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What is a primary concern when choosing a business entity form?
What is a primary concern when choosing a business entity form?
Which business entity form provides limited liability for its owners?
Which business entity form provides limited liability for its owners?
From a CFO's perspective, which factor is emphasized in business entity choice?
From a CFO's perspective, which factor is emphasized in business entity choice?
What is a major drawback of the sole proprietorship business form?
What is a major drawback of the sole proprietorship business form?
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In which business entity form is the owner considered legally responsible for all debts?
In which business entity form is the owner considered legally responsible for all debts?
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Which factor is typically less critical for a sole proprietor compared to other entity forms?
Which factor is typically less critical for a sole proprietor compared to other entity forms?
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What is a potential benefit of forming a limited partnership?
What is a potential benefit of forming a limited partnership?
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Which of the following is NOT typically a concern when selecting a business entity?
Which of the following is NOT typically a concern when selecting a business entity?
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What is a key factor that distinguishes independent contractors from agents in terms of liability?
What is a key factor that distinguishes independent contractors from agents in terms of liability?
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Which of the following does NOT apply to independent contractors?
Which of the following does NOT apply to independent contractors?
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What kind of liability does a principal have when an agent acts within the scope of their authority?
What kind of liability does a principal have when an agent acts within the scope of their authority?
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What must an employer take into consideration regarding the classification of their workers?
What must an employer take into consideration regarding the classification of their workers?
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What does the relationship with an independent contractor primarily rely on?
What does the relationship with an independent contractor primarily rely on?
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What characteristic can be included in a contract with an independent contractor to enforce certain responsibilities?
What characteristic can be included in a contract with an independent contractor to enforce certain responsibilities?
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When a principal evaluates their worker's classification, which tool do they often use to help them?
When a principal evaluates their worker's classification, which tool do they often use to help them?
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If an agent is careless and causes harm while performing their duties, who is liable to the victim?
If an agent is careless and causes harm while performing their duties, who is liable to the victim?
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What is a defining characteristic of a limited partnership?
What is a defining characteristic of a limited partnership?
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Which of the following entities allows for the formation of a single-member ownership?
Which of the following entities allows for the formation of a single-member ownership?
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What distinguishes a member-managed LLC from other business structures?
What distinguishes a member-managed LLC from other business structures?
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Which statement about limited liability companies (LLCs) is accurate?
Which statement about limited liability companies (LLCs) is accurate?
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Which of the following types of companies does NOT have a 'double L' in its naming convention?
Which of the following types of companies does NOT have a 'double L' in its naming convention?
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What is the primary benefit of forming a limited liability company compared to other business structures?
What is the primary benefit of forming a limited liability company compared to other business structures?
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In a manager-managed LLC, who is responsible for the management of the business?
In a manager-managed LLC, who is responsible for the management of the business?
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What prompted the creation of the limited liability company (LLC) structure?
What prompted the creation of the limited liability company (LLC) structure?
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What must an agent provide to avoid liability when making contracts?
What must an agent provide to avoid liability when making contracts?
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Why are undisclosed principals not allowed in contracts involving personal performance?
Why are undisclosed principals not allowed in contracts involving personal performance?
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In the scenario where Mr. Mosley buys land instead of coal, what could possibly happen if the land is worth much less?
In the scenario where Mr. Mosley buys land instead of coal, what could possibly happen if the land is worth much less?
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What is a key requirement when an agent is acting on behalf of a principal?
What is a key requirement when an agent is acting on behalf of a principal?
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What could happen if Mr. Mosley's employer is unhappy with the price he paid for the land?
What could happen if Mr. Mosley's employer is unhappy with the price he paid for the land?
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Why is it important for an agent to act with authority?
Why is it important for an agent to act with authority?
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If an agent does not disclose the principal's identity, what can the third party do?
If an agent does not disclose the principal's identity, what can the third party do?
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What is one consequence if the third party realizes they have entered into an unfavorable contract?
What is one consequence if the third party realizes they have entered into an unfavorable contract?
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What role does an agent play in an agency relationship?
What role does an agent play in an agency relationship?
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Who is considered the principal in a principal-agent relationship?
Who is considered the principal in a principal-agent relationship?
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Which of the following statements about agency relationships is true?
Which of the following statements about agency relationships is true?
