Employer Liability In Torts

Summary

Intentional torts committed by employees, like assault or battery, are generally outside the scope of employment, meaning employers are not liable for such acts. In a general partnership without an agreement, profits are shared equally. Agency relationships can end by expiration. Courts may pierce the corporate veil if corporate formalities are not followed or fraud is involved. Privately held corporations do not sell ownership interests publicly. In stock purchases, liabilities transfer to new shareholders. Sole proprietorships do not require formal registration. Contracts outside ordinary business require unanimous partner consent. Sole proprietors are personally liable for business debts. General partners have unlimited liability, while limited partners liability is capped at their investment. Independent contractors may be liable but can seek indemnification. Business structure decisions should consider liability and tax implications. Shareholders own corporations, directors oversee, and officers manage operations. Frolics absolve employers of liability for employee actions. Entity types can change based on business goals and considerations.

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Susan and Mark form a general partnership. Susan contributes $*,* as her capital contribution, and Mark contributes $*,*. They do not create a partnership agreement. If the partnership earns $*,* in profits the first year, Mark will be legally entitled to: Group of answer choices $*,* $*,* $*,* $*,* plus interest
In the absence of a partnership agreement, profits in a general partnership are typically shared equally, regardless of the capital contributions. Therefore, Mark would be legally entitled to $*,*.
Do you have any other legal questions or need further clarification?
Sally has been injured on the job, so her employer hires Kevin to fill in for her. The agreement with Kevin is that he will work until Sally returns from medical leave in three months (on July 1st). When Sally is indeed ready to return on July 1st, Kevin’s agency relationship is terminated by an express act defined as ___________. Group of answer choices Expiration Operation of Law Communication
Kevin’s agency relationship is terminated by an express act defined as Expiration.
Tyler, an extremely wealthy business investor, is the primary shareholder and CEO for BloNo Gym Corp. BloNo Gym Corp. enters into a lease agreement with Large Land Corp. to lease a large space for *-years, where Tyler is planning on setting up a premier gym. Tyler has done extensive research on the viability of a premier gym, and has followed all corporate formalities to set up BloNo Gym Corp. Unfortunately, after three years, BloNo Gym Corp. has not had the membership interest Tyler was planning on, and BloNo Gym Corp. closes its doors. Large Land Corp. sues BloNo Gym Corp. for the unpaid portion of the *-year lease, and asks the court to pierce BloNo Gym Corp.'s corporate veil, so that they can collect a judgement from Tyler, since BloNo Gym Corp no longer has any assets. The court will pierce the corporate veil if:
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In Illinois, courts may pierce the corporate veil if:
- There is a unity of interest and ownership between the corporation and its owner.
- Adherence to the corporate form would promote injustice or inequitable consequences.
Has Tyler commingled personal and corporate assets or failed to maintain corporate formalities?
Large Land Corp. can show only that Tyler was fraudulent in the lease negotiations with Large Land Corp. The court will not pierce the corporate veil because Large Land Corp. was a voluntary creditor with BloNo Gym Corp, in that they voluntarily entered into a lease agreement with them. Large Land Corp. can show that BloNo Gym Corp. did not follow any corporate formalities for the three years that they were in business. Large Land Corp. can show that Tyler was fraudulent in the lease negotiations with Large Land Corp. and that BloNo Gym Corp. did not follow any corporate formalities for the three years that they were in business.
Case Rating: *
To better understand the situation, could you clarify if BloNo Gym Corp. and Tyler have mixed personal and corporate assets or if there is evidence of fraud beyond lease negotiations?
Tyler, an extremely wealthy business investor, is the primary shareholder and CEO for BloNo Gym Corp. BloNo Gym Corp. enters into a lease agreement with Large Land Corp. to lease a large space for *-years, where Tyler is planning on setting up a premier gym. Tyler has done extensive research on the viability of a premier gym, and has followed all corporate formalities to set up BloNo Gym Corp. Unfortunately, after three years, BloNo Gym Corp. has not had the membership interest Tyler was planning on, and BloNo Gym Corp. closes its doors. Large Land Corp. sues BloNo Gym Corp. for the unpaid portion of the *-year lease, and asks the court to pierce BloNo Gym Corp.'s corporate veil, so that they can collect a judgement from Tyler, since BloNo Gym Corp no longer has any assets. The court will pierce the corporate veil if:
Case Rating: *
In Illinois, courts may pierce the corporate veil if:
- There is unity of interest and ownership between the corporation and its owner.
