Agency is a legal relationship presupposing that a person represents another person and has a right to act for him/her. The person acting on behalf of the other is the agent. Principal is a person who the agent acts for.
The agency can be created:
Duties of an agent to the principal:
Duties of e principal are stated in the contract and include:
A principal is bound by the contract if the agent has the actual authority or the apparent authority. Actual authority can be express (based on the written or oral words) or implied (interpreted from words or conduct of the principal)
Apparent authority arises out of actions of the principal which makes a third party consider the agent having the authority to make contracts for the principal (Emerson, 2004).
A principal is liable for the wrongdoings or torts of the agent if he gave an improper order or instructions, if he improperly chose or employed the agent, if he failed to supervise and control the work of the agent (Emerson, 2004).
Respondeat Superior means that the principle is responsible for the actions of the employees during the employment. The four tests for Respondeat Superior are the following: the agent must be able to perform the conduct; the conduct must take place at the authorized time and place; the principal must have motivated (at least, partially) this conduct; the agent’s means of use could have been predicted by the principal.
The doctrine Respondeat Superior cannot be applied to the torts of an independent contractor, since he doesn't work under the supervision of the employer. He's chosen to fulfill the order or work by his or her own means (Emerson, 2004).
Disclosed principal – a principal whose identity is revealed to the third party and whose agent is known by the third party to be acting for the principal. The agent is not responsible for a contract of the principal.
Partially disclosed principal – a principal who identity is unknown to a third party, but whose agent is revealed to a third party; the agent is liable on the contract.
Undisclosed principal – a principal whose identity or agent aren't revealed to a third party; thus, the agent is liable on the contract (Emerson, 2004).
An agency can be terminated:
Sole Proprietorship – “the simplest form of business: a sole owner and his or her business aren't legally distinct entities,” and the owner has unlimited liability for his business debts. It can be easily created, government has practically no regulation of it, the proprietor is the owner (Emerson, 2004, p.280). The interests of the company can by transferred by sale of business, inheritance, or any lawful means. Changes in the business formation documents needn't be filed. There is no organizational fee or annual reports required. This type of business can be easily spread to other states but it is difficult to raise capital in sole proprietorship. There are no separate taxes, business can be terminated by sale insolvency, voluntary cessation. Generally, it is rather small but substantial.
General Partnership – a partnership with no limited partners, each partner has “managerial power and unlimited liability for partnership debts” (Emerson, 2004).
Limited Partnership – a partnership reconciling with statutory requirements, which has one or more general partners and one or more limited partners. Partnerships are easily created by the agreement of partners, but it is regulated by the government, just as any business. Limited interests can be transferred. General partnerships, unlike limited ones, needn't file changes in business documents. They can run business in other states, provided there're file copies of a statutory form. It can be terminated by the terms of agreement or by death. Unlike in corporations, it’s rather small, it's hard to raise capital in partnerships, there are fewer tax advantages, a limited number of owners, and much depends on the relations between the partners. Furthermore, the owners are liable for entity and other owners’ actions. But it's much easier and cheaper to organize, each owner has his voice, and it is much more flexible (Emerson, 2004).
Limited Liability Company – a substantial, but small form of business that's a combination of the corporation and the partnership: it pays taxes as a partnership, but has a limited liability. To create LLC, the members must file the articles of organization and the amended articles. Unlike in other types, there is certain control from the government. Interests are transferable, but membership isn't transferable. There are some organizational fees and annual reports, it is not easy to work in other states with LLC, it is difficult to raise capital and there are no separate taxes, like in partnerships. It can be terminated like the partnership, by the terms of agreement (Emerson, 2004).
Corporation – a company or a group of people artificially created by stockholders by operation of law, acting as an entity, and recognized as an entity by the law. It is the largest and the most complicated type of company, it feels the governmental control most of all, it's stock is freely transferable, but it must file changes in business documents and obtain state permission sometimes. It must pay organizational fees and provide annual reports, but it can raise capital much more easily. To operate in other states, it must qualify to do business and get state certificate. Unlike partnerships, it incurred double taxation, taxes on stockholders dividends, interest taxes, state income taxes. But at the same time, there are no personal taxes, it has favorable tax treatment, it can easily raise capital and add unlimited number of members, whose liability for entity is limited and who have no liability for other owners’ actions (Emerson, 2004).
Partnerships can be created by the following ways:
Partnership can be terminated by:
Acts of the parties (if partners agree to dissolve the partnership, if the tern of duration expires or its purpose is achieved, if a partner is expelled or himself/herself withdraws from the partnership (unless it is a dissociation)).
Operation of law (if it is illegal, if it goes bankrupt, or in case of the partner’s death)
Court decree (if a partner is considered to be insane, if he or she acted improperly, if his or her business can be operated at a loss, or other circumstances, like strong personal conflicts) (Emerson, 2004).
A corporation has the following basic attributes:
A corporation a is person, who can sue and be sued, make contracts, own property, perform other personal acts, be charged.
It is created by contract with the state (statutes).
Shareholders have a limited liability. The corporation is liable for its debts.
It also has a number of powers:
It can perform any act in consistence with law.
It can sue and be sued; it can have and change a corporate seal;
It can make and amend bylaws.
It can purchase, lease, and acquire real or personal propriety, sell it or dispose of it.
It can buy, own, hold, vote, or pledge stock.
It can make contracts and guarantees, incur liabilities, issue notes and bonds.
It can lend money and invest its funds.
It can promote, be a partner, a member, an associate, or a manager of a joint venture or partnership.
It can conduct its business and exercise the powers granted by law within or outside the state.
It can act in consistency with law.
There are several types of a corporation:
Public or private. Public is formed for governmental or public purposes, whereas a private one is created for private purposes.
Federal or state. Federal corporations are created for specific purposes (national banks or loan institutions). State corporation runs business on behalf of an owner government.
Profit (created to earn money) and nonprofit (for social benefit)
Domestic and foreign (domestic for its state, foreign to all other states)
Close (relatively few shareholders, often members of one family)
S Corporations (the type of corporation which doesn't pay a corporate income tax on profit, the entire income is taxed to the shareholders, whether distributed or not)
LLC (combination of the partnership and a corporation)
Professional corporation (created by lawyers, doctors, etc. to gain corporate tax advantages for traditional partnership).
A corporation can be terminated by:
Nonjudicial dissolution (with shareholders’ approval or in case of state legislature and expiration of the charter’s period of existence)
Judicial dissolution (by the claim of the shareholders, by creditors’ court action, by the corporation itself if it cannot file its annual report, pay annual tax, or maintain an agent in the state)
Winding up and liquidation (the corporation’s proceeds are assessed and distributed to creditors, preferred shareholders, and common shareholders (Emerson, 2004).
References
Emerson, R. W. (2004). Business law (6th ed.). Hauppauge, NY: Barron's.
