study guide exam 4 Flashcards
What is agency?
consensual relationship authorizing one party (agent) to act on behalf of the other party (principal)
“relationship between agent and principal”
What is power of attorney?
document that allows you to appoint a person or organization to manage things if you become unable to
What is durable power of attorney?
to appoint an agent, such as a trusted friend or relative, to handle specific health, legal, financial responsibilities
(voidable)
Name four possible legal statuses of a person involved with a partnership
Employee, Investor, Partner, and Independent Contractor
Employee vs Independent contractor
employees- agents, vacation time, benefits, control means, manner of job
Independent- pay own taxes, no benefits, do things on own time, do not have control means or manner in job
employee vs partnership
to be partnership- have to share profit AND control
black letter law
elements of the law are free from dispute/doubt- accepted by judge
conflict of interest
have to put principals interest ahead of agents own (fiduciary duty) (within scope)
self dealing
conflict of interest on steroids
When seller/buyer is on both sides
How does agency terminate?
lapse of time, death
What is the most common form of business association in the US?
sole proprietorship
Which form of business association is responsible for most of the wealth creation in the country?
corporations
Name three factors to be considered in choosing a business association form
1) ease of formation
2) federal/state income tax laws
3) management and control
Are shareholders personally responsible for the debts and obligations of the corporations? Why?
shareholder liability is limited to the amount invested in the business enterprise
What is the difference between a for- profit and a not for profit corporation?
for profit- created for purpose of operating business
non profit- ones whose profits must be exclusively for the charitable, educational, or scientific purpose for when it was formed
What risk do the shareholders of a closely held corporation take when they ignore corporate formalities?
forfeiting their limited liability (lose)
quorum
minimal number necessary to be present at a meeting to transact business
when are directors elected
at the annual meeting of corporation
proxy
authorization to vote another’s shares out a shareholder meeting
what is right to inspect books and records
if the demand is made in good faith and for a proper purpose
what is direct suit
brought by a shareholder or a class of shareholders against the corporation based on owner of shares
derivative suit
corporation takes money brought on behalf of corporation
When they win $ goes to corporation
What should one do before agreeing to serve on a corporate board?
make sure they are ready for time and effort bc of liability, you can be sued individually
inside directors
directors are also officers or employees of the corporation
outside directors
directors who are not officers or employees
