Business Associations
Class 1 – Agency
Sole proprietorships- just you
General Partnership- more than just you
Limited Partnership: More than just you, but one person is more or less a passive investor
Limited Liability Partnerships (LLPs)- a lot of professional organizations
Limited Liability Companies (LLCs)- creature of state law
Corporations- C Corps
Sole proprietorships
-Simplest form of business association
-No paperwork required, just set up shop
-Absolute Control of your business- 100% of your business, answerable to no one
-Absolute Liability (underground studio)- can go after your personal along w/ business assets
-Pass through taxation
General Partnership
-Two or more persons carrying on as co-owners a business for profit (UPA §6) (doesn’t have to do with anything they sign or even agree on)
-No formalities required, but it’s best to seek legal counsel before setting up a partnership (absent an partnership agreement, default rules will be applied, but if you don’t want to be governed, use legal advice)
-Joint and several liability (both liable)
-Profits shared 50/50 in partnerships
-Disadvantage- can go after personal assets to go after the judgment
Advantage- pass through taxation
Limited Partnerships
-A partnership formed by two or more persons and having one or more general partners and one or more limited partners.
-Limited partner is going to have limited liability (can’t go after personal assets)
-Formalities required- must file with secretary of state (Third parties have to be on notice that they are dealing with a limited liability entity)
-General partner has general liability; limited partner has limited liability
-Pass through taxation
-Uniform limited Partnership Act- provides a lot of the same rules as the UPA, but you may not want to be guided by that, so seek legal advice
Limited liability partnerships (LLPs) –Not Responsible for it- No Cases
-Some states permit formation of LLPs
-Tax and flexibility advantages of partnerships (Same tax advantages as partnerships-not taxed, permitting partners to enter into partnership entities)
-Liability advantages of corporations
-Popular for professional partnerships
Limited Liability Companies (LLCs)
-Cross between partnerships and corporation
-Tax advantages of partnerships (No tax on entity level)
-Limited liability of corporations (only lose what money you have invested)
-Formation formalities required (file with secretary of state, put 3rd parties on notice they are dealing with a limited liability company)
-Extremely flexible in terms of organization
-Some uncertainty as to whether default rules of corporate law or partnership law apply (depending on how it feels will determine how it is treated, if it feels like a partnership then apply partnership, if corporate apply corporate law)
Corporations
-Great innovation- separate between ownership and control
-Formalities required
-Articles of incorporation or Corporate Charter
-By-laws-constitution of corporation
-Board of Directors, officers (run day to day business), minutes kept of both board and shareholder meetings, elections, filings
-Limited Liability
-Double taxation- Corporations themselves are taxed entities and if they pay our dividends to shareholders, the shareholders have to pay taxes as well
Gorton v. Doty
-Doty loaned her car for the football coach to take football players to another high school for a game and got into an accident
-Was there an agency relationship? If so, if the agent committed a tort, a third party victim can go after the principal
Agency relationship has to be based on some form of agreement. It can be implied through conduct.
*An agency relationship results from: the manifestation of consent by P to A that A shall act:
-on P’s behalf
-subjected to P’s control
-A’s consent to so act
Agency law tries to create incentives- burden of liability going to be placed on the person who is able to prevent a loss
Doty Limerick:
The court made Ms. Doty the heavy
Though Coach Garst demolished her Chevy.
When Soda Springs lost the game,
Coach accepted the blame,
t the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other’s manifestations to such third persons. – if you got you PAT triangle, yours wondering about Actual authority look at the PA leg, if you have an issue of apparent you look at the PT leg
3.Inherent Authority- only applies where you have a general agent, an undisclosed principal, and the agent exceeds her authority.
4. Estoppel- where a third party reasonably relied on an intentional or negligent representation of authority where non-existed and changed in her position in reliance, the principal can be bound by the actions of the purported agent.
5. Ratification- occurs when someone acts on my behalf purported not subject o my control, and I’m not bound, but after full disclosure I accept a benefit of the transactions, I become bound through ratification.
The legal consequences of an agent’s acts depend on the type of authority the agent possessed? No, once your bound your bound- can’t be liable for 50%.
-not if there is agency
ratification limited
estoppel is one way.
Class 2- Authority
Implied or Expressed Agency
Actual Authority
-May be express or implied
-Implied authority is highly contextual, often depending on prior practices or industry customs
– what a reasonable person in the position of the agent would believe?
– §35 e.g. Incidental authority, which includes the authority to do those things that usually accompany or reasonably necessary to the actions authorized
-Actual authority- requires a manifestation of consent from the principal to the agent
