Disputes between business partners often center on issues of money and control. As common as business partnership are, they can be quite difficult to sustain. Partnerships between any number of people often entail complicated relationships, which lead to conflicts within partnerships. Most issues between partners do not necessarily mean that the entity should be dissolved, liquidated, and split-up.  Rather, the problems can be solved with a collaborative approach and the relationships preserved. Concerns about control...

Understanding the principal-agent relationship  is critical for all business transactions. The laws of agency govern this relationship, and they establish when an agent can bind a principal to an agreement, how far an agent’s liability extends, and what the fiduciary duties are that arise from the relationship. The Principal-Agent Relationship Generally (in terms of an “actual agency”), a principal hires an agent to act on his or her or its behalf.  The principal-agent relationship is not...

Generally, corporate shareholders cannot be held liable for the acts or debts of their corporation because liability is specifically limited to their investment in the corporation via the purchase of shares. However, a shareholder may be held personally liable if a court permits another party to “pierce the corporate veil” to avoid fraud or unfairness to as a result of circumstances where the corporation has taken advantage others of by abusing corporate protections. Because there...

A director will not be found personally liable for a breach of duty of care if he or she meets the requirements of the business judgment rule ("BJR"). Under the BJR, a court will not second guess a business decision that in hindsight turned out to be poor or erroneous if the director acted in good faith and exercised due caution. Under California law, in discharging his or her duties “a director is entitled to rely on...

Generally, a corporation’s articles may limit directors’ personal liability for money damages to a corporation or to its shareholders for actions taken or for failure to take action. However, the articles may not eliminate liability for a director’s breach of duties owed to the corporation. For example a corporation’s articles cannot eliminate liability for receiving financial benefits to which the director is not entitled, intentionally inflicting harm on the corporation or its shareholders, unlawful...

The relationship between an officer or director and a corporation gives rise to certain fiduciary obligations as a matter of law. One of the fiduciary duties that an officer or director owes the corporation is a duty of loyalty. The duty of loyalty requires every officer or director to act in good faith and with a reasonable belief that what he or she does is in the corporation’s best interest. A classic example of a...

A fiduciary relationship is about trust and confidence; it exists where one or more parties are bound to act in good faith toward and for the benefit of one or more other parties.  A fiduciary relationship is often comprised of the duties of care, loyalty, confidentiality, and obedience, i.e., fiduciary duties to the parties in the relationship. Before a person can be charged with a fiduciary obligation, he or she or it must either knowingly undertake...

Every day more companies move towards cloud computing, but recent cyber-attacks have raised questions about security and reliability. Several other legal considerations have been raised, and it is therefore important for businesses considering this path to make sure to weigh the legal factors as well as cost benefits. There are many reasons why companies are switching to cloud computing. According to the National Law Journal, some experts think that cloud computing could cut corporate IT costs by...

There are many reasons to consider selling a business, and there are just as many things to consider before and during the process. To streamline a sale, it would be helpful to be (or get) highly organized, making sure all assets are in order, the logistics of an exit strategy are in line, and all legal forms are squared away. There will be a lot to do to prepare for the sale, so the best thing to do is...

Buying a business requires a significant undertaking during which you will want to do your best to protect yourself and navigate around risks and hidden issues. This will include hefty market research, financial analysis, and of course legal advice.  Every transaction is unique, and there will be different considerations for different business types, but there are some general steps that each buyer should take when buying a business or assets. Investigate Prior to Buying a Business Once a buyer...