Business Associations.

One individual owns the business and keeps its profits. Business debts are ordinarily the owner's personal debts because the business has no separate liability shield.

A contractor normally chooses how to accomplish an agreed result. Classification depends on the right to control and the governing statutory test, not simply the contract label.

Two or more people carry on a business as co-owners for profit. Their conduct can create a general partnership without a formal filing or an intention to use that label.

A filed business form with at least one general partner and one limited partner. General partners manage with ordinary personal liability; limited partners receive the statutory liability protection.

A registered partnership whose partners receive a statutory shield from partnership obligations. The scope of protection and eligible businesses depend on state law.

Filing the required organizational document creates an entity with a liability shield for members. Management and tax treatment depend on the operating agreement, statutes, and tax elections.

A legally separate entity formed under a corporation statute. It owns assets, incurs obligations, and continues independently of changes in its shareholders.

An eligible corporation elects federal pass-through tax treatment. Its income generally flows to shareholders for tax purposes while the corporation retains its separate legal identity.

A corporation taxed as a separate taxpayer. Income may face corporate tax and then shareholder tax when after-tax profits are distributed as dividends.

Owners generally risk their investment rather than their personal assets for entity debts. Personal wrongdoing, guarantees, and veil piercing can create separate exposure.

The principal and agent agree that the agent will act for the principal and subject to the principal's control. The relationship can arise through words or conduct.

A person entrusted to act for another owes loyalty and appropriate care within that relationship. The fiduciary must not misuse the position for conflicting personal gain.

Personal interests or duties to another person interfere with the fiduciary's obligations. Disclosure and valid consent may address some conflicts; undisclosed self-dealing can breach loyalty.

The traditional employment relationship turns on the employer's right to control the worker's performance. It matters because an employer may answer for torts within the scope of employment.

A principal knowingly adopts an act originally done without authority on the principal's behalf. Valid ratification generally acts as prior authorization; adopting part of an indivisible transaction adopts the whole.

A person may be prevented from denying agency when that person's representations or culpable inaction induce a third party's reasonable, detrimental reliance on supposed authority.

Ask what the principal authorized and what a third party reasonably understood from the principal's manifestations. An agent cannot create apparent authority through unsupported claims alone.

Authority exists when the agent reasonably understands the principal's manifestations as permission to act. Express authority comes from direct instructions; implied authority covers reasonably necessary implementation.

The agent may take steps reasonably incidental or necessary to an authorized task. Context, prior practice, and the principal's manifestations determine the limits.

A third party reasonably believes the agent is authorized because of the principal's manifestations. The inquiry centers on the principal's conduct and the third party's reasonable belief.

By clothing another with the appearance of ownership or authority over property, an owner may create reasonable third-party reliance that limits the owner's ability to deny authority.

A traditional doctrine sometimes bound principals to usual acts of agents despite limits on actual authority. Modern analysis often addresses these problems through apparent authority and related statutory rules.

Notice properly received by an agent within the agency can count as notice to the principal. The subject matter, agency duties, and exceptions determine whether attribution is justified.

Knowledge relevant to an agent's duties may be attributed to the principal. Adverse-interest and related exceptions can limit attribution; knowing facts is distinct from formally receiving notice.

Ratification requires an eligible principal, a ratifiable act, and informed affirmance. It cannot ordinarily validate an illegal act or unfairly defeat intervening third-party rights.

Keeping a transaction's benefits with knowledge of the important facts can signal adoption. Silence alone is not always enough; evaluate the circumstances and duty to disaffirm.

Ratification ordinarily requires awareness of facts material to the decision. A principal may also choose to affirm while deliberately accepting the risk of incomplete information.

Valid ratification usually treats the act as authorized when performed. That retroactive effect is limited when it would improperly prejudice a third person.

Agency and contract are distinct: agency can exist without a paid contract. A contract may specify compensation, performance, duration, and remedies between principal and agent.

A principal must honor agreed compensation and other contractual promises and ordinarily provide cooperation and appropriate indemnification. The precise duties depend on the relationship and applicable law.

The principal owes compensation promised by agreement. Where appropriate, the circumstances may support reasonable payment for requested services even without an express price.

The principal must not wrongfully prevent the agent from performing the authorized work. Failure to provide promised access, information, or support may breach the agreement.

