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Business Organizations
UMKC School of Law
Luppino, Anthony (Tony) J.

Business Organizations Outline

I. Introduction to Business Forms
A. Generally two types of business
1. Corporations
2. Unincorporated Associations
a. Ex: proprietorships, partnerships, limited partnerships, etc.
B. The Statutes
1. Uniform Partnership Act (1914) – UPA = §358.xxx in Missouri
C. Agency
1. Employees of a corporation are agents
a. Principal à Agent à 3rd Party
(entity, corp, etc.) à (people/humans to do the work) à 3rd Party
2. Undisclosed Principal
a. When a 3rd party does not know there is a principal
b. No defense of agency – lots of exposure
c. First agents problem than entity
3. Unidentified Principal
a. When 3rd party knows there is a principal but ID of principal is unknown
b. Agent is still liable
4. Disclosed Principal
a. 3rd Party knows who principal is
b. Agent is not liable
5. Actual Authority
a. Authority between principal and agent can be revoked at principal’s will
b. Authority is gone at termination
6. Apparent Authority
a. Created at first transaction between agent and 3rd party
b. Agent appears to have authority form principal
c. Principals have to worry about getting word out of termination to end apparent authority
7. Partnerships – each partner has authority in ordinary course of business even if not actual authority – easy to establish apparent authority
8. Independent Contractors
a. Employer – Employee relationship
b. Benefits for Employer
i. Do not have to do withholdings or pay pension plans
ii. Less liability for employer
c. IRS has factors to determine if an independent contractor – who got to decide daily activities of work?

D. Introduction to Business Forms

General Partnership

Limited Liability Partnership – LLP

§359 – Limited Partnership – LP

Limited Liability Limited Partnership – LLLP

Limited Liability Company – LC or LLC

Corp., Inc. or Company – Corp. (“S” or “C”)

Formation

No Filing with State – no writing required

§358.150(2)
File with State – easier to get from Gen. Ptnshp., just have to file a form

1) File certificate with Sec. of State – “certificate of Limited Ptnshp.”
2) Ltd. Ptnshp. Agreement b/t parties

Same as Ltd. Ptnshp. – §359.172 –what LLP does to Gen. Ptnshp., LLLP does to LP

1) Articles of Organization (like Cert. of Ptnshp.)
2) Operating Agreement

1) Articles of Inc. ($58 in MO)
2) Bylaws

Structure

General Partners – based on agreement

General Partners – based on agreement

*General Partners. – same as Gen. Ptnshp. – runs ptnshp.
*Limited Partners – “investors” – puts up money

*General Partners. – same as Gen. Ptnshp. – runs ptnshp.
*Limited Partners – “investors” – puts up money

Members

Owners = shareholders
Directors = elected by shareholders
Officers = Prez, Sec, CEO – handle day-to-day

Taxation

Flow Through – entity does not pay tax

Flow Through – entity does not pay tax

Flow Through – need an agreement to make distribution to pay tax – make sure money flows through

Flow Through – need an agreement to make distribution to pay tax – make sure money flows through

Flow Through or entity taxation – choice available

“C” comp. –– tax on dividends and entity
“S” – less than 75 owners – flow through tax only on dividends

Liability

Unlimited Liability – flows to the owners

Liability limited to the partner involved

Gen. Ptnrs. – unlimited liability
Ltd. Ptnrs. – Ltd. Liability

§359.172 – ltd. liability for Gen. Ptnrs. Also – like LLP

None for debts of business

More liability for directors than anyone else

II. The Partnership
A. The Need for a Written Agreement
1. Not necessary legally, but needed practically
2. Why ne

ork)
ii. Some have a changing/shared program – split file
iii. Sometimes depends upon the nature of the needs for the client – firm client
iv. There is a worry about an associate walking away if he or she does not get rewarded for a client
e. Going rate – firms figure out what others are paying
2. Positions within firms
a. Staff counsel/attorney – not a full partner track attorney
b. Of Counsel – minimum pay – not expected to add as much – wanted to bring in clients and laterals
c. More and more partners in recent years
d. Also increase in billable hours requirement
3. Movement between firms
a. Lateral movement
i. Entire area/division can move from one firm to another
ii. Often bonus get people to move laterally – bonuses for those moving and those getting them to move
b. Specialization in recent years
i. Not a lot can be done in a general practice
c. Emphasis on billing records
i. Movement toward efficiency
4. Size of Firms
5. Up or out Policy – not a partner in 7 years you are out
a. Not as prominent today
i. Different levels of partners – income partners (set amount per year) and equity partners
b. No true security in being a partner
6. Movement of Lawyers out of firms
a. In House Counsel – movement to clients
b. Split jobs in house
7. Risk of Income Partners
a. Indemnity possibility, but no guarantee
b. Not risk free to be an income partner
c. Biggest risk is taking a new lease for an office – 30 year lease – worry about a firm break up and the partners are stuck with the lease
8. Retirement Programs for Firms
a. Bane v. Ferguson
i. Unfunded retirement plan – plan but no one put money into it
1. Younger paying for older (like social security)
2. Lots of turmoil with these kinds of plans
ii. Funded Pension plans
1. Defined Contribution Plan
a. Put in so much a year – at end, get whatever has been put in
b. Combination of individual and corporation contributions
c. There is a great risk in programs
2. Defined Benefit
a. Can be funded or unfunded
b. Entitled to Pension regardless of what market does
c.