Limiting hidden risks
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Limiting Hidden Risks. Presented by: James L. Catanzaro, Jr. Minor, Bell & Neal, P.C. Many businesses commonly engage in practices that are, unknowingly, fraught with risk. Attention to three areas, however, can help businesses significantly reduce the impact of risk.

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Limiting Hidden Risks

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Limiting hidden risks

Limiting Hidden Risks

Presented by: James L. Catanzaro, Jr.

Minor, Bell & Neal, P.C.


Limiting hidden risks

  • Many businesses commonly engage in practices that are, unknowingly, fraught with risk. Attention to three areas, however, can help businesses significantly reduce the impact of risk.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • I.Choice of Business or Joint Venture Vehicle

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Why is legal formation with the state preferred?

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Associations of individuals or businesses operating commercial enterprises incur “partnership like” liability whether the arrangement is called a partnership or not.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • For instance, partners may be held liable personally for the contracts or acts or omissions of a “partner.”

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Under the law, where individuals or parties share net revenues, there is a good chance that a partnership will be found.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Even business entities working together, may be deemed a partnership or joint venture and be subject to vicarious liability.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Formation with the State provides for more orderly succession, liquidation or dissolution.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Use of independent contractors.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Extension of liability: Respondeat Superior

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Respondeat Superior is a legal doctrine that states an employer may be liable for the actions of an employee when the actions take place within the scope of employment.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Many businesses attempt to use independent contractors. However, independent contractor relationships can easily be converted to employment like relationships for liability purposes.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Factors in determining whether a contractor becomes an employee:

    • Control over method and manner vs. end result

    • Manner of payment

    • Otherwise treat like an employee

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Example: Toyota uses “independent contractor” mechanics. If consumers reasonably believe that these mechanics are employees, Toyota may be bound by statements or representations of or notice to such mechanics.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • III. Apparent authority.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Businesses may inadvertently “cloth” their agents (whether employees or contractors) with authority that binds them to contracts or representations (even if the employee or agent is not otherwise expressly authorized to do so).

Minor, Bell & Neal P.C.


Limiting hidden risks

  • A business that “holds out” an employee or contractor such that a third party would reasonably believe that such person had authority to engage in certain acts, is bound by the acts or statements of such employee or agent.

Minor, Bell & Neal P.C.


Limiting hidden risks

  • Holding out may include failing to make clear in questionable circumstances limitations of authority or accepting benefits of the acts or statements of such employee or agent.

Minor, Bell & Neal P.C.


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