholder, to buy shares well above the original price. Melissa, an existing shareholder, is adamant that she should be allowed to purchase Joseph’s shares at the original price. Joseph is the only shareholder who currently holds less than 5% of the shares of Spades Limited Advise Karen and Melissa.arrow_forwardSebastian, Wyatt, and Mathew are close friends who graduated with master's degrees in accounting from an Ivy League institution. Instead of seeking employment, the friends decided to create their own accounting business. At their initial meeting, the friends could not decide whether to form a partnership or a limited liability company. You were approached as a company law student for advice on the type of business that would be appropriate for the friends. A) Assume the friends opted to create a partnership, and has asked for your assistance in creating a Partnership deed; create a partnership deed that includes at least six terms that the friends may use to guide the functioning of their firm. The terms should be detailed enough to be legally binding and should be original.arrow_forward
- If within 60 days from the approval of corporation action by stockholders, the dissenting stockholder and the corporation cannot agree on the fair value of the shares, who shall determine the price of shares? * Three disinterested persons, one named by the stockholder, another named by the corporation and the third chosen by the two whose decision by majority is binding and final The dissenting shareholder The Securities and Exchange commission The Commercial Courtarrow_forward7arrow_forwardTo Partner or Not to Partner John Willis, who is 27 and single, had just completed his fifth year of employment as a carpenter for a very small homebuilder. His boss, the sole owner of the company, is Tyrone Young. A few days ago, Tyrone asked John if he would like to become a partner, which he could do by contributing $70,000. In turn, John would receive 40 percent of all prof- its earned by the business. John had saved $30,000 and could borrow the balance from his grandmother at a low-interest rate, but he would have to pay her back within 15 years. John was undecided about becoming a partner. He liked the idea but he also knew there were risks and concerns. He decided to talk to Tyrone at lunch. Here is how the conversation went. John: I've been giving your offer a lot of thought, Tyrone. It's a tough decision and I don't want to make the wrong one. So I'd like to chat with you about some of the problems involved in running a business. Tyrone: Sure. I struggled with these issues…arrow_forward
- The board of directors of a corporation: Do not have the power to bind the corporation to contracts, due to lack of mutual agency. May not also be executive officers of the corporation, due to the separate entity principle. O Are responsible for and have final authority for managing corporate activities. Are responsible for day-to-day operations of the business.arrow_forwardAy-Bee-Cee-Dee Corp. has filed a Subchapter S election under the Internal Revenue Code for taxation purposes. As you know, S corporations are allowed only a limited number of shareholders and, regardless of the number, certain types of entities, including other corporations, cannot be shareholders in S corporations. Carter wants to transfer his shares of Ay-Bee-Cee-Dee Corp. to CarCor, Inc., a corporation that he and his brothers own. If Able, Baker, and Dennis want to preserve their Subchapter S election and, thus, block the transfer of Carter's shares to CarCor (without being stuck having to purchase Carter's shares themselves), which of the following transfer restrictions would best allow them to accomplish their goal? Multiple Choice Provision disqualifying purchasers О Right of first refusal Option agreement О Consent restraintarrow_forwardAy-Bee-Cee-Dee Corp. has filed a Subchapter S election under the Internal Revenue Code for taxation purposes. As you know, S corporations are allowed only a limited number of shareholders and, regardless of the number, certain types of entities, including other corporations, cannot be shareholders in S corporations. Carter wants to transfer his shares of Ay-Bee-Cee-Dee Corp. to CarCor, Inc., a corporation that he and his brothers own. If Able, Baker, and Dennis want to preserve their Subchapter S election and, thus, block the transfer of Carter's shares to CarCor (without being stuck having to purchase Carter's shares themselves), which of the following transfer restrictions would best allow them to accomplish their goal?arrow_forward
- Matthew Mark and Luke, three auto mechanics, were delighted to start an auto repair businessand decided that they would incorporate a private company to do so. It was to be called Mechanics Ltd. They were short on capital however, so they approached ABC Ltd, a public company, to be a shareholder in their private company. John, the Company Secretary and Accountant for Mechanics Ltd decided that he will not file accounts, because it was a private company. John came to you privately to find out if he is on good ground in not filing accounts. 1. You are required to tell John if he was correct in his decision or not, and give reasons foryour answer, directly from the Companies Act. 2. At the same time, Luke is very disgruntled that the company is planning on going into thebusiness of selling auto parts as well, and said that this is in breach of the Memorandum of Association's Objects Clause which states: "To repair, service and provide diagnostics to all types of motor vehicles, and to…arrow_forwardJames and John are directors of ‘Cakes & Frozen Novelties Company Limited.’ Peter, Paul andDavid are shareholders. The company has been in operation for four years. The company has notmade any profits since its inception but James and John decided to declare dividends from thecompany’s capital reserves. The company has 10 million shares that were not distributed. Jameswent ahead and sold the shares to his wife, who is not currently a member of the company.Peter enquired as to whether or not the company can just purchase the shares issued, as there aremany different types of shares available. Paul noted that this is possible but pointed out thatRedeemable shares have particular features and certain procedures must be followed in order toredeem. He also stated three ways in which the company must finance these redeemable shares.James asked about the effect of the redeemable shares. John was puzzled and asked how acompany can redeem its share capital, especially when there is a…arrow_forwardMeir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio (in percents: Meir, 20%; Benson, 30%; and Lau, 50%). The partnership's capital balances are as follows: Meir, $70,000; Benson, $107,000; and Lau, $183,000. Benson decides to withdraw from the partnership. 1. Prepare journal entries to record Benson’s February 1 withdrawal under each separate assumption: (Do not round intermediate calculations.) Benson sells her interest to North for $160,000 after North is approved as a partner. Benson gives her interest to a son-in-law, Schmidt, and Schmidt is approved as a partner. Benson is paid $107,000 in partnership cash for her equity. Benson is paid $145,000 in partnership cash for her equity. Benson is paid $27,000 in partnership cash plus equipment that is recorded on the partnership books at $63,000 less accumulated depreciation of $20,790.arrow_forward
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