SOLE PROPRIETORSHIP and PARTNERSHIP.2

SOLE PROPRIETORSHIP
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SOLE PROPRIETORSHIP and PARTNERSHIP.2

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  1. SOLE PROPRIETORSHIPS AND PARTNERSHIPS

    Slide 1 - SOLE PROPRIETORSHIPS AND PARTNERSHIPS

  2. Slide 2

    • Sole Proprietorship
    • General Partnership
    • Limited Partnership
    • Limited Liability Partnership
    • Limited Liability Limited Partnership
    • Corporation
    • S Corporation
    • Limited Liability Company
    • TYPES OF BUSINESS ENTITIES IN THE STATE OF HAWAII
  3. DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS(DCCA)

    Slide 3 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS(DCCA)

    • Business Registration Division. Maintains the business registry for all: corporations, limited liability companies, general partnerships, limited partnerships, limited liability partnerships and limited liability limited partnerships conducting business activities in the State. 
    • In addition, the registry contains trade names, trademarks, service marks and publicity name rights.
  4. MAIN OFFICE

    Slide 4 - MAIN OFFICE

    • Business Registration DivisionKing Kalakaua Building335 Merchant Street, Rm. 201Honolulu, Hawaii 96813
    • Telephone:
    • (808) 586-2744 (Administration)
    • (808) 586-2727 (Documents Registration)
    • Email Address: breg@dcca.hawaii.gov
  5. BUSINESS ACTION CENTER

    Slide 5 - BUSINESS ACTION CENTER

    • 1130 North Nimitz HighwaySecond Level, Suite A-220Honolulu, Hawaii 96817
    • Open: 7:45 am - 4:30 pm Monday thru Friday
    • Phone: (808) 586-2545Fax: (808) 586-2544
    • Email:  bac@dcca.hawaii.gov
  6. ON-LINE FORMS REGISTRATION

    Slide 6 - ON-LINE FORMS REGISTRATION

    • http://hawaii.gov/dcca/breg/registration/
    • registration-form-info.html
  7. SOLE PROPRIETORSHIP

    Slide 7 - SOLE PROPRIETORSHIP

  8. WHO IS A SOLE PROPRIETOR?

    Slide 8 - WHO IS A SOLE PROPRIETOR?

  9. Anyone who does business without creating a separate business organization

    Slide 9 - Anyone who does business without creating a separate business organization

  10. ADVANTAGES

    Slide 10 - ADVANTAGES

    • THE PROPRIETOR RECEIVES ALL OF
    • THE PROFITS
    • EASIER AND LESS COSTLY TO START
    • MORE FLEXIBILITY THAN OTHER
    • FORMS OF BUSINESS
    • TAX IS REPORTED AS PERSONAL INCOME
    • PERMITTED TO ESTABLISH TAX-EXEMPT
    • RETIREMENT ACCOUNTS (KEOGH PLANS)
  11. DISADVANTAGES

    Slide 11 - DISADVANTAGES

    • UNLIMITED PERSONAL LIABILITY
    • TERMINATES AT DEATH, SALE OR
    • TRANSFER
    • LESS OPPORTUNITES TO RAISE
    • CAPITAL
  12. STATE OF HAWAII REQUIREMENTS?

    Slide 12 - STATE OF HAWAII REQUIREMENTS?

  13. General Excise Tax License

    Slide 13 - General Excise Tax License

  14. DEPARTMENT OF TAXATION

    Slide 14 - DEPARTMENT OF TAXATION

    • The link address is: http://pahoehoe.ehawaii.gov/tls/app OR
    • http://www6.hawaii.gov/tax/a1_b2_1geuse.htm
    • Contact: TAXPAYER SERVICES For State tax information and inquiries Tel: 808.587.4242 OR Tel: 1.800.222.3229 (Toll- Free)
  15. PARTNERSHIP

