MGMT 254 Final Exam Purdue questions with complete verified solutions already graded A+

principal

-one who is ultimately the party of the contract

-often don't have time to complete all acts

-can be: LLCs, corporations, partnerships, people

agent

-one who acts on principal's behalf

-must have contractual capacity

-must have legal purpose

law of agency

Principal -> agent -> third party

example of law of agency

real estate:

want to sell your house, hire real estate agent to deal with third parties

agency contracts

-sometimes the agency relationship is based on a contract

-can be expressed or implied

-the contract appoints an agent by the principal

-"employer" must have legal capacity but agent doesn't have to

-no consideration required

employment relationships

-master/servant

-principal/agent

-principal/independent contractor

master/servant relationship (employer/employee)

right to:

-hire, suspend, or dismiss

-to have particular person do work

principal/agent relationship

-owner delegates authority to agent to manage business

ex. car salesmen/(buyer)

-express/implied

-agent can sign on behalf of principal

principal/independent contractor relationship

-profession or trade

-uses own place and equipment/tools

-payment of wages to own employees

-payment to contractor done with no taxes withheld

-1099 (no taxes withheld) vs W2 (taxes withheld by employer)

power of attorney (general)

gives someone the authority to act as their agent to do things on their behalf

-attorney in fact

ex. parent/child

lawyer/client

art dealer/artist

trustee/benefactor

agency by ratification

-agency exceeds both actual and apparent authority

-principal is not bound but still may ratify:

---by intentionally expressing the ratification

---inadvertently by principal taking a benefit under the agreement

agents duties

duty of:

-performance

-obedience

-notification

-accountability

-loyalty

duty of performance

-must be legal

-must be cautious and use skill

-failure to perform (BREACH)

duty of obedience

-obey all lawful instructions of principal

duty of notification

-maintain information of all transactions

-keep principal informed (try to)

duty of accountability

-maintain accounting of all transactions undertaken on behalf of principal

duty of loyalty

-an agent owe a fiduciary duty not to act adversely to the interests of the principal

(follow the principals wishes)

NO DUAL AGENCY

-cannot meet a duty of loyalty of 2 parties w/ conflicting interest

usurping opportunity

agent cannot usurp (take advantage of) an opportunity

self dealing

prohibited from undisclosed self-dealing w/ principal

misuse of confidential information

can't disclose or use private info outside of agency relationships

competing with the principal

prohibited, no competition allowed

principals duties

duty of:

-compensation

-reimbursement (paid back)

-indemnification (reimburse for any losses agent may suffer)

-cooperation (cooperate w agent, don't interfere w their duties)

-provide safe working conditions

fiduciary

person acting with care

termination

-mutual agreement

-lapse of reasonable time

-purpose achieved

-occurrence of a specific event

-operation of law:

----death, insanity, bankruptcy

termination: NOTICE TO THE THIRD PARTIES

-people who dealt w agent (actual notice)

-knowledge of agency (constructive notice)

types of liability to third parties

-fully disclosed agency

-partially disclosed agency

-undisclosed agency

fully disclosed agency

-3rd party knows the agent is acting as an agent for a principal

-identity of principal

-principal is liable

-agent is not liable

partially disclosed agency

-agent reveals he has a principal

-principal + agent liable

undisclosed agency

agent pretends to be acting for himself

tort liability/ vicarious liability

respondent superior

-nature of an act

-act must be committed in the "course of employment"

fraud vs. negligent act vs. intentional act

sole proprietorship

most common business entity in the U.S.

sole proprietorship pros

-no organizational fees

-have absolute control

-retain profits

-taxes

sole proprietorship cons

-unlimited liability

-limited investment capital

-termination at death

General partnership

-contractual relationship

-if no written agreement, then every state has a partnership statute to fill in the blanks

-2+ people

-co-ownership

-business for profit

elements of a partnership (general)

-legal entity

-unlimited liability

-capital

-# of partners

-mutual confidence

-sharing profit

-agreement

-transferability of share

partnership interest

intangible interest (no physical presence)

-every partner has equal rights

management of partnership

-equal rights

-one vote

-agent

-consent of partners

duties of a partnership

same as under agency

duty of:

