Business Law Exam 4 Flashcards
Agency
Specialized business relationship between one party known as the “principal” and another known as the “agent”
Nature of Agency Relationship
Parties
Delegation of powers
Parties
Principal
Agent
Principal
Party who appoints a second party to serve as an agent
Agent
Party appointed by a principal to enter into a contract with a third party on the principal’s behalf
Delegation of Powers
From principal to agent
Act in good faith on behalf of principal’s interests
Enter into contracts on principal’s behalf
Classification of Agents
General agent
Special agent
General Agent
Authorized to carry out particular kind of business or all business at a location
• FDIC
• Funeral Director in Charge
Special Agent
Authorized to transact specific act or act(s)
Creation of Agent’s Authority
Express authority
Implied authority
Apparent authority
Express authority
Stated in agreement creating agency
Authority by appointment
Example:
Written Power of Attorney
Implied authority
Authority to do things in order to carry out express authority
Apparent authority
Authority agent believed to have because of principal’s behavior
Other Employment Relationships
Independent contractor
Employer
Employee
Independent Contractor
Person who undertakes to perform a specified task according to the terms of a contract
Other contracting party has no control except as stated in the contract
Employer
Party who hires employees to do certain work
Employee
Person hired to perform work
Employer and Employee
Employee performs work for employer
Employee under control of employer for work and manner of completion
Employer liable for injuries to third parties caused by negligence of employees
Employer liable for torts committed by employee acting within scope of employment
Employer must comply with laws relating to employees
Social security deductions (FICA)
Worker’s compensation (FUTA and SUTA)
Federal and state income tax withholdings
Agent’s Duties to Principal
Loyalty and good faith Obedience Reasonable skill and diligence Accounting Information
Principal’s Duties to Agent
Compensation
Wages
Reimbursement
Expenses incurred during course of employment
Indemnification
Compensation for sustained losses
Adherence to terms of employment contract
Termination of Agency
By act of the parties
By operation of law
By Act of the Parties
Original agreement
Subsequent agreement
Revocation
Renunciation by agent
By Operation of Law
Subsequent illegality of subject matter Death or incapacity of either party Destruction of subject matter Bankruptcy of principal** Dissolution of the corporation
Termination of agency
by war
Types of Business Organizations
Proprietorship
Partnership
Corporation
Proprietorship
Business owned by one person who is subject to claims of creditors
Simple form of business organization
Proprietor receives all profits and assumes all losses
Proprietor bears all risks and has personal liability for all debts
Death of the proprietor terminates the business
Partnership
Voluntary association of two or more people who have combined their resources to carry on as co-owners of a lawful enterprise for their joint profit
Kinds of Partners
General
Silent
Limited
General Partner
Individual actively and openly engaged in the business and held out to everyone as a partner
Silent Partner
Individual who takes no active part in management of a business, but has capital invested in the business
Limited Partner
Partner who has his/her liability for the firm’s debts limited to the amount of their investment
Operations of a Partnership
Duties of a partner
Rights of a partner
Liabilities of a partner
Duties of a Partner
Exercise loyalty and good faith Use reasonable care and skill Conform to contract of partnership Maintain records Inform
Rights of a Partner
Participate in management Inspect financial data Contribution Withdraw advances (business money for personal use) Withdraw profits
Liabilities of a Partner
For contracts of the partnership
For torts
Dissolution of a Partner
By acts of the parties
By court decree
By operation of law
Dissolution by Acts of the Parties
By agreement
By withdrawal or alienation
By expulsion
Dissolution by Court Decree
Insanity Incapacity Misconduct Futility Bankruptcy
Dissolution by Operation of Law
Illegality
Death
Corporation
An artificial being, invisible, intangible, and existing only in contemplation of law
An entity that is something that has a distinct existence separate and apart from the existence of its individual members
Classifications of Corporations
Public
Private
Public Corporations
Formed to carry out government functions
• State university
• Public hospital
Private Corporations
Formed by individuals to perform some non-governmental function
• For profit
• Non-profit (not-for-profit)
Formation of a Corporation
Articles of Incorporation
Charter
Articles of Incorporation
written document setting forth facts about a corporation prescribed by law for issuance of a charter and asserting the corporation has complied with legal requirements.
Charter
grant of authority from a government to exist as a corporation
Corporate Structure
Stock holders
Board of Directors
Officers
Stock Holders
Those having title to one or more shares of stock in a corporation.
Represent combined ownership of the corporation.
Shareholders
Conduct stockholders meetings at least once a year.
Rights of Stockholders
Receive properly executed stock certificates as evidence of ownership
Attend corporate meetings and vote (unless denied by express agreement).
Receive proportionate shares of profits when distributed as in dividends.
Proxy
Person authorized to vote for another, written authorization to vote for another.
Board of Directors
Body elected by stockholders to act on behalf of the corporation and carry out the board’s policies.
Officers
(President / Vice-President / Secretary / Treasurer)
Authorized by Board of Directors to carry out board policies.
Dissolution of a Corporation
Voluntary
Involuntary
Voluntary Dissolution
By vote of the stockholders
Corporation pays debts,
Distributes remaining assets to stockholders as to number of stocks owned, and
Surrenders articles of incorporation
Involuntary Dissolution
Action of the court or state Due to forfeiture or abuse of corporate charter, Violation of state or federal law, Fraud in obtaining the charter, or Failure to pay specified taxes.
Manner of Dissolution
Existence terminated except to complete its business.
Cannot sue, own property, or form contracts.
Except to convert assets to cash.
