Ch. 7 Agency, Partnerships and Corporations Flashcards Preview

CLEP - Intro to Business Law > Ch. 7 Agency, Partnerships and Corporations > Flashcards

Flashcards in Ch. 7 Agency, Partnerships and Corporations Deck (46)
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1

______ is the relationship where one person, known as the principal, intends for another person, known as the agent, to act on her behalf.

Agency

2

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

ratification; necessity

3

True / False: A written agreement is needed to create an agency.

False, only in some states when the contract involves the Statute of Frauds

4

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

5

A principle will be held liable for actions of an agent so long as the agent acted with _________.

authority

6

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.

actual; apparent

7

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.

acquiescence

8

True/False: If the agent does not have authority to act, then the agent will be liable for any transactions they enter.

True

9

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

10

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.

undisclosed

11

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 ______.

partnership; writing

12

If one person enters a business to make profit, it's referred to as a _____ _____________.

sole proprietorship

13

To determine a partnership, the sharing of ______ is prima facie evidence.

profits

14

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 ________________.

estoppel; misrepresentation

15

True/ False : All partners share equally in profits and losses of the business and have equal rights to manage the affairs of the partnership.

True

16

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.

flow

17

A partnership is an ________ relationship

agency

18

Each partner is ___________ _______ for the debts and obligations of the partnership, sometime referred to as a ________ partnership.

personally liable; general

19

A _____ admitted partner is personally liable only for the debts and obligations that arise after he became a member.

newly

20

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

dissolution

21

After the affairs of a partnership have been ______ up, the remaining assets must be distributed in the following order:
`1. ________
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.

wound; Creditors

22

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

limited; general

23

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.

general; limited

24

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

25

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

26

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

27

A __________ is an artificial entity created by law and viewed as having an existence distinct from its owners and managers. It also has ________ existence.

corporation; perpetual

28

To form a corporation, a __________ must be filed, this process is called the ___________.

certificate; incorporation

29

The certificate is referred to as the _______ of incorporation or organization OR knows as the _______.

articles; charter

30

The articles must contain the name of the corporation, it's _______ and powers, amount of ______ they are authorized to issue, and the name of the incorporators of the initial directors.

purpose; shares