    Slide 15 - PARTNERSHIP

  16. An agreement (association) between two or more competent persons to carry on, as co-owners, a business for profit

    Slide 16 - An agreement (association) between two or more competent persons to carry on, as co-owners, a business for profit

  17. Domestic General Partnership

    Slide 17 - Domestic General Partnership

    • A partnership formed under the laws of Hawaii consisting of two or more persons who associated to carry on business as co-owners for profit and who are personally liable for all debts of the partnership.
  18. 3 ESSENTIAL ELEMENTS

    Slide 18 - 3 ESSENTIAL ELEMENTS

    • A sharing of profits and losses
    • A joint ownership of the business*
    • Equal rights in the management of the
    • business
    • * Joint ownership of property does not necessarily create partnership (e.g. joint tenants or tenants in common)
  19. PARTNERSHIP

    Slide 19 - PARTNERSHIP

    • NOT a legal entity: A Partner cannot sue or be sued by the partnership nor may one partner sue another on matters related to partnership business….
    • 1. Debts of the partnership are debts of individual
    • partners
    • 2. One partner can be liable for the partnership’s entire
    • business (Joint and Several Liabillity)
  20. PROFIT EXCEPTIONS

    Slide 20 - PROFIT EXCEPTIONS

    • DEBTS
    • WAGES
    • RENT (to landlord)
    • ANNUITIES (to surviving spouse or
    • testamentary representative)
    • INTEREST (on a loan)
    • CONSIDERATION FOR THE SALE OF
    • GOODWILL
  21. PARTNERSHIP BY ESTOPPEL

    Slide 21 - PARTNERSHIP BY ESTOPPEL

    • Arises even though there is no
    • partnership relationship/agreement
    • between the parties:
    • When a person, by words or conduct, represents himself or permits another to represent him as a partner; or holds out another as his partner, or…
    • When a person expressly or impliedly consents to the misrepresentation of an alleged partnership relationship…
    • And there is a good faith reliance by a creditor third party
  22. FORMATION OF A PARTNERSHIP(PARTNERSHIP AGREEMENT)

    Slide 22 - FORMATION OF A PARTNERSHIP(PARTNERSHIP AGREEMENT)

    • CAPACITY (if none, then liable for contribution of capital)
    • NO WRITING NECESSARY (statute of frauds?)
    • 1. ORAL
    • 2. WRITTEN
    • 3. IMPLIED BY CONDUCT
    • LEGALITY OF PURPOSE
    • CONSENT BY ALL PARTIES
    • DURATION
    • 1. TERM (IF NO STATEMENT OF TERM THEN…)
    • 2. AT WILL
  23. DURATION OF PARTNERSHIP

    Slide 23 - DURATION OF PARTNERSHIP

    • TERM:
    • 1. Agreement specifies the duration of the partnership
    • in terms of a date or the completion of a project
    • 2. Dissolution without consent of all partners
    • constitutes a breach of the agreement
    • AT WILL:
    • 1. If no duration is specified
    • 2. Any partner may dissolve at any time without
    • violating the agreement and incurring liability
  24. PRIMA FACIE EVIDENCE OF A PARTNERSHIP

    Slide 24 - PRIMA FACIE EVIDENCE OF A PARTNERSHIP

    • SHARING OF PROFITS
  25. PARTNERSHIP DUTIES BETWEEN PARTNERS

    Slide 25 - PARTNERSHIP DUTIES BETWEEN PARTNERS

  26. DUTIES

    Slide 26 - DUTIES

    • FIDUCIARY DUTIES
    • NO RIGHTS TO COMPENSATION
    • RIGHT OF CONTRIBUTION
    • VOTING AND SHARES
  27. FIDUCIARY DUTIES

    Slide 27 - FIDUCIARY DUTIES

    • CARE:
    • 1. Not Gross Negligence
    • 2. Not will full Misconduct
    • LOYALTY:
    • 1. Best Interest of the Partnership (avoid
    • competing)
    • 2. Accounting for Profits
  28. NO RIGHTS TO COMPENSATION

