Business Entity: Authority of Owners and Managers

Question 1

Business Entity:
Authority of Owners & Managers
Partnerships

Answer 1

Partnerships
- Agency Law: governs authority of partners
- act of partner in ordinary course of business binds business unless, no authority to act, and the 3rd party knew no authority
- act of partner not in ordinary course only binds if actual authority.
- Ratification: act with no apparent or actual authority may bind if partnership ratifies
Tort Liability
- intentional tort: partnership is liable
- Misapplication of Funds: strict liability on partnership
- Joint and Severally Liable
- Late Arrivers: only liable for previous debts to extent of capital contribution

Question 2

Business Entity:
Authority of Owners & Managers
Corporations

Answer 2

Corporations

• Corporate Pyramid: shareholders are passive investors who vote on directors who appoint management
• Directors have broad authority
• Officers run the day-to-day business
  
  • express authority from Articles, bylaws, Statutes,
  • implied authority by virtue of their office
  • even if no express or apparent authority, directors can ratify

Question 3

Business Entity:
Authority of Owners & Managers
LLC’s

Answer 3

LLC’s
- operating agreement states if member-managed or manager-managed, if not, member managed
Member-Managed
- each has equal right to vote
- ordinary business issues decided by majority vote
- acts outside ordinary require unanimous
- operating agreement amended only by consent of all
Manager-Managed
- decisions decided by manager
- managers have equal rights in management
- ordinary business issues decided by majority vote
- acts outside ordinary require unanimous
- managers may be removed at any time without cause
RULLCA: member is not an agent simply by being a member