TEXAS AGENCY OUTLINE Tips:

First Sentence: This is an agency question that arises in Contract or Tort Second Sentence: Therefore, to properly assign liability, its necessary to analyze if the Agent had Actual Athority. Third Sentence: Since there is no actual authority, its necessary to analyze whether a substitute for Actual Authority existed.

I. LIABILITY IN CONTRACT A Principal becomes liable to a 3P on K entered into by Ps Agent if: 1. P&A both consent, 2. A is subject to Ps control, and 3. P has the capacity to contract (because contracts between P & 3P; As capacity is moot).
Sixteen-year-old LeAnn Rimes appoints Mom as her agent. Mom contracts with Sony Music on LeAnns behalf. Can LeAnn disaffirm the contact? Yes, because LeAnn as an infant lacks contractual capacity. Can Mom validly appoint LeAnn as Moms agent? Yes, because agent doesnt need contractual capacity

B. Agency law requires no writing but Statute of Frauds or some other law may. 1. Equal Dignities Rule: If K itself must be in writing to be enforceable under SoF, any express authorization must also be in writing (E.g., orally telling real estate agent to negotiate for sale of land violates).
Kate hires Michael to be her agent. No writing required Kate hires Mike to be her agent for 5 years. Falls within SoF 1 year provision Gilligan authorizes Mike to convey his island to Puff. Agents authorizing to sell R.E. must be in writing in Texas. A may be paid or serve gratuitously or substitute.

C. Consideration is not required. II. ACTUAL AUTHORITY A. Creation of Actual Authority. 1. Express: P expressly tells A to act on Ps behalf (authority even if P meant to tell another A, or told A to sell wrong item).
Freud tells Regis to sell his couch. Does Regis have express actual authority to sell it? Yes, and he can do whatever is reasonable to accomplish task. Thats true even if Freud is mistaken about As identity or the subject matter of the agency.

2. Implied: Ps conduct leads A to believe A has authority.

Beavis, Buttheads employee, buys supplies fr. KMart without permission. If Beavis keeps buying from KMart & Butthead pays, is Butthead bound? Yes, it looks Beavis that B has endorsed his behavior. It is reasonable.

B. Actual authority must exist when A enters a contract, since actual authority can terminate in many ways: 1. After a specified time, a reasonable time, or a specified even occurs. 2. By a change of circumstance (e.g. subject matter is destroyedhouse burns down) 3. When A acquires an interest adverse to Ps (e.g. joining Ps competitor). 4. When A says so (remember: agency is consensual) 5. When P says so, unless the authority is coupled with an interest. a. Termination effective upon receipt by A (if mailed).
Hootie gives J-lo the power to sell his truck & says the powers irrevocable. Can Hootie revoke? Yes, because merely say it is irrevocable is not enough Hootie borrows money from J-lo & says she can sell the truck if he defaults. Can he revoke? No, because Js power to sell truck is coupled with an interest in the loan. Power of attorney given as collateral for loan or security Hootie authorizes J-lo to sell his truck for a 15% commission. Can Hootie revoke? Yes, As right to share in proceeds of sale is not considered an interest in subj matter of her agency.

6. On death, incapacity or bankruptcy unless power is irrevocable (coupled with an interest?) C. Delegation: OK if P consents (can be express or implied from circumstances). III. SUBSTITUTES FOR ACTUAL AUTHORITY

A. Apparent Authority: P leads 3P to think A has authority, though A doesnt 1. Equitable doctrine: Protects 3P who relies on Ps holding out A as agent.
Mulder tells Pamela Lee, If you want to buy my X-Files, see Scully. Mulder has never authorized Scully to sell the files. If Pamela contracts with Scully to buy them, is Mulder bound? Yes, because M created the impression on Ps that S had authority

2. Reasonable belief must be created by P (not A, unless P is silent when A asserts agency in Ps presence) *** 3. Apparent authority can linger even after actual authority is terminated, unless P tells 3P.
Butthead tells Beavis not to buy supplies at K-Mart any more. Beavis does it anyway. Does no longer has actual authority, but does have apparent authority fr. KMarts perspective. Its reasonable for KMart to think Beavis still has authority. P must tell 3P to destroy apparent authority.

