Business Associations

Front 1

CREATION OF AGENCY RELATIONSHIP

Back 1

Agency relationship is consensual. It arises when one person agrees to act on behalf of another person (principal).

Front 2

TERMINATION OF AGENCY RELATIONSHIP

Back 2

Can be terminated by either party, and by death or incapacity of either party.

Front 3

AUTHORITY MAY BE:

Back 3

Express
Implied
Incidental
Apparent

Front 4

EXPRESS AUTHORITY

Back 4

When principal expressly states what the authority of the agent is.

Front 5

APPARENT AUTHORITY

Back 5

Principal's acts make a reasonable person believe the agent is authorized to act on behalf of the principal.

Front 6

INHERENT AGENCY POWER

Back 6

Since many agency relationships don't specifically state every action the agent is authorized to undertake, courts hold that an agent generally has implied, incidental or inherent power to bind the principal in the ordinary course of the agent's scope of authority.

Front 7

RESPONDEAT SUPERIOR

Back 7

Vicarious liability imposed on principal for acts of employee.

Employees responsible for own negligence.

Employees only responsible for frolic

Front 8

DUTY OF CARE

Back 8

Agent is required to act with care, competence and diligence normally expect of similar agents.

Front 9

BUSINESS OPPORTUNITY

Back 9

Agent may not:

1. Compete with principal (while employed as agent).
2. Pursue business opportunities he finds while acting in the scope of the agency, unless he discloses the opportunity to the principal, and the principal either allows him to do so, or abandons the opportunity.

Front 10

DUTY OF OBEDIENCE

Back 10

Agent is not required to follow directions to commit unethical or illegal acts.

Front 11

PARTNERSHIP (1)

Back 11

Formed when 2 or more people agree to go into business together as co-owners:
1. No formalities are required.
2. All partners in a general partnership are jointly and severally liable for debts of partnership.

Front 12

LIMITED PARTNERSHIPS

Back 12

1. File docs in secretary of states office
2. Llimited partners have at least one general partner (who is personally liable for the debts of the partnership, and at least one limited partner.

Front 13

LIMITED PARTNERS

Back 13

Have limited liability. They are only liable for debts of limited partnership up to the amount of their agreed upon investment in the limited partenership.
they can't actively engage in management of limited partnership. Otherwise, they are general partnership

Front 14

LIMITED LIABILITY PARTNERSHIPS

Back 14

Combine aspects of general and limited partnerships.

Can actively engage in management of the partnership's business and his liability is generally limited to his investment in the partnership.

Front 15

PARTNERSHIP (2)

Back 15

1. Partners are considered agents of the partnership.

2. Absent agreement between themselves, call partners can bind the partnership in the ordinary affairs, and have an equal right to manage the partnership.
3. Partnership agreements serve to control the rights of partners.

Front 16

PARTNERSHIPS (3)

Back 16

Partners in general partnership have joint and several liability for all partnership's debts.

Partners owe a duty of care and duty of loyalty to partnership.

Front 17

PROFITS AND LOSSES

MANAGE PARTNERSHIP

Back 17

All partners share equally in profits and losses.

All partners have equal rights to manage partnership.

Front 18

DISSOLUTION OF PARTNERSHIP (1)

Back 18

End of partnership by agreement of statute.

Winding up and termination precedes dissolution and involves selling partnership assets, paying debts, and distributing anything left over to the partners.

Front 19

DISSOLUTION OF PARTNERSHIP (2)

Back 19

Absent agreement, partnership is terminable at will.
It's terminated by:

1. Death or bankruptcy of any partner.
2. By court order
3. Becomes illegal to carry on the business of the partnership.

if these don't apply, the dissolution is wrongful and nondissolving partners have cause of action against partner who caused dissolution.

Front 20

DISCLOSURE REQUIREMENTS

Back 20

Limited partners have right to inspect and copy the books and records of the limited partnership, and are entitled to full disclosure form the general partner if the general partner enters into a contract with the limited partnership.

Front 21

CORPORATIONS

Back 21

Incorporators file articles of incorporation, which provide general information such as the name of the corporation, its fiscal year, the number of authorized stock, and the names and addresses of board of directors and key executives in the corporation.

Front 22

BYLAWS

Back 22

Bylaws of a corporation provide the general framework regarding how the corporation is organized and managed, and generally include such things as the timing and frequency of the director's meetings and shareholder meetings and powers of key executives.

Front 23

OPERATING AGREEMENTS

Back 23

Detail how the corporation is managed.

Front 24

PIERCING CORPORATE VEIL

Back 24

Immunity from liability is not absolute. If board of directors/controlling shareholders do not respect the corporate entity by:

1. Failing to hold required meetings.
2. Failing to sufficiently capitalize the corporation OR
3. Treating corporate assets as their own,

courts will pierce the corporate veil and hold these persons liable for the debts of the corporation.