- Adherence to the corporate form would promote injustice or inequitable consequences.
If BloNo Gym Corp. failed to maintain corporate formalities and Tyler committed fraud during lease negotiations, there is a strong case for piercing the corporate veil.
Would you like any further clarification on this matter?
Corporations that do not sell ownership interests through a broker to the general public or financial institutions are categorized as: Group of answer choices Privately held corporations Corporations, by definition, must sell ownership interests to the general public Public interest corporations Publicly held corporations
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Corporations that do not sell ownership interests through a broker to the general public or financial institutions are categorized as privately held corporations.
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Which of the following statements about a stock purchase is correct? Group of answer choices When one purchases a controlling interest of stock in a corporation, the previously acquired debt and liabilities are not transferred to the new controlling shareholders Stock purchases are not common in M&A transactions When one purchases a controlling interest of stock in a corporation, all the debts and liabilities that were incurred in the past carry over to the new controlling shareholders in the purchase A stock purchase terminates any previously acquired debt and liabilities by operation of law
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When one purchases a controlling interest of stock in a corporation, all the debts and liabilities that were incurred in the past carry over to the new controlling shareholders in the purchase.
Do you have any other legal questions or need further clarification?
All of the following are true about a sole proprietorship entity except: Group of answer choices It does not protect the personal assets of the principal It is a single-person entity It does not file a tax return, and all the income is taxed at the owner level It must always be formed by filing a set of forms with the federal and state government
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The statement that is not true about a sole proprietorship entity is:
- It must always be formed by filing a set of forms with the federal and state government.
Sole proprietorships do not require formal registration with the federal government, and in many cases, only minimal state registration is needed.
Do you have any other legal questions or need further clarification?
Absent a partnership agreement, when in a general partnership, all partners have an equal right to co-manage the business. This includes the right to sign contracts on behalf of the partnership, as long as the agreements are reasonably necessary to accomplish the tasks within the ordinary course of business of the partnership. A contract that is outside the ordinary course of business requires the unanimous consent of all the partners. Which example discussed in class is a contract that is outside the ordinary course of business, and would need unanimous consent of all the partners? A yoga studio set up as a general partnership, where a partner enters into a contract to provide car detailing services for yoga clients after yoga class A candle making company set up as a general partnership, where a partner enters into a contract to design and print bumper stickers for a large client
Case Rating: *
In the examples you provided, the contract that is outside the ordinary course of business and would need unanimous consent of all partners is:
- A yoga studio set up as a general partnership, where a partner enters into a contract to provide car detailing services for yoga clients after yoga class.
This is because providing car detailing services is unrelated to the core business of a yoga studio.
Franco is a sole proprietor who does business as Franco’s Computer Consulting. After starting up the business out of his basement, he lands a big client and begins to lease office space at a local office complex. He loses the big client in one month and can no longer generate enough business revenue to sustain the lease payments. Franco's Computer Consulting ends up owing the landlord $*,*. Assuming no business assets exist, which is true? Group of answer choices Franco is personally liable for the lease payments Franco is not personally liable for the debt if he vacates the property Franco is not personally liable for the lease payments Franco is liable only if he signed a personal guarantee
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Franco is personally liable for the lease payments.
In a sole proprietorship, the owner is personally responsible for all debts and obligations of the business.
Is there anything else you would like to know about this situation or any other legal matter?
Abel and Baker formed AB Partners, LP. Abel contributed $*,* and became the managing general partner, and Baker contributed $*,* as a limited partner. AB Partners, LP was successfully sued for an injury they caused to a third party. What is the potential personal liability for Abel and Baker, respectively? Group of answer choices $*/$*,* Unlimited/$*,* $*,*/$*,* Unlimited/$*
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In Illinois, the potential personal liability in a Limited Partnership (LP) for:
- Abel (General Partner): Unlimited personal liability for the debts and obligations of the partnership.
- Baker (Limited Partner): Liability is limited to the amount of their investment ($*,*).
Do you have any other legal questions related to this situation?
Tessa is an independent contractor of Sam. As part of Tessa's employment, she contracted with Big Drug Company to buy vitamins on behalf of Sam, a personal trainer. Sam told Tessa to use her own name and not to disclose that she was working for Sam. If Tessa signs the contract in her name only and Sam will not pay for the vitamins: Group of answer choices Tessa is liable, but may sue Sam based on indemnification. This is partially disclosed agency, and both Tessa and Sam may be liable. Tessa is not liable, because she is working within the scope of her employment. As such, Sam will be liable. Tessa is not liable because she is an independent contractor, not an employee agent.
