Ch. 16 Legal Guidelines and Business Considerations Flashcards
Typically, what structures do for-profit businesses operate under?
- Sole Proprietorship (majority)
- Partnership
- Corporation
What is a sole proprietorship?
- Business owned and operated by one person
- Does not require any formal paperwork and minimal ongoing paperwork is necessary (comparatively) to sustain the business
- Profits of business belong to owner, but financial losses and liabilities are also the sole responsibility of the owner
- Does not have a corporate veil (can wreck business and personal finances)
What is a corporate veil?
- Shields the actions of the business from the personal responsibility of the owner, even if the owner conducts business under a different company name
What is a partnership?
- 2 or more people who agree to operate a business and share profits and losses
What is a general partnership?
- Joining of 2 or more individuals to own and operate a business
What is an implied partnership?
- Individuals act as partners (such as by sharing a company checking account or jointly signing for a business loan)
What is a limited partner?
- An individual who retains no legal liability beyond his or her initial investment and does not have any formal input regarding partnership operations
What does flow-through taxation refer to?
- Financial profits and losses flow from the business directly to the investors. The business does not pay any taxes; rather, business profits are taxed on the investors’ individual tax return and losses can be utilized by the investors to offset other personal liability
What is a corporation?
- A legal entity, independent of its owners and regulated by state laws; any number of people may own a corporation through shares issued by the business
What does the corporate veil protect investors from?
- Personal liability
What are the main corporation types?
- Subchapter S-corporations
- Limited liability companies (LLCs)
- Limited Liability partnerships (LLPs)
- Franchise operations
What is a subchapter S-corporartion?
- A corporation that does not pay any income taxes. Instead, the corporation’s income or losses are divided among and passed through to its share holders
What are some pros and cons of S-corps?
Pros
- Profits flow through the business to the shareholders and are taxed as ordinary income
- Shareholders are shielded from personal liability (beyond their investments)
Cons
- Must be based in the US and can only have up to 100 total investors
- Can only issue one form of stock, meaning that every share must have the same voting rights and divided allotments
- Extensive paperwork
What is a C-Corporation?
- A corporation that is designed to operate in multiple countries and with various types of investors
What is the difference between an employee and an independent contractor?
- Employees “regularly” work for their employer
- Independent contractors typically are hired on a short-term basis to perform a specific or series of tasks
What elements are necessary to form a binding contract?
- An offer and acceptance with a mutual agreement of terms
- Consideration (an exchange of valuable items, such as money for services)
- Legality (acceptable under the law)
- Ability of the parties to enter into a contract with respect to legal age and mental capacity
What does the statute of frauds refer to?
- A contact that must be in writing in order to be enforceable
What is negligence?
- Failing to perform as a reasonable and prudent person would under similar circumstance
- For PTs, a reasonable and prudent person is someone who adheres to the established standard of care, or expected behavior for a professional faced with similar circumstances
What are two acts that result as negligence as a PT?
- PT failing to act (act of omission)
- PT acting inappropriately (act of commission)
What are the 4 elements that a plaintiff must establish to substantiate a charge of negligence in court?
- The defendant had a duty to protect the plaintiff from injury
- The defendant failed to uphold the standard of care necessary to perform that duty
- Damage or injury to the plaintiff occurred
- The damage or injury was caused by the defendant’s breach of duty (proximate causation)
What is an agreement to participate?
- Designed to protect the PT from a client claiming to be unaware of the potential risks of physical activity
- Should detail the nature of the activity, the potential risks to be encountered, and the expected behaviors of the participant
What is an informed consent form?
- Demonstrates that a client acknowledges that he or she has been specifically informed about the risks associated with the activity in which he or she is about to engage
- Primarily intended to communicate the potential benefits and dangers of the program or exercise-testing procedures, as wells as possible discomforts involved and potential alternatives
What is vicarious liability?
- Legal term meaning that employers are responsible for the workplace conduct of their employees
What is a waiver?
- Voluntary abandonment of a right to file suit; not always legally binding
What is gross negligence?
- An action that demonstrates recklessness or a willful disregard for the safety of others
- Occurs when someone deliberately acts in a manner that extends beyond the scope of employment or fails to meet the accepted standard of care
What is contributory negligence?
- Laws preventing a plaintiff in a lawsuit who has played some role in the injury from receiving any remuneration
- Not used in majority of states
What is comparative negligence?
- A system used in legal defenses to distribute fault between an injured party and any defendant
What is the statute of limitations?
- A formal regulation limiting the period within which a specific legal action may be taken
Why is it important to keep current and accurate records for every client?
- Information that is not written down did not occur or exist according to the court system
What is the Health Insurance Portability and Accountability Act?
- Prevents professionals from printing, emailing, or discussing a client’s health information unless the client has granted written permission to do so
What is one of the most important things a PT can do to ensure safety for their clients?
- Regularly inspect facilities and equipment and review protocols regarding supervision and instruction
What is the difference between general supervision and specific supervision?
- General supervision: involves overseeing a group of people, such as when a group fitness instructor leads a large class
- Specific supervision: occurs when an individual is supervised while performing a specific activity such as what typically occurs during a personal-training session
What is an umbrella liability policy?
- Insurance that provides additional coverage beyond other insurance such as professional liability, home, automobile
What do the best PT insurance policies cover?
- Cost of a legal defense
- Any claims awarded
What liabilities are often excluded in exercise professional policies?
- Abuse
- Molestation
- Cancer (resulting from tanning)
- Libel
- Slander
What is the general 5 step risk management protocol?
- Risk identification (specification of all risks that may be encountered
- Risk evaluation (review risk for probability of risk and severity)
- Selection of an approach for managing each risk
- Implementation (institute the plan)
- Evaluation (continually assess the outcome of risk-management endeavors)
What are the selection of an approach for managing risk consist of?
- Avoidance (remove possibility of danger and injury by eliminating activity)
- Transfer (move the risk to others through waivers, insurance policies, etc.)
- Reduction (modify the risks by removing or altering part of the activity)
- Retention (there are risks that will be retained, especially if the removal of the risk would eliminate a potential benefit)
When an incident occurs, how should a PT respond?
- ) Ensure the safety of all individuals involved
- ) Complete an incident report (note any facts related to the incident and solicit information from any witnesses)
- ) Retain information in a secure location for future reference
