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

Aug 28

BO 1-35, 1191-1203

Diff types of biz’s – these types imact liability mngmnt and tax consequences
1 sole proprietorship – doesn’t have to be 1 person, no separate legal entity to protect owners from liability
2 corp – creates new legal entity that assumes all responsibility
3 general P – can be oral K, decide how to split profit and mngmnt etc – may be ended at any time by any Partner
4 limited P (LLP, LLLPs = has both limited and general P’s all have limited liability, LLC’s=limited liability for all owners whether or not involved in mngmnt-very flexible for mngmnt) – same as GP, but owner’s liability limited – very little common law – creature of statute, not the default style of biz till lately
LLP’s – virtual elimination of personal liability of P’s from firms obligation is a radical change that essentially creates a new biz type
judgment creditors should first be required to use up all P funds before going to one or more of the P’s
BIZ’S usually break into 2 types;
A Incorporated – people can put $$ in, get profits but not take on liability = a creature of statute
Corporation has 3 layers
1 shareholder/owner – who pick
2 brd of directors – who hire
3 officers/ employees – who run the corp.

the entity theory of corp = govt needs to intervene for direct regulation and shareholder litigation
the contract theory = right to K is private govt stay out – parties that are the “Nexus” of the K and must be allowed to K as best desired

primary duty of brd of directors is to maximize shareholder profit – not health of biz or welfare of employees

B Unincorporated (P, proprietorship)
Closely held – not publicly traded
And publicly held – diff being if open to outside investors – traded publicly

Co’s that Limit the liability of co’s and give tax advantages are in vogue

Statutes govern a lot of biz relationships

RS of Agency – 1 dude A works for other dude P – both must manifest an intent to form relationship – biz entitiy can only work thru A’s
1.01 – fiduciary relationship – agent acts on behalf of principal and subject the P’s control – A accountable to P – scope of A usually determined by K – A must use some standard of reasonable care etc
1.02 – 1parties label is not controlling, actions are dominant
1.03 – a parties manifestation of consent may be oral or thru conduct
1.04 – superior agent = rights conferred by P to direct sub-agent
– co-A = 2 A’s w relationship to same P
– co-A can be appointed by S-A, or P w actual or apparent authority
– 2.13 – disclosed P = 3rd party knows A and P – P becomes bound but A is bound to 3rd party unless K’ed out
– 2.13 – undisclosed P = 3rd party not know about P at all, think A is P
– uID’ed P/ partially undisclosed = 3rd party know A is A, but not know who P is – P becomes bound but A is bound to 3rd party unless K’ed out
– notice = knows, should know, or has reason to know
2.01 – actual authority = power actually or implidiely given to A by P – P gives A power to represent him – if A acts w/ in reasonable scope of duties A can’t be liable to P or 3rd party – authority flows directly from P to A
2.02 – scope of authority = anything that P has manifested or implied, or in usual course/ incidental to biz etc
2.03 – apparent authority = power to affect P’s legal relations w 3rd party – if 3rd party reasonably believes A has authority to act for P – and that belief is traceable to P’s manifestation –absent knowledge that would lead reasonable person to believe differently
manifestation – must be believable and somehow come from P not just persuasive A
based on concept of estoppel
actual termination of A relationship may not end apparent authority
2.04 – repsondeat superior = P responsible for A’s behavior “acting in scope of employment” etc
2.05 – dudes can’t say not A/ are estopped once they know someone has relied on their representation of A
2.06 – P can’t reduce A”s authority after 3rd party has relied etc
2.07 – P must make restitution if he has been unjustly enriched
2.11 – inherent authority comes from function of A itself – arises by implication from common sense duties of A – incidental authority come from acts that relate to A action
2.12 – implied authority – conduct can imply authority not have to be oral/written – can be implied from previous conduct
3.09 – if either A or P renounce deal its over
3.10 – apparent authority ends when its not reasonable for a 3rd party to believe A has actual authority
independent K-er = a person who K’s w another to do something for him but who isn’t controlled by the other not subject to the other’s specific control – A is under much more control than independent K-er from P

1 major advantage of written K is that is may avoid future fights over what the arrangement actually was – also its easily proved in crt – written K may help focus attention on trouble in the deal that may not be noticed if only oral

ird person to create apparent authorities, but communicates directly with agent to create actual authority.

Third party must reasonably rely on authority held out by principal, must know of facts demonstrating principal’s consent to agent’s actions, and must actually believe agent to be authorized, in order for apparent authority to exist;

Text 1191-1203
Is responsible to third party for agents torts in course of employment. But not responsible for Indep. Contractor.

No right to control Indep. Contr., but right to control employee.

Inherent Authority – arises from agency itself….store manager lowers priced even though told not to.
Incidental Authority- arises out of actual authority (the little things.)

Partially disclosed can bind agent and principle.
Discloses binds agent
Undisclosed can bind agent only. Unless principle had given actual authority

Aug 30

May want to write into K of P – that no personal liability – just take P’s assets

It doesn’t matter what people say or write into K, or even think they are, a crt will look at conduct/ how they acted/ how the ‘world’ treated them, to decide what type of biz it is

A corp/co must fiel a ‘ficticious name’ document w the Sec of State
LLP – not a limited P = a GP
J+S liability = protection of the unsuspecting public
358.150 = Broad Shield liability
358.440 = Mo Reg for LLP – must renew every year
GP = no need for filing w the state
Usually status not affected if a good faith clerical error
358.500 = LLP = focus on entity not on P’s – helps w liability
people usually not protected from stuff that happened before the filing of LLP date

*******Richert v. Handly******
Long story short, court said that there is a partnership, and we will Use UPA when it appears to be a partnership, but parties are slient. We wont say there is none, based on lack of terms in a given area.

In action for accounting brought by plaintiff, who agreed to purchase stand of timber which