Business associations Flashcards
formation of agency relationship
- Consent: Both principal and agent must consent to the relationship.
- Control: Principal must have the right to control the agent’s actions.
- Purpose: The relationship must be for a legal purpose.
- Capacity: Both parties must have the capacity to enter into the relationship.
Express Authority
a type of actual authority
Explicitly given by the principal.
Implied Authority
A type of actual authority
Authority that is reasonably necessary to carry out express authority.
Apparent Authority
Principal’s actions lead a third party to reasonably believe the agent has authority.
Ratification
Principal accepts the benefits of a transaction after the fact.
Contract Liability
Principal is liable for contracts entered into by the agent with actual or apparent authority.
Agent is not liable if acting within the scope of authority.
Tort Liability
Principal is liable for torts committed by the agent within the scope of employment (respondeat superior).
Agent is always liable for their own torts.
duty owed from Agent to Principal
Duty of care, duty of loyalty, duty of obedience.
duty owed from Principal to Agent:
Duty to indemnify, duty to compensate.
Partnership formation (general partnership)
General Partnership: Formed by an agreement between two or more persons to carry on a business for profit.
Liability (Partnerships) (General Partners)
Personally liable for partnership obligations.
Liability (partnerships) (Limited Partners)
Liability limited to their investment in the partnership, provided they do not participate in management.
Formation (limited partnerships)
Formed by filing a certificate of limited partnership with the state.
Management and operation (general partnerships)
Each partner has equal rights in the management unless otherwise agreed
Management and operation (limited partnership)
General partners manage the business; limited partners usually do not have management rights.
Fiduciary duties (general Partnership)
Duty of loyalty, duty of care, duty to act within the scope of authority
fiduciary duties (limited partnerships)
Generally, no fiduciary duties if they do not participate in management.
Dissociation
Partner leaves the partnership, which can lead to dissolution.
Dissolution
Process of winding up the business and distributing assets.
Formation (LLC)
Articles of Organization: Must be filed with the state.
Operating Agreement: Governs the relations among members and the LLC.
Management (LLC)
2 possibilities
- Member-Managed: All members participate in management.
- Manager-Managed: Management is delegated to managers who may or may not be members.
Liability (LLC)
Members are generally not personally liable for the debts of the LLC.
Piercing the LLC Veil: Members can be held liable if the LLC is used to perpetrate fraud or injustice.
Fiduciary duties (LLC)
Members/Managers owe a duty of loyalty, duty of care, duty to act in good faith and fair dealing.
Dissolution (LLC)
two ways to go about this
- Voluntary Dissolution: As specified in the operating agreement or by consent of members.
- Involuntary Dissolution: By court order or administrative action by the state.
Formation (corporation)
you need
- Articles of Incorporation: Must be filed with the state.
- Bylaws: Internal rules governing the corporation.
Types of corporations
- C Corporation: Separate tax entity; double taxation.
- S Corporation: Pass-through taxation; limited to 100 shareholders.
Corporate Governance structure (corporations)
- Shareholders: Owners of the corporation; elect directors.
- Directors: Set policy and oversee management; owe fiduciary duties.
- Officers: Manage day-to-day operations; owe fiduciary duties.
Fiduciary duties (corporation)
- Duty of Care: Act with the care an ordinarily prudent person would take.
- Duty of Loyalty: Act in the best interests of the corporation; avoid conflicts of interest.
Liability (corporation)
Limited Liability: Shareholders are not personally liable for corporate debts.
Piercing the Corporate Veil: Shareholders can be held liable if the corporation is used to perpetrate fraud or injustice.
securities regulation
Securities Act of 1933: Governs initial sale of securities; requires registration and disclosure.
Securities Exchange Act of 1934: Governs secondary trading; established the SEC; requires periodic reporting.
Dissolution (corporation)
two ways to go about this
- Voluntary Dissolution: By board and shareholder approval.
- Involuntary Dissolution: By court order or administrative action by the state.
