Business Law 301 Final

general partnerships

"an association of two or more persons to carry on, as co-owners, a business for profit", legal entities separate from their owners, have laws

articles of incorporation

"charter" in TN; required information includes the number of authorized shares; name/addresses of incorporators and the registered agent

domestic corporation

"home state"; only incorporates in one state

respondent superior

"let the master answer" legal doctrine imposing vicarious liability on an innocent employer for the wrongs of an employee committed while he was acting within the scope of his employment injured party can sue both employer and employee does not apply to independent contractors

close corporations

"privately held corporations"; their stock is not publicly traded, informal management, shareholder agreements that restrict transfer of shares

TN statutes

Whistleblower's law - employers may not take any reprisal against an employee who whistle blows prohibits terminations based on voting in elections, call to military services, wage garnishments, filing worker's compensation, and jury duty employees that are wrongfully fired may bring civil lawsuits against employers for "wrongful discharge" or "retaliatory discharge"

liability for torts and crimes

a principal conducting business through an agent is liable for harm caused by the principal's own negligence or recklessness and for tortious actions committed by an agent but authorized by the principal agents are liable for their own torts regardless of whether the torts were committed within the scope of their employment

advantages of corporations

ability to raise capital via sale of stock, continuity of life, and limited liability of owners

foreign LLC

after organizing in one state, it may register to do business in other states as this

member-managed (LLC)

all of the members participate in mangement, unless the operating agreement specifies otherwise, statutes may provide that members have equal rights/votes on LLC matters

exempt administrative employees

applies to employees whose primary duty is office or non-manual work directly related to management or business operations of the employer, and who exercise discretion and independent judgement with respect to significant matters

Worker Adjustment and Retraining Notification (WARN)

applies to employers with at least 100 full time employees 60 days notice before mass layoffs that involve 1/3 of employees does not apply to small operations

unincorporated legal entities

are required to file formation documents with the state: LLCs, LLPs, LPs

actual authority

arises from what the principal makes clear to the agent, it can be express or implied

sole proprietorship

business form where ownership and control are vested in one individual, unincorporated business with no separate legal entity, no formation documents, personally liable for businesses debts, more than 2/3 of US businesses

partnership formation

can be formed expressly or may be implies by the conduct of the parties, duration of the partnership is usually "at will" but can be for a stated term, profit and loss sharing are equal to whatever partner contributed. each person makes a capital contribution in exchange for their partnership interest

employment-at-will

common law doctrine that provides either an employee or employer can end the relationship at any time for any reason-- unless doing so would violate a statute, an employment contract, or public policy

business judgement rule

common law legal doctrine; protects a director or officer from liability for consequences of a good-faith business decision that may turn out to be harmful or unprofitable for the corporation will protect the director or officer from liability so long as the director or officer took reasonable steps to become informed about the matter

agency

consensual legal relationship between two parties, whereby one party ("principal") agrees to have another party ("agent") act on his behalf, and the agent agrees to do so

limited partners

contribute cash/property to the partnership ("capital contribution"), liability for partnership debts is limited to their capital contributions so long as they do not actively participate in management

key provisions of FSLA

covered workers must be paid minimum wage and overtime pay for working > 40 hours a week equal pay for men and women child labor rules

by ratification

created when the principal affirms a person's unauthorized act

Uniform Partnership Act (UPA)

default rules governing a partnership's formation and operation; these rules apply if a partnership agreement does not provide otherwise, default rules can be overridden

partnership taxation

do not pay federal income taxes, form 1065 partners must pay income taxes on their share of partnership income, even if the partnership does not distribute the income to them in cash

disadvantages of corporations

double taxation, cost and complexity of formation and compliance, management constraints

