Duties of agents: performance- must perform with reasonable diligence and skill, notification agent must notify principal

l of all matters concerning the agency. Loyalty- an agent must act solely for the benefit of the principal, obedience- an agent must follow all lawful instruction of the principal, accounting. Principals duty to the agent: compensation, reimbursement and indemnification, cooperation, safe working conditions. Disclosed- A principal whose identity is known to a third party at the time the agent makes a contract with the third party. Partially disclosed principal- A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract Undisclosed principal- A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract. A principal may be liable for harm resulting from the principals negligent or recklessness. A principal who authorizes an agent to commit a tortious act may be liable. Doctrine of respondent superior- Latin for let the master respond. A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment. A principal is not liable for agents crime. Termination by act of the party: lapse of time, purpose achieved, occurrence of specific event, mutual agreement, termination y one party, notice of termination. Termination by operation law- death or intensity, impossibility, changed circumstance, bankruptcy, war. Manager hiring employees is implied authority iIf an agent doesnt disclose position, him and company are liable. If agent is stealing money bc they got cash, that is apparent authority an agent must act solely in the companys interest in matters concerning the companys business even if getting interest age discrimination is 20 or more employees, title 7 is 15 or more employees. Flma is 50 or more employers must verify citizenship Sole Proprietorship- owner is fully liable, only pays personal income taxes Partnerships-sharing profits or losses, joint ownership of business, equal right to participate in the management of the business UPA- governs the operation of the partnership in the absence of an express agreement among partners. A partnership can sue or be sued as an entity, but can be taxed as an aggregate of individual partners. Rights of partners: management rights, interest in partnership is shared unless otherwise agreed opened, property rights, business is a duty, inspection of books .unlimited liability for partners debts Dissociation- The severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business. Dissolution- The formal disbanding of a partnership or a corporation. It can take place by (1) acts of the partners or, in a corporation, acts of the shareholders and board of directors; (2) the subsequent illegality of the firms business; (3) the expiration of a time period stated in a partnership agreement or a certificate of incorporation; or (4) judicial decree LLP is a pass-through entity for tax purposes, but the personal liability of the partners is limited. Limited Partnerships- formation is public proceeding and must be filed with state official. Limited partners only liable for the extent they contributed LLC - A hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership. Advantages- members liability is limited to the amount of their investment. Disadvantage- new forms not much case law to support them. Other business forms: Joint venture treated like partnership but created for single transaction. Syndicate- group of individuals financing a project joint stock company- ownership is by shareholders cooperative- association organized to provide an economic service profit to its members Coporations-board of directors is responsible for overall management and hires corporate offers to run daily operations, liability is limited to owners investment in firm, corporation is recognized as a legal person and has the same rights as a natural person close. Formationfirst step is promotional then 1. Selecting the state of incorporation. 2. Securing corporate name 3. Preparing the articles of incorporation (shares of corporation, registered office and agent, incorporators, Duration and purpose, internal organization and management structure) 4. Filing the articles with the state. 5 first organizational meeting to adopt bylaws consolidation- A contractual and statutory process in which two or more corporations join to become a completely new corporation. The original corporations cease to exist, and the new corporation acquires all their assets and liabilities. Share exchange- some or all of the stock of a company are exchanged for some or all of the stock of another short form mergers- A merger between a subsidiary corporation and a parent corporation that owns at least 90 percent of the outstanding shares of each class of stock issued by the subsidiary corporation. Can be accomplished without the approval of the shareholders of either corporation. Corporation that buys does not need shareholder approval, but acquired corporation does not. The acquiring corporation is not responsible for

the Sellerss liabilities unless there is an assumption, sale amounting to a merger or consolidating, a buyer retains the sellers personnel a continuing the business, a sale executed in fraud to avoid the liability. Appraisal rights- are available only when a statute specifically provides for them in a consolidation or merger. Court might order dissolution if the firm does not pay taxes. Pierce the corporate veil is the answer that involves commingling. De jure is when a corporation substantially complies with all conditions precedent to incorporation. Board of directors govern a corporations, officers handle daily business. Corporations with fewer than 50 shareholders and eliminated the board of directs. First board is appointed in the articles and shareholders vote for subsequent directors. Director may set their own compensation. A director who is also a corporate officer is an inside director, one who does not is an outside director. Rights of directors- participation, inspection, indemnification. Committees- executive (limited to ordinary business matters) audit, nominating, compensation, litigation. Duty of care- make informed and reasonable decisions, exercise reasonable supervision, must attend meetings. Duty of loyalty directors cannot compete with the corporation, usurp a corporate opportunity, have an interest that conflicts with the interest of the corporation, engage in insider trading, authorize a corporate transaction that is detrimental to minority shareholders, and sell control over the corporation. Role of shareholders- owner the corporation, prove fundamental corporate changes and elect and remove directors rights of shareholders - stock certificate-A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation., preemptive rights- Rights held by shareholders that entitle them to purchase newly issued shares of a corporations stock, equal in percentage to shares already held, before the stock is offered to any outside buyers. Preemptive rights enable shareholders to maintain their proportionate ownership and voice in the corporation. dividends- payable only from retained earnings, current net profits, and surplus ,inspection rights, transfer of shares, rights on dissolution, derivative suit- shareholders can sue if directors fail to. Liabilities of shareholders- if a corporation fails shareholders only lose their investment. Exceptions include watered stock- Shares of stock issued by a corporation for which the corporation receives, as payment, less than the stated value of the shares. or if it is a majority shareholder. Officers rights are set out in officers employment contracts. Directors main right is the right of participation. A quorum is a majority of the number of directors authorized in the firms articles of bylaws. Cumulative voting involves the number of shares multiplied by number of directors to be elected Divisions of the SEC corporate finance, market regulation, investment management, enforcements security- Generally, a stock certificate, bond, note, debenture, warrant, or other document or record evidencing an ownership interest in a corporation or a promise to repay a corporations debt. Securities act of 1933- requires all essential information concerning the issuance of new securities to be disclosed to investors Contents of registration statements: description of security being offered, registrants properties a business, management, intent, pending lawsuits. Exempt securities include: government issues, bank and financial institutions, short term notes and drafts, securities of nonprofit, educational, and charitable organization, issued by common carriers, insurance contract, ones issued in corporate reorganization, issued n stock dividends and stock splits security act of 1934- regulates the markets in which securities are traded by requiring continuous period disclosure by companies that assists exceed $10 million and 500 or more shareholders insider trading- Rule 10b-5-A rule of the Securities and Exchange Commission that makes it unlawful, in connection with the purchase or sale of any security, to make any untrue statement of a material fact or to omit a material fact if such omission causes the statement to be misleading. Insider reporting and trading section 16 B- requires people owning 10 percent of the securities under section 12 to file reports concerning their ownership and trading of securitys. Proxy statements- section 14(A) regulations the solicitation of proxies from shareholder violations of 1934 act- max 25 yrs. in jail, up to $5 million for individuals and $25 for corporation. Insider trading sanctions act of 1984- SEC can bring suit in federal court against anyone violating or aiding in a violation of the 1934 act or SEC rules. Penalties include triple the profits gained or loss avoided by guilty party. Insider trading and securities fraud enforcement act of 1988- enlarged the class of persons subject to civil liability for insider trading violations increased criminal entities and gave the sec authority to reward persons providing information and make rules to present insider trading