Introduction to Agency in Business Law

A legal relationship where one party (the agent) acts on behalf of another party (the principal) to create benefits or liabilities for the principal.

A legal entity, not necessarily an individual, such as a business or organization. The CEO or president are sub-agents of the principal - they work for the principal.

A person or entity authorized to act on behalf of the principal, bound by the principal's instructions and acting within the scope of their employment.

The specific actions or duties that an agent is authorized to perform for the principal within their employment or agreement.

An agreement where the principal and agent formally outlines the terms of their relationship, including the agent's duties and authority.

An employee who can be dismissed or quit without cause or warning.

The legal concept that an agent's actions bind the principal, even if the principal didn't directly authorize them, as long as the agent acted within their scope of employment.

An individual who operates within the scope of their employment, bound by their principal's instructions and performing services under their authority.

A situation where an agent acts on behalf of a principal without disclosing the principal's identity to the third party.

A contract that excludes the possibility of an undisclosed principal, even if the agent is acting on the principal's behalf.

Legal documents, like checks and drafts, that explicitly exclude undisclosed principals.

Contracts involving specific skills or talents that cannot be easily replaced, like singing or painting.

The act of an agent acting on behalf of a principal with proper authorization, informing the other party they are an agent, and disclosing the principal's identity.

A situation where an agent (Mosley) buys something (land) on behalf of a principal (coal company) but the price is unfavorable to the principal.

A situation where an agent (Mosley) buys something (land) on behalf of a principal (coal company) but the price is favorable to the principal.

An individual who represents and acts on behalf of another person or organization (the principal), with the authority to bind the principal in legal and contractual matters.

A person who performs work for another but is not under the direct control of the employer. They operate independently, with their own equipment, and often work on various projects for different clients.

The principal is responsible for an agent's actions when the agent acts within the scope of their authority, including contracts and torts (wrongful acts). This means the principal can be held liable.

An independent contractor is not an employee, so the employer is generally not required to provide benefits like workers' compensation, unemployment insurance, or paid leave.

While the employer is usually not responsible for an independent contractor's actions, they can be held liable if they direct or control the contractor's work in a way that leads to harm.

The IRS uses three main factors to determine whether someone is an employee or an independent contractor, including:

1. Behavioral control (how the worker is supervised)
2. Financial control (how the worker is paid, expenses, opportunity for profit)
3. Relationship of the parties (written contract, other factors)

Agents are typically employees of the principal and therefore owe fiduciary duties like loyalty, confidentiality, and care. These duties don't automatically apply to independent contractors, but can be included in a contract.

A fiduciary is acting for the benefit of another person, usually with the understanding that there is a trust and confidence placed in them. They are expected to act in the best interest of the person they represent.

A single owner who is directly responsible for all business decisions, liabilities, and profits.

The legal responsibility to pay for debts, damages, or other liabilities incurred by a business.

A legal structure where the owner(s) are shielded from personal liability for business debts and obligations, meaning their personal assets are protected.

The legal framework that governs how a business is structured and operates, including determining the liability of its owners.

The amount of tax a business, or its owners, owe to the government based on their income and profits.

The ability to easily sell or transfer ownership of a business interest.

The ability of business owners to make decisions and control the operations of their business.

The ease of operating, managing, and making changes within a business structure.

A type of business structure where the owner(s) have limited liability, meaning they are not personally responsible for the business's debts. It is often chosen by smaller companies looking for flexibility and limited liability.

An LLC where the owners, known as members, collectively manage the business. Similar to a general partnership, but with limited liability for the members.

An LLC where the management responsibilities are delegated to a group of individuals or a professional manager, similar to a corporation. This can be helpful for larger LLCs.

A type of LLC where the owner is the sole member, having both ownership and management responsibilities. Allows individuals to benefit from limited liability without needing a partner.

A type of business structure where partners have limited liability, but require at least one general partner with full personal liability for the business's debts.

A type of partnership that combines features of limited liability partnerships with limited liability companies, offering flexibility and limited liability for all partners.

A type of business structure that enjoys the benefits of a corporation, such as limited liability, but is designed for social or public benefit purposes, often non-profit organizations.

A legal action allowing creditors to look beyond a company's limited liability to reach the personal assets of its owner, often used when the company is under-capitalized or has few assets.

A type of corporation where profits are taxed at the corporate level and again when distributed to shareholders.

A business entity formed by a group of individuals who contribute funds and share profits, with a separate legal identity from its owners.

The process of taxing a business entity's income separately from the owner's income. Examples include corporations and partnerships.

An entity where the owner's income and losses are passed directly to their personal taxes, avoiding double taxation.

Earnings kept within a business to fund future investments or operations, not distributed as dividends.

A legal structure where a member of an LLC files for bankruptcy, and the bankruptcy trustee becomes a substitute member, potentially impacting the bankrupt member's control.