BUSINESS ASSOCIATIONS — BAR ONE-SHEET (ELEMENTS & MNEMONICS)
Lean issue-spotting checklist — elements and mnemonics only. Pair with the full Business Associations Master Outline for depth, then practice timed essays with AI feedback at BarExamNextGen.
KEY PRINCIPLE #1 — AGENCY: FORMATION & AUTHORITY
Agency = (1) Assent, (2) Benefit, (3) Control — principal manifests, agent acts on P's behalf, subject to P's control. No consideration needed; no capacity needed for agent.
Authority types — "AAIR + Estoppel/Ratification":
- Actual Express — P's words to agent.
- Actual Implied — reasonably necessary to carry out express; custom; prior dealings.
- Apparent — P holds out agent to a 3d party who reasonably relies. Lingering apparent authority survives termination until 3d party notified.
- Ratification — P (1) knows material facts, (2) accepts benefits/affirms, (3) had capacity at act + ratification. Acts retroactively; can't ratify partially.
Contract liability: Disclosed P → P bound, agent not. Partially disclosed/undisclosed → BOTH P and agent liable.
Tort liability — respondeat superior: employer liable for employee torts in scope of employment. Frolic (own purpose, no liability) vs. Detour (minor deviation, liable). Independent contractors → no vicarious liability EXCEPT: inherently dangerous, non-delegable duty, estoppel.
Agent duties to P: Care, Loyalty, Obedience (+ duty to account).
KEY PRINCIPLE #2 — PARTNERSHIP: FORMATION & LIABILITY
GP = association of 2+ persons to carry on as co-owners a business for profit. No writing, no intent to "form partnership" needed.
Sharing of PROFITS = presumption of partnership — rebutted if payment for: debt, wages, rent, annuity, interest, sale of goodwill. Sharing gross receipts alone ≠ partnership.
- Partnership by estoppel — represent self/consent to be held out as partner → liable to relying 3d party.
- Each partner is agent of partnership for apparently-carrying-on-business acts.
Liability: Partners jointly and severally liable for all obligations. Incoming partner: NOT personally liable for pre-admission debts (only capital contribution at risk). Outgoing partner: liable for pre-dissociation debts + acts within 2 years unless notice given.
LLP: file statement; partners shielded from partnership obligations (still liable for own torts).
KEY PRINCIPLE #3 — PARTNERSHIP: FIDUCIARY DUTIES & PROPERTY
Partner duties (RUPA) — "Loyalty + Care + Good Faith":
- Loyalty — account for profits, no adverse interest, no competing. (Narrow under RUPA; only these three.)
- Care — refrain from gross negligence, recklessness, intentional/knowing violations.
- Good faith & fair dealing.
Voting: ordinary business = majority; extraordinary = unanimous. Equal profits/losses (losses follow profits) absent agreement.
Property — RUPA test: titled in partnership name OR bought with partnership funds = partnership property. Partner has NO transferable interest in specific property; can transfer only their economic interest (share of profits).
KEY PRINCIPLE #4 — DISSOCIATION & DISSOLUTION
Dissociation ≠ automatic dissolution. At-will: any partner can dissociate, triggers wind-up unless continued. Term partnership: dissolves only if within 90 days a majority of remaining partners agree to wind up.
Winding-up payment priority — "Creditors, then Capital, then Profits":
- (1) Outside creditors + partner-creditors;
- (2) return capital contributions;
- (3) distribute surplus as profits.
KEY PRINCIPLE #5 — CORPORATIONS: FORMATION & PRE-INCORPORATION
De jure — file Articles (name, agent, shares, incorporator) + appoint directors. Existence on filing.
- De facto — good-faith colorable attempt + exercise of corporate powers; treated as corp vs. all but state.
- Corp by estoppel — one who deals as if corp estopped to deny it (contract only).
Promoter personally liable on pre-incorp contracts until novation; corp not liable until it adopts. Promoter owes fiduciary duty (no secret profit). Ultra vires acts now generally valid; remedies limited (shareholder injunction, state action, suit vs. director).
KEY PRINCIPLE #6 — DIRECTORS: BJR & DUTY OF CARE
Business Judgment Rule — presumes director acted (1) in good faith, (2) informed basis, (3) honest belief in corp's best interest. No liability for honest, informed decisions even if wrong.
Duty of Care — act as ordinarily prudent person; reasonable inquiry; reliance on experts/reports OK. Breach (gross negligence) overcomes BJR.
KEY PRINCIPLE #7 — DUTY OF LOYALTY
Loyalty issues — "Self-dealing, Usurping, Competing":
- Self-dealing / interested transaction — upheld if: (1) disclosure + disinterested director approval, OR (2) disclosure + shareholder approval, OR (3) entirely fair (fair price + fair dealing).
- Corporate opportunity — director can't take opp in corp's line of business / that corp has interest-expectancy in, without first offering it. Test: interest-or-expectancy + line of business.
- Competing with the corporation.
KEY PRINCIPLE #8 — PIERCING THE CORPORATE VEIL
Pierce when — "Alter ego + Injustice":
- Undercapitalization, commingling of funds, failure to follow formalities, alter-ego/instrumentality; AND
- used to perpetrate fraud or injustice / avoid obligation.
Easier in tort (involuntary creditor) than contract. Deep Rock: equitable subordination of insider claims.
KEY PRINCIPLE #9 — DERIVATIVE SUITS & SHAREHOLDER RIGHTS
Derivative (corp's claim) requirements — "Standing, Demand, Adequacy":
- Contemporaneous ownership (own at time of wrong + through suit);
- Demand on board (MBCA: universal demand + 90-day wait, unless irreparable injury);
- Adequate representation. Recovery goes to corporation.
Direct suit = shareholder's own injury (e.g., denial of voting/dividend). Shareholders: inspection rights (proper purpose), preemptive rights only if granted, voting (proxies, voting trusts, pooling agreements). Controlling shareholders owe fiduciary duty to minority.
KEY PRINCIPLE #10 — FUNDAMENTAL CHANGES & MERGERS
Fundamental changes (merger, sale of substantially all assets, dissolution, charter amendment) — "BSAD": Board resolution → Shareholder notice → Approve (majority of outstanding) → Dissenters."
- Appraisal/dissenters' rights — dissent, demand fair value in cash. Exception: short-form merger (90%+ parent-sub, no sub-shareholder vote); "market-out" for publicly traded.
- Successor liability follows in merger.
KEY PRINCIPLE #11 — LLCs
- Hybrid — limited liability + pass-through. Formed by filing Articles of Organization.
- Member-managed (default) vs. manager-managed; managers/members owe care + loyalty.
- Members NOT personally liable for LLC obligations (veil can be pierced like corp).
- Operating agreement controls; default = profits/management often per capita or by contribution (check jurisdiction).
- Dissociation generally does NOT cause dissolution under modern acts.
★ ONE-LINE ATTACK ORDER
Identify the entity (agency → partnership → corporation → LLC) → for agency, run authority (express/implied/apparent/ratification) then P/agent contract + tort liability; for partnership, test formation (profit-sharing), liability (joint & several, incoming/outgoing), fiduciary duties, then dissolution priority; for corporations, run formation/promoter, then duty of care/BJR → duty of loyalty (self-dealing, opportunity) → veil piercing → derivative vs. direct standing/demand → fundamental change procedure + appraisal; finish with LLC limited liability and management default.