1. Business Organizations and Employment Law
CHAPTER 18
Business Organizations and Employment Law

2. Introduction
Paralegals commonly work with people in business as well as being employees of business entities themselves
Knowledge of the various legal forms used by businesses is helpful in understanding legal issues that arise in this environment

3. Introduction
This chapter reviews how a range of business organizations are formed and some of the key features of the different legal structures
Agency law is a part of the common law that plays a role in almost all business relationships

4. Forms of Business Organization
Traditionally
Sole proprietorship
Partnership
Corporation
Newer alternative forms
Limited liability companies (LLC)
Limited liability partnerships (LLP)
Professional corporations (PC)
Learning Objective: The major forms of business organizations and how each is created and operated.
Learning Objective: How profits and liabilities are distributed in each business organizational form.

5. Forms of Business Organization
Sole Proprietorships
Formation of a sole proprietorship
Advantages of sole proprietorships
Disadvantages of sole proprietorships
Taxation and sole proprietorships
Termination of the sole proprietorship

6. Forms of Business Organization
Partnerships
The Uniform Partnership Act (UPA)
Partnership formation
Rights and duties of partners
Default rules
Obligation to partners
Liability of partners
Joint liability
Joint and several liability

7. Forms of Business Organization
Partnerships
Taxation of partnerships
Partnership termination
Dissolution
Winding up
Limited partnerships
General partners
Limited partners

8. Forms of Business Organization

9. Forms of Business Organization
Corporations
Need basic knowledge of formation and operation
Basic rights and responsibilities of participants
Shareholders
Shares
Directors
Officers

10. Forms of Business Organization
Corporations
Entity status
Corporation formation
Articles of incorporation
Certificate of incorporation
Corporate charter
Bylaws

11. Forms of Business Organization
Corporations
Classifications of corporations
Private corporation
Public corporation
Publicly held corporation
For-profit or not-for-profit
Close corporations
Professional corporations

12. Forms of Business Organization
Corporations
Directors and officers
Rights and responsibilities
Dividends
Potential liability
Shareholders
Limited liability
Corporate taxation
Types of stock
Corporate termination
Liquidation

13. Forms of Business Organization
Online Incorporation
Researching state requirements
Incorporation is typically handled by the secretary of state’s office
Online incorporation services
Harvard Business Services
The Company Corporation
Corporation Service Company
Technology tip

14. Forms of Business Organization
Limited Liability Organizations
Limited liability companies (LLC)
Hybrid form of business enterprise
Pass-through tax benefits of S corporations and partnerships
Limited liability of limited partners and corporate shareholders

15. Forms of Business Organization
Limited Liability Organizations
Limited liability partnerships (LLP)
Designed for professionals who normally do business as partners in a partnership
Pass-through entity for tax purposes
Limits personal liability of partners for partnership tort liability
Professional corporations
Limits liability of the other members

16. Forms of Business Organization
The Paralegal and Business Organizations
Paralegals carry out diverse tasks involving business organizations
Reserve a corporate name
Draft a partnership agreement
Prepare articles of incorporation
Prepare minutes of corporate meetings

17. Forms of Business Organization
The Paralegal and Business Organizations
Paralegals carry out diverse tasks involving business organizations
Prepare documents relating to sale of corporate securities
Assist in dissolution
Assist in litigation
Research state laws
Monitor deadlines

18. Agency Law Common Law of Agency Pervasive concept in our society
Agency relationship exists when one party (agent) agrees to act for another party (principal)
All forms of business organizations involve agents
Learning Objective: What agency relationships are and the significance of agency law for business relationships.

19. Agency Law Employees and Independent Contractors
Hired to perform a specific undertaking
Free to choose how and when to perform the work
May or may not be an agent
Courts look at degree of control and supervision

20. Agency Law Agency Formation Formed voluntarily by agreement of parties
Agreement need not be in writing
Agreement can be implied by conduct
Agency relationship can arise through appearance of an agency, although it may not actually exist

21. Agency Law Fiduciary Duties Fiduciary relationship
High degree of trust
Confidence
Duties run both ways
Duty of loyalty
Avoiding conflicts of interest
Agent cannot represent two principals in the same transaction

22. Agency Law Agency Relationships and Third Parties
When disputes arise over who should be liable
Contract liability
Tort liability
Respondeat superior
Vicarious liability
Liability for independent contractors’ torts

23. Employment Law
An employment relationships is established when a business hires an employee
Traditionally these relationships were governed by common law in the United States
Today, federal and state statutes
Regulate the workplace extensively
Provide employees with many rights and protections
Learning Objective: How the government regulates employer–employee relationships.

24. Employment Law Employment at Will
Either party may terminate relationship
At any time, for any reason
Unless contract or statute specifically provides otherwise
Implied contracts
Dismissed for “good cause”

25. Employment Law Restrictive Covenants Covenants not to compete
Agree not to enter into competing businesses
Agree not to solicit employer’s customers for a specific period of time
Laws vary from state to state
California does not enforce such agreements

26. Employment Law Wrongful Discharge
Employee may bring an action for wrongful discharge
If employer discharges an employee in violation of an employment contract
If employer violates a statutory law
Common law principles apply
Constructive discharge
Intolerable working conditions
Reasonable person would feel compelled to quit

27. Employment Law Wage Laws Fair Labor Standards Act (FLSA) of 1938
Regulates overtime pay
Regulates minimum hourly wages
Overtime is 1.5 times regular hourly rate
Minimum wage rate
Set by Congress
Changes periodically
Many states have minimum wage laws
Sometimes set higher minimums than federal law

28. Employment Law Family and Medical Leave
Family and Medical Leave Act (FMLA)
Time off work for family or medical reasons
Leave rights
Remedies for violation of FMLA
Damages for unpaid wages
Job reinstatement
Promotion

29. Employment Law State Workers’ Compensation Laws
Establish an administrative procedure for compensating workers injured on the job
Injured worker files claim with administrative agency
No fault
Accidental
Occurred on the job or in the course of employment
No right to sue
Workers’ comp is exclusive remedy

30. Employment Law Employment Discrimination
Federal laws prohibiting employment discrimination
Title VII of the Civil Rights Act of 1964
Prohibits discrimination based on race, color, national origin, and gender
The Age Discrimination in Employment Act of 1967
Prohibits discrimination based on age
The Americans with Disabilities Act of 1990
Prohibits discrimination based on disability

31. Employment Law Employment Discrimination
Title VII of the Civil Rights Act of 1964
Sexual harassment
Liability for harassment
What did employer know?
The Equal Employment Opportunity Commission
Employers’ liability under Title VII
Discrimination based on age

32. Employment Law Employment Discrimination
Discrimination based on disability
Reasonable accommodation
Hardship

33. Employment Law Employment Law and the Paralegal
Common tasks in area of labor and employment law
Draft employment contracts
Assist in drafting an employee handbook
Prepare reports and furnish documentation
Draft a policy manual
Assist in litigation

34. Summary
Sole proprietorship is the simplest form of business organization
A partnership is created by the written or oral agreement of the parties to do business jointly as partners
A corporation is created by a state-issued charter

35. Summary
Other forms of business organization are the limited liability partnership (LLP), the limited liability company (LLC), and the professional corporation (PC)
An agency relationship arises when one person agrees to act for or in the place of another person
Employees who deal with third parties are normally considered to be agents of their employers

36. Summary The parties in an agency are held to certain obligations
Traditionally, the employment relationship has been governed by the doctrine of “employment at will” as well as by common law rules relating to contracts, torts, and agency
Both federal and state laws prohibit discrimination against employees in the workplace