4.28.11 Business Law

4.28.11

Assignment 2- DUE MAY 19TH

AT&T Ruling- Arbitration Clause is NOT against public policy and is enforceable.
S.C.O.T.U.S.- http://www.scotusblog.com/

Agency Law

Agency is a fiduciary relationship
Agent has right to make decisions, enter into contracts, and commit torts which the principal will be held responsible for.
There must be:
-Principal
-Agent
-Consent by both
-Control by the principal of the Agent
-Fiduciary relationship- Must act in Principal's interest, not their own.
1. Competent performance
2. Notice of important info
3. Loyalty and accountability

-Agent has duty
1.To obey instructions
2.Act with reasonable care
3.To provide information that the Principal should or would want to know

-Principal must
1. Cooperate with agent
2. Compensate the agent for services
3. Indemnify agent for expenses, liability

EX of Agents: Power of Attorney, Partner, Employee.

Agent IS liable on contract only if Principal's existence is disclosed but not identity, or neither the existence nor identity of the Principal is disclosed.

Employment Setting
Employee vs. Independent Contractors (act on behalf of themselves, not agent)
Contractors- Perform specific service for a set fee, decide how to do the work, use own tools.
Employee- Employer pays taxes, workers compensation, maintains control over how the task is accomplished.

Respondeat Superior
Business responsible for torts of employee, if employee was acting within the scope of employment at time of injury.
-Ramen case- has been overruled- will go into effect 90 days after.

Basic Business Organization

Forms of Business
-Sole Proprietorship
-Partnership
-Limited Liability Company
-Corporation

Assignment 2- DUE MAY 19TH
Consider:
-Formation Issues
-Liability Protection
-Management Structure
-Taxation considerations
-Exit Strategies/Tranferability of interests

The American Business Entity Landscape (on class website)

Sole Proprietorship
-Most common form
~Does not have to be registered with the secretary of the state
~Profits and losses are personal and taxed as such
~May require business license
~Personal assets are available to satisfy the debts of the business
~Owner has full control over management of business
~If sole owner dies, the business ends.
Advantages- complete control, flexibility, ease of creation and maintenance.
Disadvantage- personal liability, lacks continuity after death, difficult to finance.
EX Child Care Provider- Legal Process- State of WA Start a Business Website and SBA.gov

Partnerships
~Revised Uniform Partnership Act- governs whether partnership exists and fill sin missing terms of agreement.
~Association of 2 or more persons to carry on as co-owners of a business for profit
~Governed by contract
~No state filing
~Equal management rights and profit sharing
~Transferability- may have buy/sell agreement, usually requires agreement of all partners.
Adv.- Easy to create and maintain.
Disadv.-Personal liability, difficult to raise financing.
Partners have fiduciary duty to each other and the partnership.
-Joint liability
~Termination by Dissolution by Act (agreement or withdrawal), Operation of Law (death), or Judicial Decree

Limited Partnership
~ At least one of the partners does not share in the right to manage the business
~Required to file with state
~Limited partner invests money, but does not make decisions
~Limited partner liable only up to amount invested
~Limited partner can assign interest to someone else

Limited Liability Partnership
~Clients or customers must be informed of limited liability
~Registration requirement

Limited Liability Company- RCW 25.15
~Permits small business owners to limit their liability to the amount of their investments
~May form as single individual or as group
~No banking or insurance
~Registration required
~Members liable for own torts, but not others.
~Very flexible
~Can choose from different tax options
~Operating agreement analogous to corp. bylaws
~Agreements may be oral
~Generally if operating agreement is silent, partnership will apply


Corporation
~Business entity formed by shareholders
~Person for the purpose of conducting a business- Constitutional rights
~Can own property, enter into contracts, sue and be sued.
~Shield shareholders from liability, only liable for the amount of the investment
~Complex formation- requires ongoing efforts- reporting, meetings etc.
~Double taxation