B. Ratification 1. Even if A acts without actual or apparent authority, P is bound if P ratifies the act: a. By expressly affirming the contract/transaction, b. By accepting the benefit of it, or c. By suing 3P on the contract/transaction. 2. Requirements a. Knowledge: P know all material facts (cant ratify in ignorance) b. All or Nothing: P must accept entire transaction (e.g. P cant ratify the K & disavow a misreprresentation made by A). c. Capacity: P must have contractual capacity both at time of ratification & at time of original transaction (because ratification is retroactive).
A Corp promoter enters a lease on a forming-Corps behalf. Can Corp, once formed, ratify the lease? No b/c no original capacity.

3. Intervening BFP: P cannot ratify if an innocent BFP has arisen in the meantime.
Lucy, without authority, sells Desis car for $6,000. Desi, meanwhile, agrees to sell it to John for less. Can Desi ratify Lucys earlier sale? No because Bobbit did not know about the earlier sale (i.e., Bobbit is an innocent purchaser).

C. Adoption: A Pty can adopt K; not retroactive, so only liable from adoption forward; original Pty still liable unless/until novation (agmt to substitute Ptys).
Corp, once formed, can adopt the lease, because adoption is not retroactive. Promoter will not be relieved of liability though unless theres a novation; otherwise, once the corporation adopts the lease, both the corporation & the promoter are liable.

IV. RELATIONSHIP OF PARTIES A. Principal and Agent: 1. A owes P strict fiduciary duties, even if agency gratuitous: a. Duty of Loyalty (Must disclose material facts & get permission b/f competing) b. Duty of Care (Sliding scale: depends on any special skills A may have) c. Duty of Obedience (Must follow Ps reasonable instructions). 2. P must compensate (unless gratuitous), reimburse & indemnify A 3. Broad range of remedies (e.g. contract, tort, constructive trust) 4. On exam, always use agency terminology: Constructive Trust imposed on X fr. his breach of Duty/Loyalty
Beavis buys goods from Bozo & gets a $1,000 kickback. Of course, Butthead can get the $1,000, but dont say it that way! Use agency terminology to impress the examiners: Butthead can have a ___imposed on Beavis profit from his ___.

B. Principal and 3P (assuming actual authority or a substitute for it): 1. Principal: Always liable to 3P 2. Third Pty: Liable to P, unless 1) 3P doesnt know P exists (undisclosed P), and 2) A has a special skill/reputation (result: 3P almost always liable to P).
Madonna hired Julia Child to cater her wedding. In fact, Julia was acting on behalf of Peg Bundy. Madonna had no idea! Does Peg have nay rights against Madonna? No. Peg was undisclosed & Madona wanted Julia.

C. Agent and 3P (remember: A is just an intermediary) 1. 3P not liable to A unless As power of agency is coupled with an interest (A has her very own interest)

2. A is not liable to 3P unless: a. 3P doesnt know who P is (so 3P doesnt have anyone else to sue); or b. A misrepresented her authority
Bea contracts with Helen on behalf of Opie and Goober as disclosed Ps. Unknown to Aunt Bea, Opie is underage. Goober breaches. Is Aunt Bea liable to Helen? Goober was disclosed, so he is Opie lacked capacity, so Aunt Beas liable to Helen for

V. LIABILITY IN TORT (vicarious liability to protect innocent 3P) A. Negligence: If Servants tort was committed while acting w/i scope of employment, Master & Servent J&S liable B. Is tortfeasor servant(s) or independent contractor (I/C)? More likely Servant if: *** 1. Employer has the right to control how the jobs done, even if not exercised; 2. Employer supplies the tools and workplace; 3. Employment is long-term; 4. Little skill is required; 5. The work is part of the regular business of the employer; and 6. Payment is made in regular intervals, not by the job.
I accidently knock over podium & injure Aggie down front. If BarBri liable? No. Im an I/C; no control, already employed; Foleys hires Lucy to demonstrate cosmetics at store on weekends for 3 months for $2,000. Lucy jabs Trixie in the eye with an eyebrow pencil while chatting with Ethel. If Foleys liable? At Foleys, not much skill, but job short-term & paid in lump sum. Prbably a servant b/c done in scope.

C. Scope of Employment: Master is only liable if Servant was acting within the scope of employment. 1. Usual Task: If Servant was doing what Servant was hired to do, the tort was within the scope.