Fiduciary duties

duty of care- to refrain from grossly negligent/reckless conduct or intentional misconduct duty of loyalty- account to the partnership for use of partnership assets; the duty to refrain from competing with the partnership, self-dealing, disclosing secrets, or usurping business opportunities

fiduciary duties of loyalty

duty to act for only one principal, the duty to not profit at the principal's expense, the duty to not act adversely to the principal's interests, and the duty to keep the principal's information confidential

profit/loss sharing (UPA)

each partner gets an equal share of profits; losses are shared as profits shared

management (UPA)

each partner has an equal voice in management - one vote per partner

agency laws applying to partnerships

each partner is an agent of the partnership for the purpose for conducting the partnership's business partners have liability for the acts of other partners that occur in the course of conducting partnership business each partner is in a fiduciary relationship with the partnership and the other partners

worker's comp (state laws)

employers are insurers of work-related risks regardless of who is at fault independent contractors NOT covered, some states exclude farm and domestic workers funding determined by state

public policy

exception to the employment-at-will doctrine that occurs when an employer fires an employee for reasons that violate a clear public policy (e.g. firing an employee who refuses to perform illegal acts or who are whistle blowers)

by estoppel

exists when words or conduct of the principal lead a third person to believe that the agent has authority to act for the principal

by agreement of the parties

express or implied agreements

benefit corporations

for-profit corporations organized under specific state statutes that permit them to intentionally operate in a way that benefits society and the environment--and not just shareholders purpose, accountability, transparency

employer-employee relationship

generally only apply to employees not independent contractors employers must properly classify as either independent contractors employers have the ability to control details of how employees carry out work

liability for contracts

if agent enters contract with third person on the principal's behalf, the principal will normally be liable on the contract provided that the agent is acting within his authority ("authorized act"); not liable when agent acts without authority ("unauthorized act")

domestic LLC

in the state in which it organizes

ownership of copyrights

independent contractors own copyrights in the work they create for principals, unless they agree in writing that their work products are "work made for hire" get a written assignment of copyrights

holding companies

low-tax countries may be used by to reduce or defer federal income taxes

joint and several liability

majority rule; all partners are both jointly and severally liable for all partnership debts that can not be satisfied from the partnership's assets, can be sued jointly or separately

exempt executive employees

management-related duties (hiring/firing, supervising)

limited partnership

may be a good choice of entity when a partner does not want to take an active role in management and wants to limit his personal liability to the amount of his investment in the partnership; ULPA/RULPA; must file "certificate of limited partnership", must have at least one general partner and at least one limited partner

dividends

may be distributed shareholders, typically paid in cash, paid only if they are declared by the board of directors

manager-managed (LLC)

members designate a group of managers to manage the LLC, managers may be members or nonmembers

FMLA

more than 50 employees employee has to have worked with employer for at least 1 year to be eligible 12 weeks unpaid leave, do not have to be paid must continue health insurance entitled to get their jobs back

unlimited personal liability

most serious disadvantage of partnerships; partnership is liable for torts committed by the partnership's employees and partners when they are acting within the scope of their business duties

worker's comp benefits

must be accidental or work-related certain but limited recovery including; medical bills, lost wages, fixed sum for permanent disability exclusivity of remedy- cannot sue employer for negligence

employer- independent contractor relationship

no control over details not an employee of the principal many are not agents of the employer

LP taxation

no federal income taxes; partners pay on their share of partnership earnings

IRS restrictions for S corporations

no more than 100 shareholders only once class of stock may be issued cannot be part of an affiliated group shareholders must be individuals, estates, or trusts and certain tax-exempt organizations

social security benefits

not subject to state or local income taxes, but up to 85% of benefits are subject to federal income taxes may not be garnished increase with cost of living

piercing the corporate veil

occurs when a court ignores the corporate structure and holds shareholders personally liable for the corporation's debt; "alter ego"; closely held corporations

dissociation

occurs when a partner ceases to be associated with the partnership's business

ratification authority

occurs when the principal affirms an agent's unauthorized act, the principal then becomes liable for the act as if it had been authorized from the beginning