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What is the main characteristic that defines an agency relationship?
What is the main characteristic that defines an agency relationship?
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In the example of a grocery store employee stocking produce, what legal status does the employee hold?
In the example of a grocery store employee stocking produce, what legal status does the employee hold?
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Which of the following best describes the concept of 'standing in the shoes' in an agency relationship?
Which of the following best describes the concept of 'standing in the shoes' in an agency relationship?
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What is a common characteristic of at-will employees in relation to agency?
What is a common characteristic of at-will employees in relation to agency?
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What is one of the five required elements for forming a contract in general?
What is one of the five required elements for forming a contract in general?
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What is the primary purpose of veil piercing in relation to a corporation or LLC?
What is the primary purpose of veil piercing in relation to a corporation or LLC?
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Which of the following statements is true regarding single-member LLCs?
Which of the following statements is true regarding single-member LLCs?
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What disadvantage do shareholders face when a corporation incurs losses?
What disadvantage do shareholders face when a corporation incurs losses?
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What is a notable feature of C-corporations regarding their income?
What is a notable feature of C-corporations regarding their income?
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In what context might an LLC member lose ownership and decision-making rights?
In what context might an LLC member lose ownership and decision-making rights?
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What advantage do LLCs have in terms of taxation compared to pass-through entities?
What advantage do LLCs have in terms of taxation compared to pass-through entities?
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What does the term 'series LLC' imply in business formation?
What does the term 'series LLC' imply in business formation?
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Which of the following is generally NOT considered a problem with newer LLC types?
Which of the following is generally NOT considered a problem with newer LLC types?
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Study Notes
Introduction to Agency
- Agency is the basis of how business works
- Businesses use agents to perform tasks
- Agents act as extensions of the principal
- Principal-agent relationships are common legal relationships
- Employees are often considered agents within the scope of their employment
Principal-Agent Relationship
- Principal is the entity, not necessarily the boss
- Relationship is based on agreement to act loyally
- Relationship may be contractual, but not always
- Most US employees are at-will employees, not bound by contractual terms
- Agency relationship is defined by agreement, while a contract is outlined by a set of elements
Agency Elements
- Agreement: Mutual agreement between parties
- Consideration: Exchange of value (goods for money)
- Capacity: Parties must be of legal age and sound mind
- Legal Consideration: Subject matter must be legal
- In Writing: Some contracts require written documentation
Agency Legality
- Contracts must be legal
- Agents cannot be hired for illegal activities
- Gratuitous agency is possible (no payment required)
- Agency requires capacity for principal, not necessarily for agent
Agency Exceptions to At-Will Employment
- Public policy exception: Employees cannot be terminated for refusing to perform illegal actions
- Implied contract exception: Employee handbooks or practices can create implied contract
- Good faith exception: Terminations must be for legitimate business reasons, not discriminatory factors
Agency Problems
- Utility maximizers: Agents motivated to do the least work for the most benefit
- Moral hazard: Agent may try to sabotage the company's work after being hired
- Adverse selection: Risk of hiring an agent with questionable history or personal traits
Agency Duties
- Loyalty: Agents cannot work for competitors or use trade secrets
- Obedience: Agents must follow reasonable instructions
- Care: Agents must act as reasonable, non-negligent individuals
Agency and Third Parties
- Principal responsible for agents acting within scope of authority
- Agent liable for own torts
- Principal may be liable for agent's torts in some circumstances (vicarious liability)
- Agent can be held accountable for contract issues, even if not a direct party
Actual Authority
- Agent believes principal's actions imply authority to act
- Scope of authority encompasses actions related to job
- Custom and position may confer implied authority
- Principal has duty to reimburse agent for legitimate expenses
Apparent Authority
- Third party reasonably believes agent has authority
- Principal's actions create appearance of authority, even if not explicit
- Principal bound by agent's apparent actions to third parties
Agency and Business Entities
- Agency exists for a range of business entities
- Business entities are based around legal and tax implications
- Business entities, like corporations, partnerships, and LLCs, have distinct tax and legal implications
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Description
Explore the foundational concepts of agency within business law, including the principal-agent relationship and the essential elements that make it legal. This quiz covers the roles of agents and principals, as well as the agreements that govern their interactions in various contexts.