2. Deviation: If S was deviating from normal tasks, how substantial was the deviation? a. Detour: A minor deviation is usually within scope. b. Frolic: A substantial deviation is usually outside scope.
Sue, an Arco truck driver, goes to a pub 9 blocks off her route (way off track) for a beer. On the way back, she hits Roseanne. Sue finishes by 5:00, the usual stopping time. Is Arco liable to Roseanne? Sue was on a frolic, so it looks like Arco not liable. But when the accident occurred, Sue was returning to her route & she finished on time, so maybe Arco should be liable. In a close case,

D. Intentional torts: They are considered outside scope of employment unless: 1. Force is used to further Masters business (e.g. bouncer); 2. Master ratifies the use of force (nice job); or 3. Master authorized S to commit an intentional tort (e.g., a misrepresentation). E. Liability: M & S J&S liable to 3P, i.e., 3P can sue either S, M or both, but entitled to only 1 total satisfaction
If Sue was acting within scope of employment, whos liable to Roseanne? Both. If Roseanne sues Arco, does Arco have any rights against Sue? Yes, Arco can sue Sue for indemnification. If Roseanne releases Sue from liability, will Arco also be released? No (TX unique on this). Fred borrows Barneys full-time gardener. While working in Freds yard, the gardener negligently injures a passerby. Whos liable: Barney (the original M) or Fred (the borrower M)? Borrowed Servant Doctrine: Fred is liable if Fred had right to control gardener when accident occurred. Right to Control is the most important in tort case.

F. Direct Liability: Master may be liable for Ms own negligence if M fails to train or supervise EEs or fails to check an EEs criminal record or job history.
Dominos hired Dennis the Menace as a driver without checking his driving record. Dennis had 2 prior DWIs. Drunk on a frolic, Dennis hits Mr. Wilson. Is Dominos liable? On what theory? Dominos is not vicariously liable for Dennis negligence because he was on frolic, but Dominos is liable for its own negligence because it didnt check Dennis driving record.

TEXAS GENERAL PARTNERSHIPS

Note: TBOC governs business organizations formed after 1/1/06; [TRUPA governs orgs formed prior 1/1/06] I. FORMATION A. Partnership: An association of 2 or more persons to carry on as co-owners a business for profit, regardless of whether they intend to or not. B. To determine who is a partner, look to the following factors: 1. Intent: But court may find involuntary PS to protect 3Ps. 2. Control: Right to control may be enough, even if not exercised (i.e., owners have right to control operations) 3. Capital Contribution: Not required to be a partner, but relevant. 4. Sharing Profits: Does not create a presumption of PS, just one factor.
Rob Camilettis bakery owes Pillsbury money, but Rob & firm insolvent. Pillsbury claims Robs sweetie, Cher, is a partner because she received 20% of the profits. True? No; only one factor. What if Cher is getting profits as wages, rent, repayment of a debt, or interest on a loan? These arent even factors. What if Cher were getting 20% of the gross receipts, not profits? Not a factor either.

B. General contract principles apply since a PS is a contract among partners. C. No writing required by PS law, but may be required by Statute of Frauds.
Ice T & Ice Cube form PS to record 2 rap albums. Is writing required? No. What if they agreed PS was to last 2 years? Need writing.

D. Joint Venture: Ttreated like a PS, but requires express agreement on how losses will be shared. F. Estoppel: If no PS has been formed, parties may still be liable as if theyre partners in order to protect Rsbl reliance by 3Ps (only liable as partners if they held out to that specific 3P; usually a creditor).
Grace applies to Bank One for a loan. Will lets her say hes her partner, even though hes not. Is Will liable to Bank One if it loans money to Grace based on the statement? Yes. Can Bank One recover from Grace? Can Graces other creditor recover from Will based on the statement?

II. PROPERTY INTERESTS A. Rules for Determining Partnership Property 1. Acquired in PSs Name: This is PS property. 2. PS Funds: Property acquired with PS funds is presumed to be PS property. 3. Transaction Mentions PS: Property acquired in partners name is PS property if the instrument transferring title indicates its being acquired for a PS (i.e., PS mentioned) 4. No PS Funds: Property acquired in a Partners name without PS funds is presumed to belong to the partner personally if the instrument transferring title doesnt indicate the ppty is being acquired for PS.
AB Partners acquired truck in As name. A paid for truck w/ own money. Partners pays insurance & use it for deliveries. . PS property? No, under #4.

*** B. Rights in Partnership Property 1. PSs Rights in PS property are unrestricted.

Can the PS pledge its interest in the truck as collateral for a loan? Yes. Can a judgment creditor of PS attach PSs interest in the truck? Yes.

2. A Partners Rights: Only right in PS property is right to use it for PS purposes, unless other Partners consent. This right is not transfereable.
Assume the truck is PS property. Can A use it on her vacation? No, unless B consents. A doesnt own truck, PS does.

