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75 Cards in this Set
- Front
- Back
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Define fiduciary
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refers to a person having a duty created by his undertaking to act primarily for another's benefit in matters connected with the undertaking.
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Do workman's comp, social security, etc. laws apply to independent contractors?
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No.
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What is the employer-employee relationship?
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All employees who deal with third parties are agents of the employer.
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Define independent contractor
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A person who contracts with another to do something for him, but who's work is not controlled by him. He may or may not be an agent.
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Know how to define employee or independent contractor
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Consider how the person is payed, whether the tools are provided by the employer, whether the employer has considerable control over the worker, and whether the work is in the employer's usual field of work.
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Define "work for hire"
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Whenever an employee creates a copywrited work within the scope of his employment, the employer owns the copywrite.If it is indepedent contractor, however, then the contractor owns it.
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Does and agency relationship have to be in writing? Does consideration need to be given?
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No.
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Can a principle not have contractual capacity?
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He must have contractual capacity. However, an agent can be anyone.
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Four ways to form an agency relationship.
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1. Agency by agreement
2. Agency by ratification 3. Agency by estoppel 4. Agency by operation of the law |
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Agency by ratification?
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If someone who is not an agent makes a contract on behalf of someone else, and then that person affirms the contract by act or word, then the agency relationship is ratified.
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Agency by estoppel?
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When a principal causes a third person to believe that another person is the principal's agent, and the third person acts to his detriment in reliance of that belief, the principal is "estopped to deny" the agency relationship.
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Agency by operation of law?
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Emergency situations, or when a spouse buys necessary living supplies on his spouses charge card.
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Five duties owed to principal by agent.
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1. performance
2. notification 3. loyalty 4. obedience 5. accounting |
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What if only agent is notified of something?
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Notice to agent is notice to principal.
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Loyalty?
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An agent must act solely for the benefit of his principal and not in the interst of another person.
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Principal's four duties to agent?
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1. compensation
2. reimbursement and indemnification 3. cooperation 4. safe working environment |
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Define express authority
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authority declared in clear, direct, and definite terms. It can be oral or in writing.
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Define equal dignity rule
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If the contract being executed is or must be in writing, then the agent's authority must be in writing as well. Failure to comply with this rule makes the contract voidable at the option of the principle only.
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Durable power of attorney
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Usually a power of attorney is nullified by the death or incapacity of the principal. However, a durable one isn't.
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Implied authority
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An agent has implied authority to do what is reasonable in pursuit of fulfilling objectives of his agency.
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Dif between actual authority and apparant authority?
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Actual authority is what principal makes to agent. Apparant is what principle makes to third party.
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In authorized acts, when is the agent held liable?
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When the principle is either partially disclosed, or not disclosed at all, the agent may be held liable, but the principal still has a duty to perform.
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When does the Uniform Partnership Act (UPA) govern the operation of partnerships?
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In the absence of express agreement.
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What three criteria determine a partnership?
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1. A sharing of profit or losses.
2. A joint ownership of the business. 3. An equal right to participate in the management of the business. |
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What if not all three criteria are met in determining a partnership?
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If sharing of profits and losses are present, a partnership is presumed to exist.
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Does joint ownership of property and sharing of profits determine a partnership?
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Not necessarily. However, if both profits and losses are shared, it is a partnership.
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When is a partnership treated as a separate entity and when as an aggregate of individuals?
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An entity almost always: to sue and be sued, to hold real property, to collect judgements, etc.; an aggregate for tax puposes: a partnership doesn't pay taxes, individual partners pay them.
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Does a partnership have a tax liability?
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No. Tax liabilities are passed through to individual partners. However, a partnership does have to file an "information return" to the IRS.
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A partnership can be formed orally, writen, or implied by conduct. When does it have to be written?
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When what they do has to be in writting according to the statute of frauds, such as when an agreement authorizes partners to deal in real property.
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What is a partnership agreement called?
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Articles of partnership.
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Which types of partnerships are there? Which can and can't be dissolved at any time?
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A "partnership for a term" must be fulfilled for the duration of the agreed upon term. A "partnership at will" can be dissolved at any time.
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Can a corporation be a partner?
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Yes.
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When does partnership by estoppel exist?
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When someone makes a representation that a third party reasonably relies upon, then the courts will force a partnership for the liablilities icurred, but not for anything else.
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Who manages a partnership if one partner contributes more capital than another?
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In the absence of a different agreement, both partners have equal right in the management of the business regardless of contributed capital.
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Majority rule usually controls partnership decisions, when do decisions need to be made unanimously?
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1. Altering the essential nature of the firm.
