Agency formation and management perspectives

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Business Finance

Question Description

without the law of agency, corporations could not function at all.” Share an example not given in the textbook that proves this statement correct. Next, outline the advantages and disadvantages of the various types of agency relationships.

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Explanation & Answer

Agency law is concerned with any "principal"-"agent" relationship; a relationship in which one person has legal authority to act for another. Such relationships arise from explicit appointment, or by implication. The relationships generally associated with agency law include guardian-ward, executor or administrator- decedent, and employer-employee. An example would be, Aflac agents/ employer. The agent is responsible for going out to different business to represent their company and sell to build the company. 

General Corporation: This is the most common corporate structure. The corporation is a separate entity that is owned by stakeholders.


Ø  Owners’ personal assets are protected from business debt liability

Ø  Tax free benefits such as insurance, travel, and retirement plan deductions

Ø  Change of ownership need not affect

Ø  Easier to raise capital through sale of stocks and bonds.


Ø  More expensive to form than proprietorship

Ø  More legal formality

Ø  More state and federal rules and regulations

N_Fntr1 (21)
UC Berkeley

Awesome! Perfect study aid.

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