3. A partner has no rights in PS property that can be transferred [b/c we dont want outsiders interfering with PS property].
If the truck is PS property, can A pledge it as collateral for a personal loan? Can As judgment creditor attach (charge) her interest in it? If A dies, does As husband acquire any rights in it? No to all. They all allow outsides interference w/ PS affairs; not allowed.

*** C. A Partners Interest in the Partnership Itself 1. A Partners interest is a right to receive profits a. Fully transferable, so right passes to heir/devisee on Partners death; can assign interest too. b. Transferee does not become a Partner or acquire management rights, only right to profits c. Transferor retains all other rights and obligations of being a Partner. d. Community Property: Partners interest subject to Community property law (its personal property) [TRUPA: Also has a charging order, which lets a partners judgment creditor attach her interest]. III. RELATIONS AMONG PARTNERS A. PS agreement controls; Statutes apply where there is no agreement B. Sharing profits & losses: Profits & losses are shared equally regardless of capital contributions; Ptys can agree to share profits & losses differently, but if they dont, whatever they decide for profits will apply to losses. C. 3Ps: Partners cant limit right of 3Ps w/o 3Ps consent, so cant say one Partner wont be liable to 3P even if Partners agree one Partner wont bear any losses. C. Compensation: Not entitled even if a partner runs day-to-day operations. D. Management rights conflicting under TX law: says both that: Partners have equal rights & matters of ordinary business are decided by a majority in interst.
Rachel gets 60% of the profits; Monica & Phoebe get 20% each. Rachel votes against selling goods to Frasier; Monica & Phoebe vote in favor. What result?

E. Indemnification and Interest: If a Partner pays out on a PS debt, she gets reimbursed w/ interest. F. Partners owe fiduciary duties to PS: Partners cannot eliminate these duties but may determine standard to be applied so long as std not manifestly unreasonable (fiduciary duties same as Corps): 1. Duty of care: Ordinarily prudent person in similar circumstances. 2. Duty of Loyalty: (e.g. cant take advantage of PS opportunity). 3. Duty to exercise GF 4. Disclosure: Partner must render full information about the PS on request to extent Rsbl. H. Admission of New Partners: Requires unanimous consent.
Rachel & Monica want to admit Dharma as a partner. Phoebe objects. Result? If Dharma is admitted, is she liable for debts incurred by RPM before she was admitted?

IV. RELATIONS BETWEEN PARTNERS & THIRD PARTIES A. APPLY AGENCY PRINCIPLES [partnership is P, partner is A]. 1. Actual Authority may be conferred by: a. PS agreement, b. Majority vote of the partners (e.g. 3-2); or c. Statute: Every partner is an A of the PS for carrying out business as usual (but can be negated by partners). 2. Apparent Authority may be created by: a. Partners title, b. PSs prior conduct, or c. Conduct of similar firms in the area.
Ally knows Monica is RPMs managing partner & has signed contracts for RPM before. Rachel & Phoebe forbid Monica to sign new contracts, but she signs one anyway. Monica have apparent authority? Yes! Look fr. Allys perspective: She knew Monica was managing partner & had done this before, so its reasonable for Ally to think Monica is authorized to do it again.

3. No authority: Look for Ratification or Adoption 4. Conveyance of real property without Authority: PS can get the ppty back from the initial Transferee (who

should have checked), but not from a subsequent BFP (no reason to check).
Southfork is PS property. Partner JR conveys Southfork to W without authority. Can the PS get the property back from W? If W had transferred Southfork to Eminem, could the PS get Southfork back from Eminem?

5. Torts: Partners are owners, so all that matters is whether the tort was committed w/i the ordinary course of the PSs business. * B. Liability for PS obligations 1. PS itself is liable: Suing Pty MUST try to recover from the PS first before suing individual Partner, even if an individual Partner, while in scope of ordinary business, injured a 3P. 2. Partners are J&S liable (right to receive indemnification from PS & right to contribution fr. other Partners.
RPM breaches its contract with Ally. Can Ally recover her damages from Rachel individually? Must Ally try to recover from the PS first? Rachel has the right to be ____ by the PS and the right to ____ from the other partners for their share of the obligation.