    Slide 28 - NO RIGHTS TO COMPENSATION

    • No right to be paid for work on behalf of
    • the Partnership
    • EXCEPTION: Winding-up Payments
  29. RIGHT OF CONTRIBUTION

    Slide 29 - RIGHT OF CONTRIBUTION

    • Pro rata right of contribution from other partners when one partner pay the entire obligation
  30. VOTING AND SHARES

    Slide 30 - VOTING AND SHARES

    • Equal voting and share distribution
    • unless spelled-out otherwise in the
    • partnership agreement.
  31. RIGHTS AMONG PARTNERS

    Slide 31 - RIGHTS AMONG PARTNERS

  32. INTEREST IN THE PARTNERSHIP

    Slide 32 - INTEREST IN THE PARTNERSHIP

    • PROFITS AND LOSSES
    • 1. Governed by the partnership agreement
    • 2. Otherwise, shared equally
    • ASSIGNMENT OF PARTNERSHIP
    • INTEREST
    • 1. Partner’s interest in Partnership is freely assignable (Profits and capital
    • contribution are transferable)---Assignee does not become a partner AN
    • 2. Individual Partner has no right to specific partnership property
    • (tenancy in partnership)
    • CREDITOR’S LIEN ON PARTNERSHIP
    • INTEREST (Charging Order by the court)
  33. MANAGEMENT RIGHTS

    Slide 33 - MANAGEMENT RIGHTS

    • UPA: All partners have equal rights in
    • managing the partnership
    • Majority rule governs all ordinary
    • decisions
    • Significant decisions require unanimous
    • vote:
    • 1. Alter nature of firm’s business or capital structure of partnership
    • 2. Admit new partners or enter into wholly new business
    • 3. Assign partnership property into a trust
    • 4. Dispose of partnership goodwill
    • 5. Permit a judgment by a creditor or submit to arbitration
    • 6. Undertake any act making partnership business impossible
    • 7. Amend articles of the partnership agreement
  34. COMPENSATION

    Slide 34 - COMPENSATION

    • INDEMNIFICATION (payments made and
    • liabilities reasonably incurred)
    • CONTRIBUTION (when one partner is compelled
    • to pay for debt, other partner contributes their pro rata
    • share)
    • REMUNERATION (only for winding-up and
    • extraordinary services)
  35. PARTNERSHIP LIABILITIES

    Slide 35 - PARTNERSHIP LIABILITIES

    • For contracts made within the scope of
    • Partnership business
    • For wrongful acts or omissions of a
    • Partner in the course of Partnership
    • business
    • JOINT AND SEVERAL LIABILITY
    • 1. CONTRIBUTION (proportional share)
    • 2. INDEMNIFICATION (from partnership)
  36. PARTNERSHIP LIABILITY LIMITATIONS

    Slide 36 - PARTNERSHIP LIABILITY LIMITATIONS

    • ADMISSION AS NEW PARTNER
    • RETIREMENT/WITHDRAWAL AS
    • PARTNER
  37. TERMINATION OF PARTNERSHIP

    Slide 37 - TERMINATION OF PARTNERSHIP

    • DISSOLUTION--does not terminate partnership but terminates authority of partner to act on behalf of the partnership.
    • WINDING-UP--partnership continues until winding-up of obligations is completed.
  38. DISSOLUTION

    Slide 38 - DISSOLUTION

    • BY ACTS OF THE PARTNERS
    • 1. By agreement
    • 2. UNLIKE CORPORATION, creditor cannot dissolve
    • BY OPERATION OF LAW
    • BY JUDICIAL DECREE
    • 1. INSANITY/INCOMPETENCE
    • 2. INCAPACITY
    • 3. BUSINESS IMPRACTICALITY/UNPROFITABILITY
    • 4. IMPROPER CONDUCT OR BREACH
    • 5. OTHER CIRCUMSTANCES
    • NOTICE (actual or constructive)
  39. WINDING-UP

