FUNDAMENTALS OF BUSINESS ORGANIZATIONS FOR PARALEGALSTHIRD EDITION

Deborah E. Bouchoux

Chapter One

Introduction to Business Organizations and

Agency Law

Key Types of Business Enterprise

Sole proprietorships General partnerships Limited partnerships Limited liability partnerships Limited liability companies Business corporations Professional corporations S corporations Close corporations

Sole Proprietorship

Business owned and operated by one person

General Partnership

Business co-owned by two or more persons

Limited Partnership

Business created under a state statute in which some partners have limited liability

Limited Liability Partnership

Business entity providing limited liability for its partners

Limited Liability Company

Business providing limited liability and pass-through tax status for its members

Business Corporation

Legal entity existing under the authority of the state legislature

Professional Corporation

Corporation formed by professionals, such as doctors, lawyers, accountants, and engineers

S Corporation

Corporation that passes through all income to its shareholders, who pay tax on income received

Close Corporation

Small corporation whose shareholders are active in managing the business and that operates informally

Considerations in Selecting a Business Enterprise Ease of formation Management Liability and financial risk Continuity of existence Transferability Profits and losses Taxation

Companies Indexed by Numbers of Employees (2004)

Size of Company Number of Employees

Percent (%)

20-99 employees 856,000 11.6%

100-499 employees 154,000 2.1%

500-999 employees 12,000 0.2%

Over 1,000 employees 7,000 0.1%

Under 20 employees 6,359,000 86.1%

Agency Relationships

AgentAgent:: One who acts for or represents another

PrincipalPrincipal: : The person for whom an agent acts

Duties Owed in Agency Relationships

DUTIES OWED BY AGENT

Performance Notification Loyalty Accounting of

Profits

DUTIES OWED BY PRINCIPAL

Compensation Reimbursement

and Indemnification

Cooperation

Key Features of Agency Relationships Formation of agency occurs through express

agreement, implied agreement, or estoppel Agents have actual authority (express or

implied) or apparent authority to act for their principals

Agents and principals owe fiduciary duties to each other

Agents are liable for their own torts and principals are liable for an agent’s torts and acts committed in the course and scope of the agency.