A principal's own negligence or contractual duties may create liability for injury to an agent. Employment injuries may instead fall within a workers' compensation system.

An agent may seek contract remedies when the principal breaks the agency agreement. A power to terminate authority does not necessarily eliminate liability for wrongful termination of the contract.

The agent must act within authority, follow lawful instructions, and use the care and skill the undertaking requires. Duties of loyalty and accounting also protect the principal.

An agent must account for benefits received through the agency and avoid secretly keeping profits belonging to the principal. Informed consent can change the permitted allocation.

Identify the duty, disloyal or careless conduct, and resulting harm or improper benefit. Remedies may include damages, disgorgement, an accounting, or equitable relief.

An authorized contract generally binds a disclosed principal. With an undisclosed principal, both principal and agent are ordinarily parties, subject to defenses and the rule against double recovery.

A principal is generally bound by contracts an agent makes within actual authority. Apparent authority and ratification provide separate possible bases for binding the principal.

Without actual or apparent authority, ratification, or another recognized basis, the principal ordinarily is not bound. The agent may face liability for falsely warranting authority.

The writing should identify the principal and show representative capacity. Statutes and the document's language can affect whether the principal, agent, or both become parties.

An employer may answer for an employee's tort within the scope of employment even without personal fault. The relationship and connection between the work and wrong are central.

Delegating work does not erase an employer's own negligence or nondelegable duties. Direct liability is analytically separate from liability imposed merely because someone else was the employee.

Historically, the doctrine limited employer liability for injuries caused by a coworker. Workers' compensation statutes and modern rules have substantially displaced that common-law defense.

Statutory systems generally compensate covered work injuries without proving employer negligence. In exchange, an exclusive-remedy rule often restricts ordinary tort suits against the employer.

An authorized contract may give the principal enforcement rights against the third party. Whether the agent also can sue depends on party status and the contract's terms.

Acting for multiple principals can create conflicting loyalties. Proper disclosure and informed consent are generally needed when the interests conflict.

An agent appoints another person to perform agency functions for the principal. Authority to appoint and the resulting relationships determine who bears duties and liability.

A subagent receives only authority validly delegated. The original agent cannot enlarge the principal's authorization merely by passing the task to another person.

A subagent owes appropriate duties to the principal and appointing agent. Delegation does not excuse disloyalty or careless performance of the assigned work.

A subagent may also be an employee when the relevant principal has the right to control the work. Liability follows the actual relationship, not the title alone.

A worker loaned to another employer may become that employer's servant for a particular task. Control over the work helps determine responsibility for the worker's torts.

Hiring a contractor does not necessarily avoid liability for negligent selection, nondelegable duties, or certain dangerous work. Identify a recognized exception instead of assuming all contractor acts are attributed.

Actual authority may end through agreement, revocation, renunciation, completion, or operation of law. Apparent authority can persist until a third party no longer reasonably believes it exists.

Ending the internal agency relationship may leave outsiders reasonably believing authority continues. Appropriate notice to affected third parties helps end that apparent authority.

Someone who represents that a partnership exists, or permits that representation, may be liable to a third party who reasonably relies on it in a transaction.

Profit sharing, co-ownership, management, and conduct help show a partnership. Profit sharing can create a presumption, but statutory exceptions cover payments such as wages, rent, or debt installments.

Property acquired for the partnership belongs to the entity under governing law. Title, purchase funds, and acquisition circumstances help distinguish it from a partner's personal property.

A partner's transferable economic interest generally consists of rights to profits, losses, and distributions. Transferring that interest does not automatically give the transferee management rights.

A partner's economic interest is personal property. It is distinct from ownership of specific partnership assets, which ordinarily belong to the partnership itself.

Subject to agreement and statute, partners share management rights, information access, and economic distributions. Default rules for voting, profits, and losses can be modified within statutory limits.

Partners owe loyalty and a statutory duty of care. Under California RUPA, care addresses gross negligence, recklessness, intentional misconduct, and knowing illegality; good faith and fair dealing is a separate obligation.

Each partner ordinarily acts as an agent for partnership business. An act apparently carrying on ordinary business can bind the partnership unless the outsider has the relevant notice of lack of authority.