    Slide 39 - WINDING-UP

    • No new business….but may “wrap-up” old business such as:
    • 1. Collecting and preserving partnership
    • assets (selling)
    • 2. Discharging liabilities (paying debts)
    • 3. Accounting to each partner for the value
    • of their interest in the partnership
    • 4. Assigning/compromising claims
    • 5. Performance of contracts made prior to dissolution
    • 6. Collection of debts
  40. WINDING-UP

    Slide 40 - WINDING-UP

    • WHO MAY WIND-UP:
    • 1. All partners
    • 2. Remaining partners
    • 3. Surviving partners
    • 4. Executor
    • SURVIVING PARTNERS ENTITLED TO
    • PAYMENT FOR THEIR WINDING-UP
    • SERVICES
    • Partner wrongfully dissolving partnership cannot wind-up
  41. Asset Distribution Priorities

    Slide 41 - Asset Distribution Priorities

    • REPAYMENT OF THIRD PARTY CREDITOR DEBTS
    • REFUND OF ANY ADVANCES (LOANS)
    • MADE TO OR FOR THE FIRM BY A
    • PARTNER
    • RETURN OF PARTNER’S CAPITAL
    • CONTRIBUTION
    • DISTRIBUTION OF THE BALANCE, IF ANY,
    • TO PARTNERS IAW RELATIVE PROPORTION OF THEIR RESPECTIVE SHARES IN THE PROFITS
    • PARTNERS MUST BEAR ANY LOSSES
  42. STATE OF HAWAII

    Slide 42 - STATE OF HAWAII

    • To register a Domestic General Partnership in Hawaii, the Registration Statement for Partnership (Form GP-1) is filed with the appropriate filing fee.
    • Application must be typewritten or printed in black ink, and must be legible.
    • All signatures must be in black ink.
    • Submit original application with the appropriate fee(s).
    • This statement must be signed and certified by at least on general partner. If partner is a CORPORATION, a corporate officer much sign on behalf of the corporation. If partner is another PARTNERSHIP, a general partner must sign on behalf of the other partnership. If partner is a LLC, must be signed and certified by at least one manager of a manager-managed company or by at least one member of a member-managed company. If partner is a LLP, must be signed by at least one partner.  If partner is a LLLP, must be signed by at least one general partner.
    • Statement must be filed in the Department of Commerce and Consumer Affairs, together with the required filing fee, within thirty (30) days after the partnership is formed. Failure to file a registration statement within the prescribed time will make each partner liable severally to the State in the amount of $25.00 for each and every month while the default shall continue.
  43. Information for Partnerships After Registration With The DCCA:

    Slide 43 - Information for Partnerships After Registration With The DCCA:

    • Chapter 425, Hawaii Revised Statutes, relating to partnerships in general, provides the following:
    • You must file annually a statement of facts concerning your partnership as of the preceding year. The forms will be mailed to every partnership each year. The filing fee is $5.00. If you fail to file any annual statement for a period of two years, your partnership may be canceled by the Director of Commerce and Consumer Affairs. The cancellation of your partnership shall not relieve you of liability for the penalties for failure to file any annual statement.
    • Whenever your partnership name is changed, a statement of change of firm name must be filed in this office within thirty (30) days after the change on a form provided by the DCCA showing: a) the registered name of the partnership, and b)the new name of the partnership. The filing fee is $10.00.
    • Upon dissolution, whether by mutual consent of all the partners, disagreement among the partners, death of a partner, or for any other reason, a statement of dissolution must be filed. Any lawful taxes, imposts, license fees or assessments for which the partnership, or any partner, is liable shall constitute a prior lien upon the assets of the partnership, but not as against the interest of those creditors who have prior recorded liens. The filing fee is $10.00.
    • Failure to comply with any of the above requirements carries a maximum penalty of $25.00 for each month of delinquency. The penalty may be waived provided the reason for the delinquency is satisfactory to the DCCA.
  44. Questions ?

    Slide 44 - Questions ?