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November 24, 2014 at 5:03 am #190337AnonymousInactive
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!
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November 24, 2014 at 5:10 am #619938MamabearMember
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!!November 24, 2014 at 5:17 am #619939AnonymousInactiveR8 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.
November 24, 2014 at 5:21 am #619940KimboroniMemberHmmm, 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. 🙂
November 24, 2014 at 5:30 am #619941AnonymousInactiveR8
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
November 24, 2014 at 6:30 am #619942pia achMemberThanks 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.November 24, 2014 at 6:58 am #619943AnonymousInactiveYou'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.
November 24, 2014 at 8:20 am #619944AnonymousInactive@ 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
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