C. Notice to a partner is generally imputed to the PS. VI. WITHDRAWAL OF A PARTNER (where a partner bows out) * A. Event of withdrawal (occurs upon: 1. Notice of a Partners express will to withdraw; 2. Occurrence of an agreed-upon event (e.g. a partner turns 65); 3. Partners expulsion, death, bankruptcy, or incapacity; 4. Appointment of a trustee, receiver, or liquidator for a Partner; 5. Termination of a partner that is a business entity (like death); or 6. Redemption by the PS of a transferees interest in the PS. B. Effect: PS just buys out withdrawing partner for fair value & continues on without her. C. Withdrawing Partner liable: 1. To existing creditors unless released by that creditor (expressly or impliedly). 2. For 2 years to Subsequent Creditors who Rsbly believed she was still partner
Six mos after Phoebe withdraws, Rachel contracts for RPM w/ Niles. Is Phoebe liable? But Phoebe could have protected herself by

3. To other Partners if withdrawal was wrongful a. Only wrongful when breached express PS agmt, or implied agmt where PS formed to accomplish a particular undertaking (PS has built-in ending); most PSs are at will & Partner can w/draw any time * D. Apparent authority continues for 1 year to 3Ps after withdrawl if 3P unaware of w/drawl. 1. Notice: PS can protect itself by notifying potential creditors of the withdrawal 2. Indemnification: PS can seek indemnification from withdrawn Partner since he had no actual authority. VII. WINDING UP A PARTNERSHIP A. Only certain events require a PS to be wound up: 1. Event that makes a PSs business illegal, 2. Sale of all PS assets outside the usual course of business, 3. Entry of a judicial decree requiring winding up of the PS, & 4. PS w/ a built-in Ending: 0 a. The ending occurs (term is up), or 0 b. Partners unanimously consent (like recission), 5. PS at will:

0 a. Agreement of a majority-in-interest (per profit sharing) of partners who have not assigned their PS
interests, 1 b. Request to wind up from any partner, unless a majority-in-interest agree to continue.
If Phoebe requests winding up, is that curtains for RPM? NoPS at will can continue as long as majority-in-interest desire. What is Rachel & Monica continue RPMs business w/o express agreement? Prima Facie evidence of an agmt to continue.

B. Right to Wind Up: Any Partner who hasnt wrongfully withdrawn may wind up. * C. Apparent Authority: Any Partner may continue to have apparent authority to bind the PS. D. Distribution of PS Assets on Winding Up 1. First to creditors (including Partners who are creditors) 2. Second, to Partners for what is in their capital accounts 3. Third, to Partners equally or per their profit sharing agmt. E. PS Assets Insufficient to Cover Liabilities: Paid out pro rata (if have $30K & owe 2 creditors $40K & $20K, they get $22K & 11Kone gets twice as much as other b/c PS owes one twice as much as the other).
What if RPM had only$33,000 in assets when it was wound up? 33K split between N Sync (22K) & Rachel (11K) pro rata

F. Creditors rights (per other law, like federal bankruptcy code): 1. If a Partners separate creditors & PSs creditors assert claims against PS assets, PS creditors have priority 2. But if both sets of creditors assert claims agains a Partners separate assets, those claims have equal priority. LIMITED LIABILITY PARTNERSHIPS (LLPs) I. LIABILITY A. LLPs are exactly like a PS except Partners in an LLP have almost no Vicarious Liability. B. Broad Shield: A Partner is not liable for any obligations of the LLP 1. Exceptions: Partner liable for his own torts/malpractice, and for tort committed by someone else if the Partner: a. Was directly involved in activity, b. Was supervising tortfeasor, or c. Had notice or knowledge of the tort & did nothing to prevent it. C. LLP itself is vicariously liable for torts committed w/i the scope of its business & contracts executed by an Agent with actual authority or a substitute for it.
Rachel, Phoebe & Monica graduate from law school & form an LLP. Phoebe commits malpractice (tort) defending Bill in a paternity suit. Who is liable to Bill? Pheobe liable for her own malpractice. Rachel & Monica are not liable unless w/i the exception. LLP is liable b/c w/i ordinary course of business. Phoebe, acting with authority, contracts for the LLP with Bill. Only LLP liable.

0 II. FORMATION A. Registration: Must register/renew annually with SS& pay annual $200/partner, B. Name: Must include words [Registered] Limited Liability Partnership or initials LLP in its name, and C. Insurance: Carry at least $100,000 in liability insurance or segregate $100,000 in funds (to protect 3Ps). LIMITED PARTNERSHIPS (LPs) I. NATURE AND FORMATION A. LP: PS with 1 or more Gen. Partners (generally liable) & 1 or more Ltd partners (liability ltd to their investment B. Formalities: Must file certificate of formation (certificate of LP) with SS & pay fee C. Writing: Must have a written PS Agreement C. Name: Must include the words limited partnership or initials L.P. in name.

