[Anonymous]

Hi everyone

I take Reg this wednesday (11/26) and have not started R8 because I have been reviewing the topics in R1-R5, which make up the majority of the exam. Due to my constraint in time, I wont be able to complete all the homework in R8. I can probably skim through the chapter and do a few hw problems on each chapter.

Besides Business Structures, which other topics should I focus on the most in R8? And will not doing all the hw in R8 affect me in any way? Once I finished R7, I went back and re-did all the hw and sims for R1-R5, so I feel prepared for the tax + ethics portion of the exam. Any advice will be appreciated, thanks!

[Mamabear]

Not a Becker user. What is R8?

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Anonymous]

R8 is Becker's Chapter 8 for REG which covers:

1) Suretyship & Agency

2) Business Structures of:

Sole Proprietorship

General Partnership

Limited Partnership

LLP

LLC

Corporation

I sat REG without reading R5-R8 because I slacked off in the beginning of my preparation so I ran out of time. I just skimmed through the outlines of BLAW chapters. So if I don't get a passing score for REG tomorrow, I know why.

[Kimboroni]

Hmmm, I'd say to try to get a basic understanding of the difference between the business structures so you could reason your way through any questions you get on it. Get a basic idea of agency also. What's in the book factoid-wise won't necessarily be on the test, and vice versa, so memorizing probably isn't the best use of resources.

AUD 84 (1/9/14-Wiley books/TB + free materials)
FAR 83 (5/21/14-the above + NINJA 10 Pt Combo Lite)
REG 84 (7/9/14-Wiley books/TB + NINJA Audio/FC/Notes)
BEC 76 (10/5/14-Wiley books/TB + NINJA Audio/FC)

Disclaimer: My ninja avatar is not meant to imply that I have any affiliation with this site other than being a forum member. That's a pic of a T-shirt that my daughter gave me for my birthday. 🙂

[Anonymous]

R8

Sole Proprietorship

Advantages

– One person owns and manages

– Free to transfer business

– Unlike a corporation, it is not taxed as a separate entity

– No need to file with the state

Disadvantages

– Personally liable for the debts of the business

– Proprietorship ends when the owner dies

General Partnership [GP]

Formation

– 2 or more partners decide to form a partnership and decide to run as co-owners for a business for profits

– No filing of formation is necessary unless the partners decide to run the partnership for more than a year

– A legal entity separate from its partners for most purposes except for federal income tax purposes and for obligations; partners are personally liable for the obligations of the partnership

Joint Venture

– Similar with a GP but it involves an agreement with a more limited undertaking

– May be for more than a single venture; it may be for a series of transactions

Liability of Partners

– Unlimited liability for the obligations of the partnership

– Jointly and severally liable for all the partnership torts and debts

Partners are agents of the partnership and agents of each other

Duties of the partners:

5 [DIAL-O]:

Due care

Inform of all relevant facts

Account for money spent and received

Loyalty

Obedience

Partners’ Rights

Most decisions require only a majority vote.

However, unanimous consent is required for the following partnership key transactions:

4 [CAT-F]

C – Court cases => Admit a liability or submit a claim to arbitration

A – Admitting a new partner

T – Transfer partnership properties to others

F – Fundamental change like selling a goodwill or changing a [WPA] written partnership agreement

Equal Rights:

5 [PRIMI]

P – Profits

R – Reimbursement (for loans made to partnership)

I – Indemnification (for liability incurred when properly acting on behalf of the partnership)

M – Manage

I – Information => Full information

Examples:

C – Copy books and records

I – Inspect books and records

T – Tax information

Formation Continuation of Business Following Dissociation

1) Partnership may still be continued by the former partners and others.

2) Dissociating or non-continuing partners are not liable for the debts of the new partnership if they file a notice of dissociation with the state, which terminates the partner’s liability for partnership obligations incurred more than 90 days after the filing.

3) Incoming partners have limited liability to creditors of the old partnership.

Causes of Dissolution:

1) Decide not to continue

2) Declare bankcruptcy

3) If 90 days after a partner’s death or bankcruptcy, a majority of the partners do not wish to continue

Distribution upon Dissolution

1) Creditors are paid first including partners who are also creditors

2) Partners are credited or charged of an amount equal to their contributions plus or minus the P/L.

Limited Partnership [LP]

 It is dissolved upon the death, withdrawal, or bankcruptcy of a general partner. Changes in limited partners do not cause dissolution.

Formation

• 2 or more partners form a partnership in compliance with the state statute for the purpose of providing limited liability for limited partners

• Certificate of Limited Partnership [COLP] must be filed with the state.

• At least 1 general partner and 1 limited partner. The general partner may also be a limited partner in the same partnership at the same time.

Liability

General Partners:

• Unlimited personal liability, as in a general partnership

Limited Partners

• Only investment or interest is at risk

Rights

Limited Partners

• Very limited rights to manage or control

• May vote on the following events without incurring liability

3 [VFA]

V – Voluntary dissolution of the limited partnership

F – Fundamental changes in the business (including amendment of the COLP)

A – Admission or removal of a general or limited partner

Similarities of General and Limited Partners:

• May be secured or unsecured creditors of the limited partnership

• Have the right full information about the business, specifically including the right to inspect books and records

• May assign their limited partnership interest without the consent of others.

Other Differences of GP & LP:

GP

• Agents / Fiduciary

LP

• Not agents / not fiduciary

• Just like investors / stockholders

Limited Liability Partnership [LLP]

 It is similar to a GP with 2 major differences in filing and liability.

Filing => LLP must file a registration statement with the state, which must include the name of the LLP and a clear indication that the entity is an LLP

Liability

General Partner

 Always liable for his action negligence or wrong acts and for the negligence and wrongful acts of anyone acting under the partner's direct control or supervision

Partners

 Not liable for the negligence of other partners or for those not under his direct control

 Not personally liable for LLP contracts.

