FUNDAMENTALS OF BUSINESS
ORGANIZATIONS FOR
PARALEGALS
THIRD EDITION
Deborah E. Bouchoux
Chapter One
Introduction to Business
Organizations and Agency Law
Key Types of Business Enterprise
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Sole proprietorships
General partnerships
Limited partnerships
Limited liability partnerships
Limited liability companies
Business corporations
Professional corporations
S corporations
Close corporations
Sole Proprietorship
Business owned and operated by
one person
General Partnership
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Business co-owned by two or more
persons
Limited Partnership
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Business created under a state
statute in which some partners
have limited liability
Limited Liability Partnership
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Business entity providing limited
liability for its partners
Limited Liability Company
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Business providing limited liability
and pass-through tax status for its
members
Business Corporation
Legal entity existing under the
authority of the state legislature
Professional Corporation
Corporation formed by
professionals, such as doctors,
lawyers, accountants, and
engineers
S Corporation
Corporation that passes through all
income to its shareholders, who
pay tax on income received
Close Corporation
Small corporation whose
shareholders are active in
managing the business and that
operates informally
Considerations in Selecting a Business
Enterprise
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Ease of formation
Management
Liability and financial risk
Continuity of existence
Transferability
Profits and losses
Taxation
Companies Indexed by Numbers of
Employees (2004)
Size of Company
Number of
Employees
Percent (%)
20-99 employees
856,000
11.6%
100-499 employees
154,000
2.1%
500-999 employees
12,000
0.2%
Over 1,000 employees
7,000
0.1%
Under 20 employees
6,359,000
86.1%
Agency Relationships
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Agent: One who acts for or represents another
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Principal: The person for whom an agent acts
Duties Owed in Agency Relationships
DUTIES OWED BY
AGENT
 Performance
 Notification
 Loyalty
 Accounting of Profits
DUTIES OWED BY
PRINCIPAL
 Compensation
 Reimbursement and
Indemnification
 Cooperation
Key Features of Agency Relationships
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Formation of agency occurs through express
agreement, implied agreement, or estoppel
Agents have actual authority (express or implied) or
apparent authority to act for their principals
Agents and principals owe fiduciary duties to each
other
Agents are liable for their own torts and principals
are liable for an agent’s torts and acts committed in
the course and scope of the agency.