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Tessa is liable, but may sue Sam based on indemnification.
Since Tessa signed the contract in her own name without disclosing Sam's involvement, she is personally liable to Big Drug Company. However, she may pursue indemnification from Sam for any losses incurred.
Do you have any other legal questions or need further clarification on this matter?
April is starting a new business teaching ballet. She is trying to decide if she should incorporate or operate as a sole proprietorship. When making her decision, she should consider: (I) The personal liability risk she is willing to take on (II) The number of employees she will employ, as she will be limited on how many people she can hire if she operates as a sole proprietorship (III) Her long-term objectives for the business, as she will not be able to change the entity type once she establishes it (IV) Her personal tax situation, as she may be taxed personally for all the income of the business if it is a sole proprietorship Group of answer choices I, II, III, and IV I and IV I, II, and III I and III
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April should consider the following factors when deciding whether to incorporate or operate as a sole proprietorship:
- The personal liability risk she is willing to take on
- Her personal tax situation, as she may be taxed personally for all the income of the business if it is a sole proprietorship
So, the correct answer is:
I and IV
Would you like to know more about the differences between incorporation and sole proprietorship?
Painting Corp. is a corporation that does interior painting work around Bloomington-Normal. The business has three owners, Anna, Bert, and Cam. Doug and Ellie run the day to day operations of Painting Corp. which includes negotiating customer contracts, setting the price of painting jobs, giving estimates, and managing the employee schedule. In this case: Group of answer choices Anna, Bert, and Cam are the Shareholders and Doug and Ellie are Officers Anna, Bert, and Cam are the Board of Directors, and Doug and Ellie are the Officers Anna, Bert, and Cam are the Partners, and Doug and Ellie are the Officers Anna, Bert, and Cam are the Shareholders, and Doug and Ellie are the Board of Directors
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Anna, Bert, and Cam are the Shareholders, and Doug and Ellie are Officers.
Would you like any further clarification or have another legal question?
Paul tells Sally, an employee agent, to mail a letter. Before mailing the letter, Sally decides she wants a break from work and takes two hours to visit her uncle in a town * miles away. On her way back, she crashes her car and injures another driver. This is: Group of answer choices A frolic, and Sally's employer is liable for damages sustained in the crash A detour, and Sally's employer is liable for damages sustained in the crash A detour, and Sally's employer is not liable for damages sustained in the crash A frolic, and Sally's employer is not liable for damages sustained in the crash
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This is considered a "frolic," meaning Sally's deviation from her work duties was substantial and for personal reasons. Thus, Sally’s employer is not liable for damages sustained in the crash.
- Frolic: Significant deviation for personal reasons.
- Detour: Minor deviation still related to work.
Would you like any further clarification or have another legal question?
Shareholders of a corporation are the owners of the business. The Board of Directors of a corporation is responsible for oversight of the business. Officers of a corporation run the day to day operations of the business. Which specific example did we discuss with regard to officers of a corporation? Group of answer choices A clothing boutique with one location where the officer decides which merchandise to carry, and determines day-to-day staffing needs A pet store with * locations, where the officers would be in charge of determining what products to carry and what pets to sell A jewelry store with * retail locations, where the officers would be in charge of staffing decisions, merchandise decisions, and decisions around what to do about an underperforming store A pizza restaurant with three locations, where the officers would be in charge of setting a menu, staffing decisions, and day-to-day financial tasks
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The specific example discussed regarding officers of a corporation is:
- A clothing boutique with one location where the officer decides which merchandise to carry, and determines day-to-day staffing needs.
Would you like to know more about the roles and responsibilities of corporate officers?
Which of the following statements about entity types changing over time is/are true? I) Entities always remain the same type once established. II) Legal entities cannot change their classification after formation. III) Entity types may change as the goals of the business change. IV) A corporation can never convert into a partnership or LLC. V) The choice of entity types may be driven by risk management considerations and tax consequences. Group of answer choices III and V V only IV and V All of the above
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Entities can indeed change their type over time based on business goals and considerations. The accurate statements are:
- Entity types may change as the goals of the business change.
- The choice of entity types may be driven by risk management considerations and tax consequences.
So the correct answer is:
III and V