Chapter 18: Business Organizations and Employment Law

Employment at Will

A common law doctrine under which employment is considered to be "at will" - that is, either party may terminate the employment relationship at any time and for any reason, unless a contract or statute specifies otherwise.

Professional Corporation (PC)

A corporation formed by professionals, such as attorneys or accountants. Each member of the firm is liable for his or her own malpractice, but is generally protected by limited liability as in the corporate form.

Close Corporation

A corporation owned by a small group of shareholders, often family members. (Also called a "closely held" corporation.)

Publicly Held Corporation

A corporation whose shares are eligible to be publicly traded in securities markets, such as the New York Stock Exchange.

Dividend

A distribution of profits to corporate shareholders, disbursed in proportion to the number of shares held.

Respondeat Superior

A doctrine in agency law under which a principal-employer may be held liable for the wrongful acts committed by agents or employees acting within the scope of their agency or employment.

Limited Liability Company (LLC)

A hybrid form of business organization authorized by a state in which the owners of the business have limited liability and taxes on profits are passed through the business entity to the owners.

Limited Liability Partnership (LLP)

A hybrid form of business organization authorized by a state that allows professionals to enjoy the tax benefits of a partnership while limiting in some way the normal joint and several liability of partners.

General Partner

A partner who participates in managing the business of a partnership and has all the rights and liabilities that arise under traditional partnership law.

Limited Partnership

A partnership consisting of one or more general partners and one or more limited partners.

Director

A person elected by the shareholders to direct corporate affairs.

Officer

A person hired by corporate directors to assist in the management of the day-to-day operations of the corporation.

Agent

A person who is authorized to act for or in the place of another person (the principal).

Independent Contractor

A person who is hired to perform a specific undertaking but who is free to choose how and when to perform the work. This person may or may not be an agent.

Agency

A relationship between two persons in which one person (the agent) represents or acts in the place of the other (the principal).

Fiduciary Relationship

A relationship involving a high degree of trust and confidence.

Bylaws

A set of governing rules adopted by a corporation or other association.

Uniform Partnership Act (UPA)

A set of rules governing the operation of a partnership (unless the partners have expressly agreed otherwise).

Constructive Discharge

A termination of employment that occurs when the employer causes the employee's working conditions to be so intolerable that a reasonable person in the employee's position would feel compelled to quit.

Share

A unit of stock; a measure of ownership interest in a corporation.

Restrictive Covenants

Agreements between an employer and employee that the employee will not attempt to compete with the employer for a specified period after employment ends.

Wrongful Discharge

An employer's termination of an employee's employment in violation of the law.

Principal

In agency law, a person who, by agreement or otherwise, authorizes another person (the agent) to act on the principal's behalf in such a way that the acts of the agent become binding on the principal.

Liquidation

In regard to corporations, the process by which corporate assets are converted into cash and distributed among creditors and shareholders according to specific rules of preference.

Sexual Harrassment

In the employment context, (1) the hiring or granting of job promotions or other benefits in return for sexual favors or (2) language or conduct that is so sexually offensive that it creates a hostile working environment

Vicarious Liability

Legal responsibility placed on one person for the acts of another.

Shareholder

One who has an ownership interest in a corporation through the purchase of corporate shares, or stock.

Limited Partner

One who invests in a limited partnership but does not play an active role in managing the operation of the business.

Joint and Several Liability

Shared and individual liability. In partnership law, joint and shared liability means that a third party may sue all of the partners (jointly) or one or more of the partners separately (severally). This is true even if one of the partners sued did not participate in, ratify, or know about whatever gave rise to the cause of action.

Joint Liability

Shared liability. In partnership law, partners incur joint liability for partnership obligation and debts.

Worker's Compensation Laws

State statutes that establish an administrative procedure for compensating workers for injuries that arise out of or in the course of their employment, regardless of fault.

Articles of Incorporation

The document filed with the appropriate state official, usually the secretary of state, when a business is incorporated.

Certificate of Incorporation or Corporate Charter

The document issued by a state official, usually the secretary of state, granting a corporation legal existence and the right to function.

Dissolution

The formal disbanding of a partnership or a corporation.

Winding Up

The process of winding up all business affairs (collecting and distributing the firm's assets) after a partnership or corporation has been dissolved.

Sole Proprietorship

The simplest form of business in which only one person owns the business.