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Chapter 1

INTRODUCTION TO LAW ON ENTERPRISES


[Work in group] Select a country whose company laws you would like to know something
about. The purpose of this task is to encourage you to do some research on the company laws
of another country and to present your findings, in outline, using the following guidelines:
To which legal family does the country belong?
American law belongs to the Common Law family of legal system.

What are the origins of its company law (i.e. was it taken from another source, or did
it emerge from that country without foreign influence?)

US company law emerge from US, the first have a simple public registration procedure to
start corporations (not specific permission from the legislature) for manufacturing business.

What is the specific source of the company law in the country? Is it a code? A statute?
Is it partly made up of case law?
Most corporate law comes from state statutes
Case law
How is the law interpreted? (e.g. does the provision of a civil code give way to a
specific provision of a commercial code, do the provisions of a commercial code give
way to specific legislation, etc)?

The Uniform Commercial Code (UCC) is a set of laws that provide legal
rules and regulations governing commercial or business in all country.
There is no general provisions or code applied to all state, each state has their
own.

What types of company exist in the country? (list them and briefly describe them)

Sole Proprietorship
Rather than start a corporation, an entrepreneur can go into business under their own name as
a sole proprietor. This has the advantage of simplicity: there is no need to file paperwork
with the government or hold meetings and elections, all of which must take place in a
corporation.

A sole proprietor, however, is "one with their business." Their profits and losses are treated as
personal income on their taxes. If they accumulate business debts, creditors can go after their
personal assets. If a sole proprietor dies, their business is treated like any other personal asset,
and ends up in the hands of whomever they will it to. Most importantly, a sole proprietorship
is just one person: if more than one person wants to start a business, they need a more
complex form.

Partnership
The partnership is the most basic form of collaborative business. Like a sole proprietorship,
it has the advantage of simplicity.
Two or more people can start a business with no special formalities, and their business will be
treated as a general partnership. They directly control the partnership and can make binding
decisions with a simple majority vote. Assets of the business will be listed in their names
individually, and the partners will jointly be liable for any debts incurred by the partnership.
The partners are also entitled to take home any profits made by the partnership. They are
taxed individually on their share of the partnership's profits, regardless of whether they keep
these profits or reinvest: the partnership is not taxed separately, which offers a huge advantage
over corporate taxation.
Limited partnerships (LPs) allow individuals to invest as "limited partners," which gives
them the limited liability of shareholders at the expense of relinquishing their right to
participate in management of the partnership. A partnership can also file with the state to be
treated as a limited liability partnership (LLP), which offers some of the limited liability
benefits of a corporation. A few states allow the general partners in an LP to file for LLP
status, creating a limited liability limited partnership (LLLP), but such organizations are
still rare.
Regardless of type, all partnerships are considered to be an aggregate of their partners, rather
than a separate entity. Unlike corporations, in which stock can be freely traded (assuming a
willing buyer), a partner involved in the management of the partnership can only transfer their
interest with the consent of the other partners. If the mutual consent to form a partnership
breaks down, the partnership breaks down as well. This means that partnerships do not last as
long as corporations, and the form is unsuited for larger businesses, especially those that wish
to take advantage of public equity markets, like stock markets, to seek new investors.

Limited liability companies


A Limited Liability company (LLC), or a Limited Liability Partnership (LLP), is an entity that
limits liability to its owners. In this way, it is similar to a corporation. However, unlike a
corporation, an LLC is not subject to double-taxation. In this way, an LLC is similar to a
partnership or an S-Corporation. An LLC differs from a partnership in that it continues to
exist if one of the owners dies. An LLC differs from an S-Corporation in that it does not
require that profits be paid evenly to share holders.

Corporation
a separate juridical entity owned by shareholders who may have limited, unlimited or no liability
Public Corporation: a corporation that can raise money in public market through the sale of freely
transferable shares. Its financial statements have to be disclosed to the public

Private corporation: a corporation that may not ask the public to subscribe to its shares, bonds, or
other securities and that is subject to less stringent public disclosure laws than a public
corporation.

How are companies formed?


Are there rules minimum capital rules for each type of company?

No need
What main issues are required to be dealt with by the company constitution? (E.g.
must the company have shareholders meetings? Must the company state its objects?
Etc)
(c 3 caau)
Legally, in the United States, there is no type of representative offices in Vietnam
like. Most states do not require minimum capital to establish enterprises.
Procedures for setting up businesses in the states are simple and fast.
Companies with foreign investment subject to the law regulating the same as
domestic companies. There are some procedures:
1. Ascertain the legal configuration of your business:
You need to organize your business as a legal entity. Some firms / businesses need
to be registered with your state government:

A corporation
A nonprofit organization
A limited-liability company or
partnership

You wont need to register your business at the state level, if you set up your
business as a sole proprietorship (also known as sole trader a business entity
owned and run by one individual)..
Your first choice of a business type is not permanent. You can initially register as a
sole proprietorship, and if your business expands and your personal liability risk goes
up, you can change your business to an LLC.
2. Register your business / firm name:.
The legal name of a firm / business by default is the name of the person or
organization that owns a business.
3. Acquire your federal tax ID:
Employers with employees, business partnerships and corporations, and other
categories of organizations, are required to acquire an Employer Identification
Number (EIN) from the U.S. Internal Revenue Service.

4. Register with your state revenue agency:


In addition, you are required to obtain Tax IDs and permits from your states revenue
agency, just as you are required to have a Federal Tax ID.
If you decide to sell products and you need to compile sales taxes, you will probably
be required to acquire a Sales Tax Permit or Vendors License. This can be obtained
from your state or local government (or both).
As well as business taxes which are needed by the federal government, you will
need to pay some state and local taxes, with every state and locality having its own
tax laws. The most frequent types of tax obligations for small businesses / firms
include the following:
Tax Permit.
Income Taxes

5. Acquire licenses and permits:


The majority of businesses need to acquire some category of business license or
permit to formally operate. Most small businesses are required to acquire a general
business license / industry-specific operating permits from state and local
government agencies. You may be required to be licensed at the federal, state and/or
local level, depending on your business. As well as a basic operating license, you
might need specific permits, including an environmental permit.
What are the main powers, responsibilities and duties of the directors?
Rights:
1. Directors right of access to board information and to participate in board
action
2. . Access to legal advice
Generally, the director in office might not be denied access to the legal advice provided
for the purposes of boards activities
Obligations:
1.

Directors have two basic fiduciary obligations to the corporation and its stockholders: the duty
of care and the duty of loyalty. The extent of these obligations varies from state to state;
however, since most companies are incorporated in Delaware, we will focus on Delaware law.

2. Under Delaware law, the duty of care requires a director to exercise the care that a reasonably
prudent person in a like position would exercise under similar circumstances. The duty of
loyalty requires a director to act in good faith and to refrain from putting his personal interests
ahead of the interests of the corporation and/or its stockholders.

What are the main rights of the shareholders?

Voting rights on issues that affect the corporation as a whole

Rights related to the assets of the corporation


Rights related to the transfer of stock
Rights to receive dividends as declared by the board of directors of the
corporation
Rights to inspect the records and books of the corporation
Rights to bring suit against the corporation for wrongful acts by the
directors and officers of the corporation
Rights to share in the proceeds recovered when the corporation
liquidates its assets

Are there rules for the protection of minority shareholders?


Yes. http://www.yalelawjournal.org/pdf/425_6avvoksi.pdf
Present your research to the class.
Speak for no more than 10 minutes.