-performance

-obedience

-notification

-accountability

-loyalty

dissolution

/ \

partnership winding up-> termination

when a partner leaves or dies

order of payment of debts

1. outside creditors

2.partnership creditors

3. capital investments

4. income (retained earnings)

tax consequences of a partnership

not taxed

Limited Liability Partnership (LLP)

-just like a partnership

BUT there is a clause about liability

--must file a small form

--must put LLP in your name

ex. Lucy's Dressings LLP

Limited Partnership (LP)

-participate in profit but not in daily activities

--1+ general partner

--1+ limited partner

--must file a certificate with the state & "LP" must be I your name

ex. Lucy's Dressings LP

Limited Liability Limited Partnership (LLLP)

-limited partnership that consists of one or more general partners and one or more limited partners

-must have LLLP in your name

Limited Liability Company (LLC)

corporation + partnership = LLC

-formation= 1977 Wyoming

-no double taxation

-can be a single member

-certificate to state

-must have LLC in your name

-no federal income tax

-member can be employees

-multiple ownership levels

corporations

-an artificial being, viewed as a person by law

-separate and distinct from persons who own the corporations

-have the rights of a person (except 5th amendment)

-4 types of responsibility

4 types of responsibility

social, ethical, legal, economic

Classifications of Corporations

Private Business Corporation- in business for profit

ex. Ford Inc.

Publicly Traded Corporation-stock publicly traded for investments, SEC regulated

Close Corporations- shares are limited to a small group of people

Non-Profit Corporations-charitable, educational, civic or quasi public purpose organizations

Municipal Corporation- local government

Public Benefit Corporation- have a purpose/job

ex. rebuild state street, create a nature sanctuary for the city

Domestic Corporations- organized in a particular state

Promoters

incorporated the business (enter into contracts in their own name)

steps to incorporation

-articles

-bylaws (rules)

-certificates

-government authorization (state vs. federal)

why incorporate in Delaware?

business friendly rules

perpetual life

bylaws keep on going

dissolution

ends/dissolves corporation

tax issues: S corp vs C corp

S Corp:

- tax pass through

-limited # of shareholders

-single class of stock

-no stock options

C Corp:

-taxes paid by C Corp

-unlimited shareholders

-multiple stock classes

-flexible stock options

merger + aquisitions

merger

A->A<-B

(A+B=A)

Consolidation

A->C<-B

(A+B=C)

conglomerate

reasons for consolidation/merger/conglomerate

good will

mutual; benefits

economies of scale

attorney in fact

agent authorized to act for another under a power of attorney

torts and crimes

agents are liable for harm caused to third parties by the agents' fraudulent, intentional, or negligent acts

vicarious liability

imposing liability for the fault of another

Respondeat Superior

doctrine that the principal or employer is vicariously liable for the unauthorized torts committed by an agent or employee while acting within the scope of the agency or the course pf the employment, respectively

soliciting agent vs contracting agent

soliciting-

--salesperson

contracting-

--agent with authority to make contracts, person with whom the buyer deals

dissolution by decree of court

insanity, incapacity, misconduct, impracticability, lack of success, equitable circumstances

franchise

privilege or authorization to engage in a particular activity within a specific geographic area

ex. government franchise to operate a taxi company in a specific city

trademark

mark that identifies a product

Franchise Rule of FTC

Federal Trade Commission (FTC) rule requiring detailed disclosures and prohibiting certain practices

unincorporated association

combination of 2 or more persons for the furtherance of a common nonprofit purpose

Existence of a partnership

sharing profits/losses

contribution of skill/labor

fixed payment

gross returns

tenancy in a partnership

ownership relationship that exists between partners under the Uniform Partnership Act

charging order

order by a court, after a business partner's personal assets are exhausted, requiring that the partner's share of the profits be paid to a creditor until the debt is discharged

suretyship

a partner has no implied authority to bind the firm by contracts of surety, guarantee, or indemnity for purposes other than firm business

cessation of business

cannot make contract that would make it impossible to do normal partnership business

ultra vires

act or contract that the corporation does not have the authority to do or make

de facto

existing "in fact" rather than legally

corporation de jure

corporation with a legal right to exist by virtue of law