Limited Liability Company [LLC]

 Hybrid of corporation and partnership

 Virtually every state permits an LLC comprised of only a single member

 An LLC having two or more members is taxed like a partnership for federal income tax purposes

 Dissolved upon the death, withdrawal, or bankruptcy of a member, unless the remaining members vote to continue the business.

 Assignment of the right to profits does not dissolve the LLC.

Formation

The Articles of Organization [AOO] must be filed with the state, which must contain the name of the:

1) LLC

2) Persons who will be managing the company

3) Registered agent, address of the registered agent must also be included

Liability

1) No liability beyond their capital investment

2) Liable for any capital contribution not made

3) Liable for their own negligence

Rights

4 [FEPA]

– Full information about the business, specifically including the right to inspect books and records

– Election of tax with IRS

– Participate in management

– Assign rights to profits

P/L Sharing

(G-C-LP) General Rule-Contributions-LP

(E-E-GP) Exception-Equally-GP

-Generally, and in most states, P/Ls are shared based on contributions, just like a LP.

-Exception: Under Uniform Limited Liability Company Act [ULLA], (followed by a few states and specifically tested on CPA test), P/Ls are shared equally just like a GP.

Note:

• “Operating Agreement” is the agreement made between the member of the LLC

Corporation

• Managed by officers / directors

• Major advantages:

-Freely transferable (except closely held)

-Perpetual life

-Limited Liability

Formation

• Promoters

-Procure capital commitments and other agreements

-Liable for preincorporation contracts and remain liable unless a novation is executed.

-If the corporation accepts (or ratifies) the promoter’s contract, the corporation is also liable.

• Articles of Incorporation [AOI]

Must be filed by incorporators with the state, which must contain:

2 [N&N]

-Number of shares authorized to be issued

-Name of RIC:

R – Registered agent including the address

I – Incorporators

C – Corporation

• For business operations in other state, no need to file AOI, but only need to apply or secure certificate of authority in other states. No need to incorporate in every state when a business wants to run a business in different states.

• Bylaws

-Govern the corporation’s internal management and are not filed.

-The directors or incorporators usually adopt bylaws at the first business meeting.

-Can be amended by board or stockholders; vote is not needed since this is internal and it’s not a fundamental change

Financing the Corporation

3 [RED]

• Retained Earnings

• Equity Shares

• Debt securities

Note:

• One class of common stock must have voting power.

• TS

-No voting rights

-No dividends

• The corporate entity may be disregarded and stockholders held personally liable for:

3 [FUC]

-Fraud

-Undercapitalization at the time of formation

-Commingling of company assets

• “Voting Trust Agreement” is a trust agreement by which shareholders transfer their legal ownership in their shares to be voted a certain way by a trustee.

Rights

• Shareholders

-Inspect books and records at reasonable times unless the shareholders have an improper motive

-Preemptive right (available only if the articles so provide)

-Appraisal right or dissenters’ rights to be brought out by the corporation at FMV after a corporation’s fundamental change (i.e., DAMS) for which the stockholder did not vote to approve.

• Stockholder Management

-Right to elect (and remove) members of the BOD

-Right to vote for fundamental changes in the corporation

4 Main Fundamental Changes

[DAMS]

-Dissolution

-Amending the AOI

-Mergers, consolidation, and compulsory share exchanges (except short form)

-Sale of substantially all the corporation’s assets outside the ordinary course of business, but not buying all of the assets of another corporation

Liabilities

• Shareholders have no liability beyond their investment

Approval Steps for Fundamental Changes to the Corporation

A majority of the BODs must approve the following:

1) Resolution Passage

2) MAC – Mergers (except for short form mergers) and consolidations

3) Resolution submission for the approval of the stockholders. (A copy of the resolution and notice of TDP [Time, Date, Place] where the vote is to occur.

4) Articles of (e.g., of Amendment, of a Merger, etc.) must also be filed with the state.

Dividends

• Declared by BOD

• Once declared and communicated, cash dividends are a debt and cannot be revoked; stockholders become unsecured creditors of the corporation

• Stock dividends

-do not reduce assets

-do not increase the stockholder’s percentage of ownership or wealth

-no effect on E&P for federal income tax purposes

Directors

• Handle overall management

• Set corporate policy

• Fiduciary

Officers

• Handle day-to-day affairs

• Fiduciary

• Agents

• Remember: SAR

o S – Selected by the board

o Agents of the corporation, with duties of DIAL-O

o Removed by the board

[pia ach]

Thanks a ton for sharing this @AmorD…i somehow end up writing the whole book while making the notes, so it takes way too much time to go through in the final days. Do you have anything written on basis of the diff entities?

Finally done!!! Experience-pending. Ethics- Pending.
Reg 78 / 73/82.
Aud 74/89.
BEC 72 /78.
FAR 74/ 73/ 82.

[Anonymous]

You're welcome Pia.

It took me forever to study R1-R4 so I ran out of time to get to R5 and onwards. I crammed writing only the most important lectures from Becker's BLAW. Too bad, it was just handwritten. I stopped handwriting at R7 and simply began typing most of my R8 notes on MS Word.

(God please forbid) If I don't get a passing score for REG later today 11/24, I will begin REG with reading and writing my R5 notes till R8. I am not going to reread the book for R1-R4. I will just use my notes (plus NINJA) and work more on MCQs.

[Anonymous]

@ 602 Kid.

There is a great outline on Page 25 of R8 for business structures. “overall summary of the entities and their attributes”.

I'm taking Wed as well. Good luck

[Author]

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