Business Entity
Includes all the possible forms of doing business.
Unlimited Liability Business Entity
Means a business entity whose owners have unlimited personal liability for all of the business entity's debts.
Limited Liability Business Entity
Means a business entity whose owners have no personal liability for the business entity's debts.
Entity
Broader and can refer to a person, partnership, joint venture, limited partnership, corporation, nonprofit corporation or group, church, limited liability company, professional corporation, government, or part of a government.
Sole proprietorship
A business entity operated by one person. If the person is married, the spouse may have community property or marital property interests in the business should they divorce. They DO NOT FILE income tax returns; all income and deductions are taken on the i
Exempt Property
Property that CANNOT be seized to cover the debts of a person.
Nonexempt Property
Property owned by the individual that does not appear on the exempt property list.
Tort
A noncontract injury such as negligence or defamation.
Interstate Succession
The state law outlining who receives a person's property if they die without a valid will. Typically distributes the assets to the spouse and children. If there is no spouse or children, state laws distribute the property to parents, siblings, cousins and
General Partnership or Joint Venture
A business entity operated by two or more entities for profit. Almost any other business form except the sole proprietorship, which is unavailable for two or more entities, is a better choice.
Partnership and Joint Venture
The difference between a partnership and a joint venture is usually the length of the operation. Partnerships are for an indefinite period, a long time. They file an informational tax return (IRS Form #1065) with the IRS and send the partners a Schedule K
Joint Liability
Means each partner/joint venturer is individually liable for a PERCENTAGE of the debt equal to their ownership or share of business.
Severable Liability
Means each partner/joint venturer is individually liable for the ENTIRE debt should any of the other partners/joint venturers not have sufficient assets to cover their portion of the debt.
Joint and Severable Liability
Each partner is individually liable for his or hers individual proportion of the debt and is also individually liable for all of the debt should the other partners/joint venturers be unable to pay.
Corporation
A legal entity created by a state government and is considered a separate and legally recognized "person" for most laws. The corporation pays it's own taxes and is liable for it's own debts. THE MAIN ADVANTAGE OF THE CORPORATE FORM OF BUSINESS IS THE CORP
After the corporation has paid taxes on its profits, it can do the following:
Keep the profits in the business: use them to expand the business, pursue other business opportunities, or save them
Pay out the profits as salary and bonuses to employees
Pay out the profits, or a portion of them, to the shareholders as dividends
Publicly Traded Corporation
One whose stock is bought and sold on exchanges such as the New York Stock Exchange. A ready market exists for the shares. The federal government regulates these extensively.
Closely Held Corporation
One whose stock is owned by a small group of people. The stock is not for sale to the general public.
Incorporators
Person who files the required forms with the state to start a corporation. The forms include copies of the bylaws that outline how the corporation will function.
Subchapter S Corporation
Is not a special type of corporation but a federal tax status. It gives the corporation the tax advantages of a partnership but the protection of a corporation.
Professional Corporation
A corporation which the shareholders must have some type of license to operate. Individuals of professional corporations are liable for their own negligence. Under the Model Professional Corporation Supplement, an individual performing professional servic
One of the advantages of hiring a contractor for the owner instead of doing things themselves is that the contractor assumes the _______.
Liability
Disadvantage of partnership or sole proprietorship?
Owners/Partners are fully liable for personal assets.
Limited Liability Company (LLC)
Takes the tax advantage of the sole proprietorship and combines it with the limited liability of a corporation. Require filing paperwork with the state in order to be validly formed. LLC must file the same IRS Form 1065 as a general partnership and issue
If any business entity does business under any name other than its legal name, it must file a doing business as (DBA) certificate or a fictitious business name statement. This is _______?
