Agency & Partnerships & Corporations

Question 1

Agency

Answer 1

Agency is a consensual legal relationship where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with third parties.

Question 2

Types of agent authority?

Answer 2

Actual authority is when the agent and principal have agreed, either expressly or impliedly, that the agent will act on behalf of the principal in a certain capacity.

Apparent authority is when the principal cloaks the agent with the appearance of authority and there is reliance by the third-party.

Ratification occurs when the principal has knowledge of all material facts, accepts the contract’s benefits, and has capacity.

Question 3

Respondeat superior

Answer 3

The principal will be vicariously liable for torts committed by the agent if there was a principal agent relationship and the tort occurred in the scope of the principal agent relationship (w/in job description, on the job, conduct intended for principal’s benefit).

Question 4

Without the right to control, there is no vicarious liability for an independent contractor towards unless:

Answer 4

Ultra hazardous activities, estoppel, non-delegatable duties, principal knowingly selected incompetent independent contractor.

Question 5

General partnership

Answer 5

And association of two or more persons who are caring honest co-owners of a business for profits. Persons can include entities. No formalities are required for formation. Profit-sharing creates a presumption of partnership.

Question 6

Limited partnership formalities

Answer 6

At least one general partner
At least one limited partner
A certificate of limited partnership executed and filed in the office of the secretary of state
A records office in state of organization and
An agent for service of process

Question 7

Rights and liabilities with a limited partnership

Answer 7

General partners have the right to manage, the right to vote on any matter, and are personally liable for debts and obligations of the limited partnership.
Limited partners have no right to manage, have the right to vote on any matter, have the right to obtain partnership information and bring a derivative action and are not personally liable for debts and obligations of the limited partnership.

Question 8

Liability with limited liability partnership

Answer 8

No partner is personally liable for the obligations of the partnership. Each partner, however, will remain personally liable for her own wrongful acts, i.e. torts.

Question 9

Limited liability partnership formalities

Answer 9

The partnership files a statement of qualification after a vote and files an annual report in the office of the secretary of state.

Question 10

Fiduciary duties of partners

Answer 10

Duty of care, duty of loyalty (no secret profits, no self dealing, no usurping partnership opportunities),

Question 11

Irrevocable agencies

Answer 11

Some agency relationships Dash agency coupled with an interest and power given as security – are irrevocable

Question 12

De Jure Corporation

Answer 12

A de jure corporation is formed when the incorporator validly complies with the requirements of the states general incorporation law. To be a valid corporation, the incorporator must file articles of incorporation and adopt initial bylaws.

Question 13

De facto corporation

Answer 13

At common law, a defective corporation may be found where there is a valid general corporation law, the incorporator made a colorable good faith attempt to comply with the statute, the incorporator was not aware that the attempt to comply with the statute was invalid, and the corporation took some action indicating that it considered itself a corporation.

Question 14

Corporation by Estoppel

Answer 14

Results when a corporation holds itself out to the public as a corporation, acts as such, and enters into contracts under that banner but is not actually a corporation at the time. Such an entity is estopped from claiming that it was not, in fact, a corporation when it entered into those contracts, as it benefited from claiming that it was.

Question 15

Liability with corporation

Answer 15

If properly formed, shareholders are not personally liable for the debts or obligations of the corporation.

Question 16

Piercing the corporate veil

Answer 16

A corporation is a separate legal entity designed to insulate its officers, directors, and shareholders from personal liability. However, the corporate form will be ignored by courts in some circumstances to avoid fraud and unfairness. Piercing the corporate veil renders your holders personally liable for corporate obligations.

Question 17

Limited liability company formalities

Answer 17

Must file articles of organization and may adopt operating agreement

Question 18

Advantages of LLCs

Answer 18

Limited liability and favorable partnership tax treatment

Question 19

S corporation

Answer 19

Tax like a partnership. Requirements are max of 100 shareholders, one class of stock, and shareholders must be individuals.

Question 20

Federal securities regulation

Answer 20

Publicly held corporation or subject to federal securities laws.
Director, officer or more than 10% shareholder of large companies cannot short swing trade.
An insider cannot use an instrumentality of interstate commerce in any scheme to use fraud in the purchase or sale of securities.

Question 21

Sarbanes Oxley act

Answer 21

A federal law that set new Orhan standards for all US public company boards, management, and public accounting firms.

Question 22

Direct or liability

Answer 22

Directors can be held personally liable to the corporation for injuries caused from breach of their duties (duty of care, duty of loyalty)

Question 23

Types of corporate dissolution

Answer 23

Voluntary dissolution, administrative decision, judicial dissolution

Question 24

Are you shareholder has a fiduciary duty to the corporation and the other shareholders only when the shareholder is

Answer 24

A majority shareholder or a shareholder in a close corporation

Question 25

A majority shareholder owes a duty to minority shareholders not to

Answer 25

Use his voting power to obtain special advantages for himself or use his voting power to unfairly prejudiced minority shareholders.

Question 26

Shareholders in a close corporation owe what to their fellow shareholders

Answer 26

I duty of loyalty and a duty to act in utmost good faith

Question 27

Member managed LLC

Answer 27

Default structure, members operate, authority is governed by general agency principles, owe fiduciary duties to each other

Question 28

Manager managed LLC

Answer 28

Members appointment edgers to operate a business, members typically are passive investors, members cannot find the LLC, managers owe fiduciary duties to members.

Question 29

Duties of directors of corporation

Answer 29

Duty of care and duty of loyalty!

Do you need to manage, or disclose

Question 30

Duty of care

Answer 30

A Director must act in good faith and in a manner the Director reasonably believes to be in the best interest of the corporation.
Business Judgement Rule: A court will uphold the decisions of a Director as long as they’re made in good faith and based on sound business judgment after a reasonable investigation of the facts.

Question 31

Duty of loyalty

Answer 31

A Director must act in the best interest of a corporation and may not receive an unfair benefit to the detriment of a corporation or shareholders unless there is been disclosure and independent ratification. No self-dealing and no usurping corporate opportunities.

Question 32

Shareholder direct action

Answer 32

In a shareholder direct action, a shareholder brings a suit against the corporation for breach of a duty owed to the shareholder. Any recovery from a direct action goes to the shareholder, not the corporation.

Question 33

Shareholder derivative action

Answer 33

A lawsuit started by a shareholder to enforce a corporate cause of action. Any recovery from a derivative action goes to the corporation, not to the shareholder who brought the suit.

Question 34

Fiduciary duty in Partnerships

Answer 34

A partner owes to the partnership and the other partners the duties of loyalty and care. Partners are liable for damages to the partnership and co-partners for breach of these duties.

Claims for breach of duties by partners in limited liability partnership are not subject to the rule of limited liability applicable to claims by outside parties.