Flashcards in Ch. 7 Agency, Partnerships and Corporations Deck (46)
______ is the relationship where one person, known as the principal, intends for another person, known as the agent, to act on her behalf.
An agency is created by:
a. an agreement, express or implied
b. by estoppel- the principal indicates to a third party that someone has the ability to act as her agent
c. by ____________, - meaning that the principal agrees to be held liable for the actions of a third party, even when those actions were not originally authorized by the principal AND
d. by __________ - a principal will be held responsible for the agent's acts during an emergency situation
True / False: A written agreement is needed to create an agency.
False, only in some states when the contract involves the Statute of Frauds
An agent owes 3 fiduciary duties to a principal:
1. duty of _______ - the agent cannot act in ways that benefits herself in detriment to the principal.
2. duty of ________ - they must obey all reasonable instruction from the principal.
3. duty of ____ - agent must carry out her duties on behalf of the principal in good faith and with reasonable care.
loyalty; obedience; care
A principle will be held liable for actions of an agent so long as the agent acted with _________.
Two forms of authority:
______ authority - agent reasonably believes she has based on her interactions with the principal (express actual authority or implied)
________ authority - when the principal leads a third party to reasonably believe that the agent has the authority to act on her behalf.
Implied actual authority may arise from ____________ - when the agent has performed an action for the principal in the past and they had notice of the performance, but failed to object to it within a reasonable period of time.
True/False: If the agent does not have authority to act, then the agent will be liable for any transactions they enter.
If a principal is __________, meaning their existence AND identity are known to the third party, then the agent will have no liability unless the parties intend otherwise. A principal is _________ _________ if a third party has knowledge of their existence, but not their identity, and an ___________ principal is one whose identity and existence are not knows to the third party.
disclosed; partially disclosed; undisclosed
If a principal is partially disclosed, then both the agent and principal are liable for the transaction. However if a principal is __________, only the agent is liable.
A ___________ is an association of two or more people who enter into a business together for the purpose of making profit. It can be formed without any formalities, and need not be in ______.
If one person enters a business to make profit, it's referred to as a _____ _____________.
To determine a partnership, the sharing of ______ is prima facie evidence.
A partnership by ________ arises when a person indicates to a third party that he is a partner, when in fact he is not. The person will be held liable to the third party for any harm created by his ________________.
True/ False : All partners share equally in profits and losses of the business and have equal rights to manage the affairs of the partnership.
A partnership is subject to ___-through tax treatment where the partnership itself is not taxed, but each partner is taxed on their share of the profits, whether or not the profits have been distributed.
A partnership is an ________ relationship
Each partner is ___________ _______ for the debts and obligations of the partnership, sometime referred to as a ________ partnership.
personally liable; general
A _____ admitted partner is personally liable only for the debts and obligations that arise after he became a member.
A ____________ represent a change in the relation of the partners (like someone exiting). This can arise by:
a. a specific period of time as outlined in an agreement
b. express desire of any partner, if the partnership has no specific period
c. mutual agreement of all partners
d. the expulsion of any partner
e. the death of a partner
f. bankruptcy of a partner or the partnership OR
g. court decree
After the affairs of a partnership have been ______ up, the remaining assets must be distributed in the following order:
2. Any partners who made loans to the partnership
3. Partners, as return on their capital contributions AND
4. All partners equally, or consistent with the terms of the agreement.
A _______ partnership must have a certificate filed with the secretary of state or an equivalent state office.. It has two types of partners:
Limited partners and ________ partners
A _________ partner has personal liability for all debts and obligations of the limited partnership. A ______ partner does not have personal liability and does not participate in managing the affairs of the business.
A _______ ______ ___________ (LLP) is an entity that has all of the features of a general partnership, EXCEPT with regard to formation and liability. A ______ is required to create a LLP. _____________ liability is used and is when liability only extends to partners who commit a wrongful act or who are supervising people who commit such an act. Partners in an LLP may have ________ liability
limited liability partnership; filing; supervisory; limited
A ________ ______ _______ (LLC) is an entity in which the people who have made financial investment in the company (known as ________), do not have personal liability.
limited liability company; members
An LLC can choose their __________ structure where all members can participate in the management of the LLC, called a _______-managed LLC or only a few members, known as ________, may be authorized to manage the LLC, this is referred to as a _______-managed LLC. The LLC [does/does not] require a filing to be formed.
management; member; managers; manager; does
A __________ is an artificial entity created by law and viewed as having an existence distinct from its owners and managers. It also has ________ existence.
To form a corporation, a __________ must be filed, this process is called the ___________.
The certificate is referred to as the _______ of incorporation or organization OR knows as the _______.