A government document, usually filed in the office of the county recorder where the business entity is doing business. It records the name under which the entity is doing business and the legal name of the business entity. The statement will also require
Piercing the Protective Veil or Alter Ego Theory
When owners create limited liability businesses, they have to make sure they maintain the separation between their personal funds and company funds. When they start merging that line, they are essentially acting like a sole proprietorship and can be sued
There are some special laws not applicable to a private contract that may be applicable to a contract with a government agency. Some examples are:
Procurement laws and false claims laws
Affirmative action requirements
Procurement laws and false claims laws
Are designed to help the government entity obtain competitive rates for contracts, prevent corruption and favoritism, and prevent fraud in government contracting. These laws make it illegal to bribe government entities to obtain contracts. It may be illeg
Affirmative action requirements
These requirements are usually designed with the goal of making the contractor's and major subcontractors workforce mirror the population in which the contractor works and that government entity operates.
The doctrine of sovereign immuninity holds the "king could not be sued." It has been transformed by the common law into the maxim that the _______.
Government cannot be sued.
Statute of limitation
The time period after some event during which one can file a lawsuit.
The most common forms of project delivery are:
Traditional Form
Construction Management or CM
Design-build
An Agency is someone that acts on behalf of the _______.
Principal or Owner. They are an entity empowered to enter into contracts for another i.e. the Principal. Example, the Designer is an Agent for the Owner. They are looking after the owners interests and that is why they are hired.
Traditional Form (see diagram on page 97)
An owner enters into an agency with a designer to design the project and to oversee the construction. After the project is designed, the owner enters into an independent contractor relationship with the contractor to build the project.
The owner should no
Construction Management (CM) (see diagram on page 98)
Owner still hires a designer, but now they hire a Construction Manager instead of a General Contractor. The CM is an agency just like the Designer. The owner uses subcontractors as an independent contractor and pays the CM to manage the process for the ow
A person with a fiduciary duty must _______?
Always operate in the best interest of the other, not in its own best interest. The duty of GOOD FAITH exists in almost all contracts and requires the parties not to engage in acts that prevent the other party from receiving the benefit of the contract.
Design Build (see diagram on page 99)
The owner enters into one contract with one company to both design and build the project, thereby avoiding or at least minimizing conflicts between the designer and the general contractor. The design build company does it all, they enter into contracts wi
The typical contractual relationships encountered on construction projects are as follows:
Employer-employee
Principal-independent (aka general contractor)
Principal-agent
Buyer-seller-Uniform Commercial Code relationships
Employer-employee
A contractual relationship between two parties: the employer or principal hires the employee to perform tasks the employer wants completed. Two major characteristics: The employer supervises the work of the employee and the employee is not empowered to en
Principal-independent (aka general contractor)
Hiring them for something but do not control what they do. The person that you hired can not enter contracts on your behalf. There is an arms length relationship here, where both parties are expected to operate on their own best interest and it shields th
An EXCEPTION of non-liability of the principal (owner) (Bottom of page 100):
The principal (owner) is strictly liable, that is liable even if not at fault, for INJURIES CAUSED BY ABNORMALLY OR DANGEROUS ACTIVITIES contracted to an independent contractor. The independent contractor is still liable and therefore an injured party can
Principal-agent
AGENCY LAW - Term given to law covering the relationship between a principal and an agent.
PRINCIPAL - is an entity that gives power to another, called the agent, to act for the principal.
The decisions of the agent are binding on the principal, and the n
The power given to the agent can be _____, _____, or _____.
Expressed, implied, or apparent
Express power
The power specifically given to the agent in the agency contract.
Implied power
The power to do the things necessary to carry out the express powers but is not specifically outlined in the contract.
Apparent power
Is the most problematic. It is the power given to the agent by the principal's acts and is separate and apart from express or implied authority.
Principal-agent: Owner (Principal)-Construction Manager (Agent) Relationship Example
The CM is used to describe the relationship between the owner and a person hired by the owner to supervise the construction and/or to keep the owner informed of the progress of the project.
Buyer-seller-Uniform Commercial Code (UCC) relationships
The Uniform Commercial Code (UCC) or the law of sales is a set of statutes developed by experts, and it has contributed greatly to the standardization of commercial transaction law in the U.S. Contracts for GOODS incorporated into a construction project a
A Good
A piece of tangible property capable of being moved.