Acts outside ordinary business generally require appropriate partner authorization. Internal restrictions may not protect the partnership against an outsider who lacks the notice required by statute.

Actual admission as a partner requires the consent and conditions imposed by the agreement and statute. Existing partners cannot create another person's liability solely by announcing that person is a partner.

A claimed partner must establish actual partnership status or a separate reliance-based rule. Merely describing oneself as a partner does not automatically confer ownership or management rights.

General partners ordinarily face personal liability for partnership obligations under governing law. LLP status, admission timing, creditor agreements, and procedural collection rules can change the result.

A partner leaving is dissociation. Dissolution begins winding up only when a statutory trigger occurs; death or withdrawal does not invariably end a modern partnership.

A partner may have power to leave yet breach the agreement by doing so. Wrongful dissociation or dissolution can produce damages and affect settlement of the departing partner's interest.

Death ordinarily causes dissociation. Whether the partnership must dissolve depends on governing law, the agreement, and subsequent partner choices; automatic dissolution is not a universal modern rule.

Dissolution does not itself release partners from existing debts. A creditor's release, payment, or other legal discharge is needed to eliminate an existing obligation.

After dissolution, the partnership settles affairs, pays obligations, disposes of assets, and distributes the remainder. Winding up is the closing process rather than ordinary continuation of business.

A general partner ordinarily participates in management and bears personal responsibility for partnership obligations. Entity form and statutory liability shields can alter that default exposure.

A limited partner has economic rights and a statutory liability shield. Exercising permitted voting or consultation rights does not automatically create general-partner liability; use the applicable statute's control rules.

A corporation with concentrated ownership and no broad public trading market. Applicable statutes or agreements may permit governance arrangements adapted to a small shareholder group.

In this business-law context, a corporation whose shares are publicly traded. Securities disclosure and market regulation distinguish it from a closely held business.

A person organizes a corporation before it exists. Promoters may be personally bound on preincorporation contracts unless the other party agrees otherwise or later releases them through a novation.

Incorporators file the required articles under state law. In California, existence begins on filing; organizational steps then establish governance, officers, and authorized share issuance.

The filed charter establishes the corporation and specifies required foundational terms, including its name and authorized shares. It takes priority over inconsistent internal bylaws.

Internal rules govern matters such as meetings, officers, and voting procedure. They must conform to the corporation statute and articles.

Owners of corporate shares hold the rights attached to their class. Ownership usually brings voting and economic rights but does not itself authorize day-to-day management.

The board generally manages or directs corporate affairs. Directors usually act collectively through valid meetings or written action rather than through individual authority alone.

Officers carry out corporate business within authority supplied by the board, bylaws, office, or agency law. A title does not confer unlimited power.

A corporation validly formed through compliance with the incorporation statute. It is distinct from doctrines that protect parties despite a defect in formation.

A traditional doctrine recognizes corporate treatment after a good-faith attempt to incorporate under an available statute and actual exercise of corporate powers. Modern statutory treatment varies.

A party that dealt with an enterprise as a corporation may be prevented from denying that status to avoid an obligation. The doctrine does not cure every formation defect for every purpose.

A court may disregard the liability shield when entity separateness has been abused and the jurisdiction's additional injustice requirements are met. Ownership or control alone is insufficient.

An act exceeds the corporation's permitted powers. Modern statutes usually restrict when lack of corporate power can invalidate a transaction and who may challenge it.

Courts examine whether owners treated the entity as genuinely separate. Commingled funds and disregard of separateness can support veil piercing, but additional jurisdiction-specific requirements remain.

Grossly inadequate resources for a business's foreseeable risks can support a veil-piercing argument. Low capital is a factor, not an automatic basis for owner liability.

Shareholders elect directors and vote on matters reserved by statute or charter. They ordinarily do not bind the corporation merely by being shareholders.

A corporation acts through people. Ordinary agency rules help determine when acts of officers or employees create rights and liabilities for the corporation.

A person exercising an office under an apparently valid appointment may have acts recognized despite a defect in appointment. The doctrine protects appropriate reliance, subject to governing law.

A corporation may validate an otherwise lawful defective act through the approvals the governing statute requires. California section 119 provides a specific ratification process with limits and fraud protections.

