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Business Organizations
UMKC School of Law
Downs, Robert C.


a. What law governs these entities?
i. state law
1. can choose to incorporate your business in whatever state you want
2. state you choose is the law that controls
3. size of business has no impact on what statutes control à same laws for large and small businesses
b. Agency Law
i. typical situationà corporation is the principal and the employee is the agent
1. the customer is the 3rd party
ii. Is an agent an employee or an independent contractor?
1. better for business to have independent contractors
a. don’t have to pay federal withholding taxes
b. less liability for business if independent contractor
c. don’t have to pay an independent contractor benefits
2. How do you know if someone is an independent contractor or an employee?
a. is the work supervised? If they tell you when and how you will do a job à good indication you’re an employee
b. independent contractors set their own hours
c. -Actual authority – where P tells A directly what to do. Also called Actual express authority.
-Implied authority would include the small details that are required to accomplish the actual task that A was told to do.
-Apparent authority- from a P to a 3rd party, where you hold out to a 3rd party, your entitled to rely on the apparent authority that a 3rd party represents to you.
-Inherent authority-
a. Sole Proprietorship
i. this is not actually a “business organization”
ii. not governed by agency laws
iii. formationà no filing required
1. not required to file papers to create (may need business permit/license)
2. if you use a business name à would have to file that name w/ the state
iv. duration
1. determined by sole proprietor
v. liability
1. owner is personally liable on all business obligations (unlimited liability)
2. owner wishing to limit liability à will transfer business to wholly-owned corpo

the partnership
v. taxation
1. flow-through taxation
2. not a taxable entity
3. income/loss passed-through to the partners in the partnership
vi. dissolving GP (dissociation)
1. may be dissolved by a partner at any time
2. only requirement is a statement of the partner’s express will
vii. partners have no right to compensation for their services unless provided by agreement
viii. fiduciary duties
1. partners have fiduciary duties to each other to act in good faith with due care and undivided loyalty
c. Limited Liability Partnership (LLP) – § 358.150 àstarts as a GP
i. creation
1. there is no common law of limited partnerships
2. NOT a default form of business
ii. filing
1. file a form with the Secretary of State’s office