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Business Entities and Agency - Coggle Diagram
Business Entities and Agency
Agency
Formation
Apparent (manifestations to third party reasonably believed agent was acting with authority)
termination
completion, condition, termination by either party -- apparent authority may still exist
liability (ARE liable)
employer
tort/crime: BAN (benefit to employer, authorized part of job, natural part employment)
scope of employment SITRPC (skills, indy, tools, relationship, pay,
control)
acting w/ authority
Estoppel
ratification
Fiduciary Duties
Duty of Care The fiduciary must act in good faith, with the care of an ordinarily prudent person in a like position, and in a manner they reasonably believe to be in the best interests of the entity.
Duty of Loyalty - SOC-M (self dealing, opportunity appropriation, compete, material fact non disclosure)
Safe harbor
disclosure to directors and vote by disinterested directors
disclosure to share holders and vote
Final test: Enitlrey Fair to corporation 1) fair dealing 2) fair price (ARMS LENGTH TRANSACTION)
Partners: Limited strictly
to the specific scope of the partnership's ongoing business or geographic market.
Corporate Officers:
Broadly covers any opportunity within the corporation's current lines of business, its expected lines of expansion, or any opportunity the officer discovered using corporate capacity, time, or resources
Business Judgment Rule (LLC and CORP) - Presumption that business managers aft with care faith, and w/o COI
overcoming RULE FUCKING COOL CAPITALISM (good Faith, care, conflict interest) if not true then BJR does not apply
Misfeasance must be grossly negligent to overcome rule
Sustained Failure to Monitor (Caremark Claim): The board fails to implement any internal compliance or reporting systems, or consciously ignores a massive, ongoing legal violation within the company
No investigation
Waste
: Approving a transaction so completely irrational that
no reasonable person in business
could believe it serves the entity's best interests
Nonfeasance BJR does not apply
EXCULPATION: CAN ONLY Eliminate DOC but never DOL
Other Duties OLD CAaR (obedience, loyalty, disclosure, care, act within authority, account, reason care
Partnerships
GP
Formation
(The default entity requiring no formal state filing. Formed when two or more persons agree (explicitly or implicitly by conduct) to carry on a for-profit business as co-owners, defaulting to equal sharing of profits, losses, and management control)
Liability
= all personal liable for debts of entity, All partners can bind the entity during regular course of business
LP, LLLP
formation
must file cert
Liability in an LP, LPs are only liable for their contributions while GPs are unlimitedly personally liable -- in an LLLP all are afforded limited protections from personal liability for LP to become LLLP unanimous consent of all partners required
defianacy in filing lose protection
LLP
formation
must file certificate
Liability limited liability to all partners
deficient filling lose protection
Winding up
disassociation
wrongful
rightful
dissolution
management
all GP have right to manage + share in profits unless modified by agreement -- all GP have actual authority to bind unless modified -- all GPs have apparent authority
LLC
Formation
Articles of Organization + Operating Agreement
deficient formation
de facto LLC
Valid Statute: A valid state law must exist under which the LLC could have been legally formed (which is true in every state).
Colorable Attempt: The owners made a good-faith, honest effort to comply with the state's filing requirements.
Exercise of Power: The business actually operated and conducted transactions as if it were a valid LLC (e.g., opening a bank account or signing contracts under the LLC name
Estoppel
If a third party deals with your business under the distinct belief and agreement that it is a limited liability entity, that third party is "estopped" (legally barred) from later denying the LLC's existence just to sue the owners personally
liability
not personally liable unless pierce veil
management
Can be member or manager managed
Power to Bind
member - have actual and apparent authority
manager - only managers can bind and have apparent authority
Corporations
formation (Article of incorporation + Bylaws)
Shareholder agreements
voting
directors vs shareholders
Fiduciary duties
power to bind
management
liability
profit
derivative claims
SAD
Standing ((shareholder at injury and contnous throughout litigation)
adequate representation
Demand to corporation / unless futile because board is not disinterested -
demand must give board 90 days or. Irreparable Injury: The shareholder can prove to a judge that waiting the full 90 days will cause irreparable har
direct claims
winding up
Pierce the Veil (
all limited liability entities
)
Dominating Foramlities funds Capitalism
Fraud, Injustice, or Inequitable Result
prong 2
What Counts as Injustice: Using the entity shield to intentionally trick creditors, hide stolen assets, bypass a statutory duty, or breach a contract while funneling the profits safely into a personal account.
What Does Not Count: The simple fact that a business ran out of money and cannot afford to pay a creditor or a lawsuit judgment is not an injustice under this test. A bad business outcome is a normal risk of commerce
Proving that an owner ran their business poorly or mixed funds is not enough on its own to pierce the veil. The plaintiff must also prove that respecting the limited liability shield would sanction a fraud, promote an injustice, or lead to an evasion of legal obligations
.
prong 1
balance test
Formalities
Funding
Dominating
Capitalization