Directors must use the care required by governing law and make appropriately informed decisions. Liability protections and standards differ from the separate duty of loyalty.

Courts generally defer to informed, disinterested business decisions made in good faith. The rule does not automatically protect conflicts, bad faith, or an uninformed process.

Corporate fiduciaries must not improperly put their own interests ahead of the corporation. Conflicted transactions require analysis of disclosure, approval procedures, fairness, and applicable statutory protections.

A fiduciary may not improperly take an opportunity belonging to the corporation. Relevant tests examine the corporation's interests, ability, business line, and the circumstances of acquisition.

A potential transaction or venture may belong to the corporation when sufficiently connected to its business or expectancy. Identify that connection before evaluating a fiduciary's personal participation.

Proper approval can matter when a fiduciary proposes a conflicted transaction. The effect depends on informed disclosure, disinterested decision makers, and the governing statute or doctrine.

Shares represent ownership interests with specified rights. Classes and series may differ in voting, dividends, and liquidation priority; issuance status is a separate classification.

A charter may assign a nominal minimum value to a share. Par value is a legal-capital concept and need not match market value; modern statutes differ in their treatment.

A corporation may assign a stated amount to no-par shares for capital accounting. Its legal significance depends on the applicable statute.

Shares issued without a stated par value in the charter. Their permitted consideration and capital treatment follow the relevant corporation statute.

Traditional terminology for shares issued without a separate payment, often as an inducement alongside another transaction. Legality depends on required consideration and issuance rules.

Traditionally, par-value shares issued for less than par. Statutory restrictions may create liability for the unpaid amount; do not confuse this with a low market trading price.

Traditional terminology for shares issued for consideration overstated relative to their represented value. Liability depends on the governing valuation and issuance rules.

The issuer sells newly issued shares and receives the proceeds. This raises capital for the corporation rather than paying an existing shareholder.

An existing holder sells shares to another investor. The seller ordinarily receives the proceeds, while the corporation generally issues no new shares.

Issued shares currently held by shareholders. They are distinguished from authorized but unissued shares and shares reacquired by the corporation.

Previously issued shares reacquired and retained by the corporation under statutes recognizing treasury status. Their voting, dividend, and reissuance treatment is governed by law.

Instruments such as bonds or debentures represent borrowing obligations. Holders are creditors with contractual repayment rights rather than owners merely because they hold the debt.

State blue-sky laws regulate securities offerings and market participants through registration, antifraud provisions, licensing, or qualification. Exemptions and federal preemption can limit their reach.

An offering must be registered or qualify for an exemption. Registration supplies required information; it does not guarantee investment quality or eliminate antifraud duties.

These laws prohibit deception in securities transactions. An exemption from registration does not necessarily exempt the transaction from antifraud liability.

Securities intermediaries may need registration or licensing. Distinguish regulation of the person selling securities from registration of the securities offering itself.

Some state systems require administrative qualification or a permit before an offering. The applicable law determines exemptions and whether merits review is involved.

A promise to buy shares before the corporation exists. Statutes may impose an irrevocability period and regulate enforcement after formation.

A commitment to acquire shares from an existing corporation. Contract terms, authorization, consideration, and statutory issuance requirements govern enforceability.

A distribution to shareholders because of their ownership. In California, authorization must satisfy the statutory retained-earnings or assets-and-liabilities test; a profitable year alone does not compel payment.

A shareholder votes separately for each director position using the votes attached to the shares. A voting majority can ordinarily elect every seat.

Votes equal eligible shares multiplied by the number of directors being elected. The shareholder may concentrate those votes on one candidate, improving minority representation where permitted.

Shareholders may inspect specified corporate records when statutory requirements are satisfied. Proper purpose, ownership thresholds, demand form, and scope can affect access.

Rights may include voting, information access, declared distributions, transfer, and enforcement actions. The statute, charter, and share class determine the actual package.

Shareholders contract about matters such as voting, governance, or transfers. Enforceability depends on the statute and the agreement's compatibility with mandatory corporate rules.

Shareholders agree to vote their shares together. They keep share ownership while coordinating voting under the agreement.

Shareholders transfer voting power through a trust arrangement while retaining beneficial interests. Statutes can impose formalities, disclosure duties, and limits.