2. Admitting new partners. 3. Disposing of partnership goodwill. 4. Confessing judgement against the partnership. 5. Amending terms of partnership agreement. |
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What is a confession of judgement?
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An act by a debtor permitting a judgement to be entered aginst him by a creditor, for an agreed sum, without the institution of legal proceedings.
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How are profits shared if there's nothing agreed upon in the partnership agreement?
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Profits and losses are shared equally no matter who contributed how much. Also, losses will be shared in the same proportion as profits if there isn't anything written.
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Does a partner have a right to sell or transfer partnership property?
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No.
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What is a charging order?
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If a creditor of a partner wants to use partnership property to satisfy debts, he can't, but he can petition court for a charging order which is an order to go after the rights of the partner to profits in the partnership.
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Define joint liability.
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A third party must sue all of the partners as a group, but each partner can be held liable for the full amount.
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Define joint and several liability.
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A third party has the option of suing all of the partners together or separately.
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Is a new partner personally liable for previous partnership debts?
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No.
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What is the buyout price for a partnership?
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The amount the partner would have received if the partnership was wound up that day.
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Is a dissociated partner still able to enter into transactions on behalf of the firm?
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For two years after dissociation, the firm can be liable for the dissciated partners actions based on apparant authority.
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Define dissolution.
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The termination of the partnership.
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What is the process of collecting, liquidating, and distributing the partnership assets defined as?
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Winding up.
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How does an LLP protect members?
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A partner is only personably liable for his own acts, or acts of those he supervises.
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Describe a limited parnership's formation
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There is a general partner and one or more limited partners. The formation is public and formal. They have to file a certificate of limited partnership with the secretary of state.
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What are the owners of an LLC referred to as?
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Members.
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How to form an LLC
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File articles of organization with the sec of state.
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What about diversity of citizenship lawsuits for LLC's?
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An LLC is a citizen of every state where its memers reside, so a suit can only be filed based on diversity of citizenship if NO members of the LLC live in the same state that the plaintiff lives in.
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How is an LLC taxed?
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It can choose to be taxed as a partnership or a corporation if it has two or more members.
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Who manages an LLC
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If member-managed, decisions are made by a majority vote. If manager-managed, then the managers decide.
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Define a joint venture
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A relationship in which two or more persons or business intities combing their efforts or their property for a single transaction or project or a related series of transactions or projects.
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What is a syndicate.
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Basically an investment group that gets together to finance a particular project such as a shopping mall or buying a pro sports franchise.
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Define a joint stock company
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A true hybrid of a corporation and a partnership. Ownership is represented by transferable shares of stock, but each owner has personal liability.
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Define a cooperative.
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An association that is organized to provide an economic service to its members. It is usually formed by groups of people who wish to pool their resources in order to get economic advantages.
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Who is responsible for the overall management of the corportation?
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The board of directors.
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Which rights do a corporation have and which doesn't it have?
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It has all the rights in the Bill of Rights except the fifth amendement.
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Does a corporation automatically have authority to do business in a different state than in which it's incorporated?
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No. It must get a certificate of authority.
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Difference between a public corporation and a public company?
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Public corporation is owned by government.
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Define close corporation.
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One in which shares are held by members of a family or by relatively few persons.
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What are benfits and qualifications of an S corporation?
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Benefit: No income tax at corporate level.
Qualifications: Must be domestic, all share-holders must be domestic, and less than 100 share-holders. |
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Tax advantages of S Corporation?
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1. When it has losses, shareholders can use losses to offset income.
2. When shareholder's tax bracket is lower, the whole corporation can be taxed at that rate. |
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Four steps of incorporating?
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1. Select a state of incorporation.
2. Secure corporate name. 3. Prepare articles of incorporation. 4. File articles of incorporation. |
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Where are firms operations spelled out?
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In the bylaws.
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What is a de jure corporation?
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If the corporation has complied with everything, it has (rightful and lawful) existence.
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What is de facto corporation?
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If the business didn't comply with rules of incorporation by honest mistake, then they are de facto (actual) corporation.
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What is a corporation's express and implied powers?
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Express are spelled out in the bylaws. Implied are powers that are reasonably necessary in the course of normal business.
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Define ultra vires
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It means "beyond the power". When a corporation acts beyond its powers, the acts are void.
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What is the term used for making shareholders liable?
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Peircing the corporate veil.
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What is the categorical imperative?
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It was developed by Kant and means that we need to think about if everyone in the world acted as we act, would the world be better?
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Philosophy of "greatest good for greatest number of people"
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utalitarianism
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What is the Sarbanes-Oxley Act?
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it requires companies to set up confidential reporting system so that employees can raise red flags.
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What is the moral minimum?
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Compliance with the law.
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