D. Law: General PS law governs except where L.P. statute is inconsistent. II. LIABILITY OF LIMITED PARTNERS *A. General rule: Liability of ltd partner limited to her capital contribution (can only lose their capital contribution)
Ken forms an L.P. to run a club. Linda invests $50K as a ltd partner. Club flops; all its $$ is gone, including Linda. Is Linda personally liable for the L.P.s debts? No, liability capped at capital contribution.

1. Exception: When limited partner takes part in control of LP businesses. Statute doesnt define control, but it provides certain safe harbors. a. Safe harbors are not narrow: Ltd. Partner can be employed by LP, advise GP & guarantee a LP note. B. Scope of Liability for Participating in Control: Reliance Test: If 3P relies on apparent GP status (e.g., Ltd. Partner signs a bank loan on the LPs behalf which leads bank to believe shes a GP, i.e., they relied). C. Liability if No Certificate is filed: 1. Consequence: All partners are J&S laible, 2. Avoidance: Ltd. Partner can avoid future liability by filing a certificate or withdrawing & notifying SS w/i Rsbl time after Partner discovers no certificate had been filed. III. RIGHTS & OBLIGATIONS OF LIMITED PARTNERS A. Promise to Contribute: Enforceable by LP or a creditor wh relied only if it is in a signed writing. B. Withdrawl: Only if LP agmt permits [TRLPA: Can also withdraw by giving 6 months notice to each GP] IV. RIGHTS & OBLIGATIONS OF GENERAL PARTNERS A. GPs are personally liable the LPs obligations. B. GP can limit his exposure to personal liability if GP registers his LP as an LLP creating a Limited Liability Limited Partnership (LLLP), shielding GPs from liability in the same way an LLP does. C. Formula: LP (shields Ltd Partners) + LLP (shields GPs) = LLLP D. Obviously, then, LPs only exist today on the bar exam :-).
Ken wants to avoid personal liability. Can he make Newt, whos broke, the sole general partner? Yes. L.P. not required to have any assets. Can Ken form a corporation & make the corporation the sole general partner? Yes. Drawback? Newt or corp will be in control

V. DISTRIBUTION OF ASSETS ON WINDING UP: A. First to creditors (including Partners who are creditors) B. Second, to Ltd. Partners for capital contributions C. Third, per their profit sharing agmt (which, of course, is in writing b/c required).
The L.P. has $3 million & owes $300,000 to 3d party creditors. Limited partners put up $1 million. Linda, a limited partner, also loaned the L.P. $500,000. How will the assets be distributed on winding up? First to creditors, including partner creditors 300K to Cr 500K to Linda on loan 2nd; to partners for capital 1mm each 3rd: to partners for profits balance split among partners according to partnership agreement

LIMITED LIABILITY COMPANIES (LLCs) I. ADVANTAGES: BEST OF BOTH CORPORATE & PARTNERSHIP FORMS A. Members get limited liability, like shareholders in a corporation. B. Pass-through tax treatment-like a PS, if you just check the box.

II. FORMATION: LIKE A CORPORATION A. Filing: Must file articles of organization (AO), have registered office, etc. B. Name: Name must contain words limited liability company or initials LLC C. Professionals: Can form PLLC; All members & managers must be licensed to render professional svcs, but not necessarily in Texas. D. Management: Can be structured like a Corp or a PS, but managers run LLC unless certificate provides otherwise. E. Taxation: Pass-through like a PS unless it chooses otherwise. F. Profits/Losses: Split in proportion to capital contributions, unless agmt provides otherwise. III. LIABILITY A. Members: Have limited liability, except their own torts. B. LLC: Vicariously liable on contracts & torts under agency principles (just like LLP really) Vicarious Liability in Unincorporated Texas Business Associations: A Comparison Business Form PS (general PS) LLP LP LLC Vicarious Liability of Partners/Members J&S Contract: None; Tort: None (unless supervising, etc.) None for Ltd. partners (unless control); J&S for GPs None Comment Worst aspect of GP Safe fr. most torts & LLP Ks Tit for tat for ltd partners Like a corporation

REMEMBER: A partner or member is always liable for his or her own malpractice & The firm itself is always liable if the act was within the scope of its business. Can convert fr. one form of business assn to another or merge one into another by new filing & partner approval.