Before selling to an outsider, the owner must give the designated holder an opportunity to buy on the required terms. It is a transfer restriction, not an automatic purchase duty.

Some close-corporation decisions require controlling owners to give minority owners an equal opportunity in certain share repurchases. The doctrine is jurisdiction-specific, not a universal corporate rule.

A person whose role or relationship gives access to confidential corporate information and may carry relevant duties. Access alone does not establish every element of insider-trading liability.

Material information that has not been made public. Materiality asks whether a reasonable investor would consider it important in the overall mix of available information.

An insider cannot avoid fraud liability by making a materially false statement during a securities transaction. Duties concerning silence require a separate analysis.

State common-law duties to disclose in share transactions vary. Analyze the relationship, direct dealings, special facts, and applicable fiduciary doctrine rather than assuming a universal disclosure obligation.

Under this traditional approach, an insider buying a shareholder's stock may have to disclose unusually significant nonpublic facts. Its application depends on jurisdiction and the transaction.

An insider must not secretly exploit corporate information in breach of duties owed to the corporation. Disclosure and remedies depend on the relevant fiduciary relationship and transaction.

The rule prohibits deceptive schemes, material misstatements or misleading omissions, and fraudulent practices connected to buying or selling securities. A private damages claim requires additional elements.

A trader possessing material nonpublic information must abstain or make legally sufficient disclosure when trading would breach a relevant duty. Mere possession without such a duty is not the full test.

Corporate insiders owe duties to the issuer's shareholders. Tipping liability requires a duty breach for personal benefit, which can include giving confidential trading information to a relative or friend.

Securities fraud can arise when someone secretly uses confidential information for trading in breach of a duty to its source. The deception concerns the source's entrusted information.

A person discloses material nonpublic information in breach of a duty for a personal benefit. That benefit can be indirect, including certain gifts of information.

Under the Dirks civil rule, the insider must have tipped in breach of duty for personal benefit, and the recipient must have known or had reason to know of that breach. Mere receipt is insufficient.

The issuer may recover profits from matched purchases and sales of its covered equity securities within less than six months by directors, officers, and greater-than-10-percent owners. A 10-percent owner must qualify at both transactions. Intent is unnecessary; exemptions apply.

Authority given to another person to vote shares. Its duration, revocability, and solicitation are governed by the authorization and applicable law.

Federal proxy rules regulate covered solicitations for registered securities. Required disclosures and antifraud duties apply, subject to exemptions and permitted delivery methods.

The federal agency administers and enforces federal securities laws. Its work includes disclosure regulation, market oversight, rulemaking, and civil enforcement.

Insolvency can mean insufficient assets or inability to pay debts as they mature. Identify the governing statute and test before drawing consequences for distributions or creditor rights.

The bankruptcy balance-sheet test generally compares debts with property at fair valuation, subject to statutory exclusions. It differs from a cash-flow inability to meet current obligations.

A business cannot pay obligations as they come due in the ordinary course. This liquidity test can produce a different result from comparing total assets and liabilities.

The corporation reacquires shares under a redemption right or agreement. The transaction must satisfy applicable terms, authorization requirements, and distribution restrictions.

Corporations combine through a statutory process in which a surviving entity succeeds to the constituent entities' assets and obligations. Approval and appraisal rights depend on the transaction and statute.

The acquirer uses a subsidiary in the merger. The target disappears into the subsidiary in a forward merger; the target survives the subsidiary in a reverse merger.

A shareholder sues to enforce an individual right or remedy a personal injury. The claim and recovery belong to the shareholder rather than the corporation.

A shareholder pursues the corporation's claim when those controlling it fail to act. Standing, demand or demand-excusal, and other procedural requirements limit the action.

Decision makers cannot obtain the votes needed for corporate action. Depending on law and agreements, remedies may include a custodian, buyout, or dissolution.

An issuer or outside bidder offers directly to security holders to buy securities on specified terms. It can acquire a large stake without negotiated purchases through corporate management.

A bidder offers cash directly to holders for their securities. Applicable tender-offer rules govern disclosures, timing, and treatment of tendering holders.

A bidder offers its own securities in exchange for target securities. Securities issuance rules apply in addition to the relevant tender-offer requirements.