Front 25

CORPORATIONS FINANCE OPERATIONS THROUGH

Back 25

1. Selling stock
2. Borrowing money
3. Operating income.

Front 26

SECURITEIS ISSUANCE

Back 26

Wide range of classes of stock (voting, nonvoting, common preferred).

There are limitations on number of shares of each stock which can be sold.

Front 27

DIVIDENTS AND DISTRIBUTIONS

Back 27

Dividents are payments to shareholder, either in proportion to their respective stock ownership interests in the corporation or according to the terms of the corporation's stock issuance agreements. Dividends are based on current earnings, and can be in the form of cash, or in the form of additional sock. If allowed by state staute, distributions to stockholders come from the capital of the corporation.

Front 28

MEETINGS

Back 28

Shareholders meet annually to elect directors and to conduct other business.

Only stockholders owing stock at a date set in advance of the meeting are entitled to vote at the meeting.

Front 29

VOTING ARRANGEMENTS

Back 29

Arrangements where shareholders agree in advance how they will vote at a meeting.

Front 30

VOTING TRUSTS

Back 30

More formal form of voting agreement under which shareholders give power to vote to voting trustee.

Front 31

NOTICE (Shareholder meeting)

Back 31

Notice is required in advance of shareholder meeting.

Front 32

QUORUM

Back 32

Minimum number of shares to be present in order to make the shareholder vote at the meeting binding.

Front 33

ACTION BY WRITTEN CONSENT

Back 33

Corporate bylaws generally provide that directors can act by written consent, instead of meeting in person.

Front 34

ACTION BY COMMITTEE

Back 34

Corporate bylaws generally provide for the delegation of duties from the board of directors to various committees formed for a specific purpose.

Front 35

SCOPE OF AUTHORITY (CORPORATIONS)

Back 35

If member or manager acts within scope of his authority as an agent for disclosed principal, the member of manager is not personally liable.

Front 36

BEST INTERESTS OF CORPORATION

Back 36

Duties of:

1. Care
2. Honesty
3. Disclosure
4. Loyalty to corporation

Front 37

DUTIES OF SHAREHOLDERS
(CORPORATIONS)

Back 37

Shareholders owe no fiduciary duties to the corporation, and can act in their own self interest, except in cases involving majority shareholders and shareholder in closely held corporations.

Front 38

DUTIES OF MANAGERS AND MEMBERS (CORPORATIONS)

Back 38

Managers and members owe the same fiduciary duties to LLCs as directors and officers owe to corporations.

Front 39

CLOSE CORPORATIONS

Back 39

Corporations with:

1. Few shareholders.
2. Active participation by the few shareholders in management of corporaiton.
3. no ready market for sale of shares.
4. Close corporations, the shareholders are treated as partners and owe a high level of fiduciary duties to other shareholders.

Front 40

SHARE TRANSFER RESTRICTIONS

Back 40

An owner of stock is free to sell the stock to anybody the shareholder chooses. These are used in closely held corporatoins and are a contractual agreement requiring the shareholder to first offer the stock to the corporation.

Front 41

OPTION OR BUY/SELL AGREEMENTS

Back 41

Shareholders in a close corporation enter into buy/sell agreements to ensure that remaining shareholders can continue the corporation's business without an influx of new shareholders.

Front 42

MERGERS AND CONSOLIDATIONS

Back 42

1. Corporations frequently merge for business or tax reasons.
2. Merger is accomplished by:

1. One corporation buying hte shares of stock of another corporation.
2. One corporation buying all assets of another corporation, either for cash or stock, and dissolving the seller corporation and distributing cash or stock to dissolving corp's shareholders.
3. One corporation buying enough shares of another corporation to become a sbsidiary of the buying corporation.

Front 43

SALE OF SUBSTANTIALLY ALL ASSETS (CORPORATION)

Back 43

Corporation which sells substantially all of its assets is not automatically dissolved. it becomes a shell corporation and will dissolve after paying off its debts and distributing what's left to its shareholders.

Front 44

RECAPITALIZATIONS

Back 44

Corporation amends its articles of organization to change its financial structure which changes the rights of stockholders and requires shareholder approval.

Front 45

DISSOLOUTIONS OF CORPORATIONS

Back 45

Ending of business. Debts are paid, and remaining corporate assets are distributed to shareholders. May be voluntary or involuntary.

Front 46

DIRECT LAWSUITS

Back 46

Directly impact a shareholder, so he may file a direct suit against the corporation (like when dividend isn't paid).

In most cases, the corporation is harmed, and shareholder is indirectly harmed.

Front 47

DERIVATIVE LAWSUITS

Back 47

Power to sue on behalf of corporation rests with Board of Directors. For breach of fiduciary duty.

1. Demand must be made on board of directors
2. Shareholder must have owned the stock at the time of the wrongdoing
3. Shareholders post bond to pay the defendant's legal fees in event of unsuccessful outcome.