Business Associations
Agency
Agency requires consent, control, and a fiduciary relationship. The principal is liable for the agent's acts if the agent had actual, implied, or apparent authority. Ratification and estoppel may also bind the principal. The agent owes duties of loyalty, obedience, and care.
Partnerships
A general partnership is formed by an association of two or more persons to carry on a business for profit. Partners are jointly and severally liable for partnership obligations. Limited partnerships have general and limited partners; limited liability partnerships protect partners from certain liabilities.
Corporations
Corporations require articles of incorporation, bylaws, and a board of directors. Shareholders elect directors; directors manage. Piercing the corporate veil requires abuse of the corporate form (alter ego, undercapitalization, fraud). Directors owe duties of care and loyalty; the business judgment rule protects informed decisions. Shareholder derivative suits require demand or demand futility.
LLCs
LLCs combine limited liability with pass-through taxation. Members owe fiduciary duties unless the operating agreement provides otherwise.
Traps
Questions test whether apparent authority exists (objective manifestations by the principal), whether the business judgment rule applies (informed, disinterested decision), and whether veil piercing is justified (usually requires fraud or undercapitalization).
Rule of thumb
For agency liability, ask: what authority did the principal manifest? For corporate liability, ask: was the decision informed and disinterested?