Intro

Question 1

Why does agency matter?

Answer 1

1. Principles are vicariously liable for their agents’ actions that are within the scope of the agency relationship.
2. Agents owe fiduciary duties to their principal

Question 1

What is an agent?

Answer 1

An agent is a person who is authorized and agrees to act on behalf of and subject to the control of another. (their principal)

Question 2

What are some characteristics of partnerships?

Answer 2

1. GPs are simple to form and are democratic and flexible in their organization.
2. Partners of GP are agents of the other partners and of the partnership.

Question 3

What are some responsibilities that a partner owes to another partner in a GP?

Answer 3

1. Partners owe fiduciary duties to one another and to the partnership.
2. Partners are personally liable for other partners’ actions that are within the scoope of the GP.

Question 4

What are some characteristics about LLC?

Answer 4

1. Most widely used form of business that brings together limited liability and preferential tax treatment.
2. LLCs are creatures of contract.
3. The nature of the contract informs the agency relationship.
4. Operators can mis and match different features to create a business entity that best suits their needs.

Question 5

What are some characteristics about Corporations?

Answer 5

1. Shareholders own shares of the corporation and elect directors to manage the business and affairs of the corporation.
2. The director hires officers (who then hire other employees) who are responsible for the day-to-day operations of the corporation.
3. Directors and officers (D&O) are agents of the corporation.

Question 6

What duties do Directors and officers owe to the corporation?

Answer 6

1. Duty of care
2. Duty of Loyalty

Question 7

What is duty of loyalty?

Answer 7

Duty of loyalty is a director’s responsibility to act at all times in the best interests of their company.

Question 8

What are various types of business entities?

Answer 8

Sole Proprietorships
General Partnerships
Limited Partnerships & Limited-Liability Partnerships (LLPs)
Limited-Liability Companies (LLCs)
Professional Limited-Liability Companies (PLLC)
S Corporations (a U.S. tax classification, see next slide)
Benefit Corporations – for-profit organizations that are created to benefit society first instead of shareholders
Non-Profit Corporations (not covered in this class, but a valid organizational form)

Question 9

What is an LLC?

Answer 9

A limited liability company is a structured business entity that helps shield owners from litigation.

Question 10

What is an S corp?

Answer 10

An S-Corp is a tax classification that provides liability protection and passes income through to owners.

Question 11

What is an requirement to form an S-corp?

Answer 11

100 shareholders or less

Question 12

What is S-corp and LLC known for?

Answer 12

Both S corps and LLCs are pass-through entities, meaning that they don’t pay corporate taxes, and both offer limited liability protection for their owners/principals. However, LLCs are more flexible.

Question 13

What two business entities are “Common law” business entities?

Answer 13

1. Sole Proprietorships
2. General Partnerships

Question 14

What does it mean to be a “Common Law” Entity?

Answer 14

It means you don’t need to file paperwork with the state to start them. They can arise based on the circumstances.

Every other type of organization is only formed when you file the right paperwork.

Question 15

When was the first partnership formed?

Answer 15

1300s according to the historians

Question 16

What is a Benefit Corporation

Answer 16

A benefit corporation is a corporate form designed for for-profit entities that want to consider society and the environment in addition to profit in their decision-making process.

Question 17

What’s the difference between a shareholder and a stakeholder?

Answer 17

1. Shareholders own at least one share in the company.
2. Stakeholders are those who have a vested interest in a company and can either affect or be affected by a business’ operations and performance. ex. investors, employees, customers, suppliers, communities, governments, or trade associations.

Question 18

What is shareholder primacy

Answer 18

It is the traditional view that companies should prioritize shareholder wealth maximization.

Question 19

What is stakeholder capitalism?

Answer 19

A new approach suggests that companies should be run for the benefit of all their stakeholders.