Exempt employees

ones who are exempt from the FSLA overtime pay rules because of the nature of their work, includes: executive, administrative, and professional employees, outside salespersons, and certain computer professionals, highly compensated (>100k yr)

public corporations

organized by governments to meet governmental purposes (e.g. TVA, AMTRAK)

LLC formation

organized under the laws of the state of its choice by filing Articles of Organization with that state's secretary of state, business name must include "LLC", can be expensive to form and maintain

LLP taxation

partial shield treated like other partnerships; their profits/losses are passed through to partners federal income tax

rights of directors

participate in corporate decisions, inspect corporate books and records, indemnification

partnership termination

partners are liable for the losses in the same proportion they share profits (unless agreed otherwise); however, if one partner does not pay his proportionate share to cover losses, the other partners must pay his share (but they have a "right to contribution" against that partner)

compensation (UPA)

partners are not entitled to compensation for services rendered to the partnership, all property of partnership is shared, partners can inspect books and records

principal's duties to the agent

pay agent in a timely manner, advance money, provide safe working conditions, indemnify agent for liabilities arising from agent's lawful and authorized acts, cooperate

agent's duties to the principal

performance, notification, loyalty, obedience, accounting

formation of the agency relationship

principal must have contractual capacity, but an agent does not have to have contractual capacity since he derives authority from the principal agency relationships can be created in 4 ways: agreement by the parties, ratification, estoppel, and operation of law

corporate taxation

profits can be kept and reinvested or distributed to shareholders; taxed by state and federal DOUBLE TAXATION

foreign corporation

registering to do business in a state other than the state it incorporated in, must have "certificate of authority" many companies incorporate in Delaware

S corporation

regular, for-profit corporation that makes special IRS election to be taxed like a partnership

limited liability company

relatively new and very popular hybrid form of business organization that provides owners with the limited liability of a corporation and the tax advantages of a partnership, created under state law, not personally liable for LLCs debts members not shareholders interest not shares

limited liability partnerships

relatively new type of partnership that provides some limitation on a person's personal liability for business debts while permitting all partners to participate in management, designed for professionals who normally practice their business as partners in a partnership, but want protections from potential judgments arising from malpractice by their partners

taxation of sole proprietorship

schedule C, form 1040

corporations

separate legal entity created under state law, ownership is represented by shares of stock

LLC Operating Agreement

sets out the rights and obligations of the owners, and typically contains provisions relating to management, meetings, distributions, transfer of membership interests, and other significant issues may be oral, but strongly recommended to be written default rules apply if LLC does not adopt its own

corporate management

shareholders do not directly manage the corporation; they elect members of the board of directors who manage the corporation; board of directors hires officers to run the business on a day to day basis

income security

social security act to provide minimal retirement income

registered agent/office

specific person in the state authorized to receive any legal notice and documents from state and/or third parties

express authority

stated in clear and definite terms; can be oral or written writing may be required under the equal dignity rule power of attorney (written express authority)

implied authority

the authority that an agent has to do what is reasonably necessary to carry out the express authority and accomplish the objectives of the agency

publicly held

those whose shares are traded in a securities market

LLC taxation

treated as a partnership for federal income tax purposes (unless it elects otherwise), form 1065 with K-1's for each member, single level of taxation, can elect to be taxed like a corporation

Nonprofit corporations

typically formed and operated for educational, health, ot charitable purposes

rights of partners

unless partnership agreement provides otherwise, the UPA rules govern the partners' rights and obligations

FLSA

was enacted to eliminate labor conditions that did not allow employees to maintain minimum living standards and to prohibit oppressive child labor, enforced by Department of Labor

FLSA

was enacted to eliminate labor conditions that did not allow employees to maintain minimum living standards and to prohibit oppressive child labor, enforced by Department of Labor does not apply to independent workers

apparent authority

what the principal causes a third party to believe concerning an agent's authority to act, based on the conduct of the principal and not on the acts of the agent

Bylaws

written set of rules that govern the internal operations of the corporation, usually at the first organizational meeting this is adopted, do not have to be filed with state