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OK, let's let's be honest. 
If you're a law student staring 

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down business associations, you 
know, terms like limited 

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00:00:07,680 --> 00:00:10,120
liability, piercing, the 
corporate veil, all the 

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different entity types. 
It can feel like, well, like 

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00:00:13,760 --> 00:00:16,239
trying to build a skyscraper 
blindfolded sometimes. 

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00:00:16,239 --> 00:00:18,200
Oh, absolutely. 
It's that classic law school 

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fire hose moment, isn't it? 
Totally. 

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00:00:20,560 --> 00:00:23,440
And, you know, these concepts 
are just critical for the exam, 

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00:00:23,440 --> 00:00:26,360
but cutting through all that 
noise to figure out what really 

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matters, that is the challenge. 
It really is. 

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Students often get caught in the
weeds, you know, memorizing all 

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the exceptions before they even 
really grasp the core rules and 

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the real test. 
What makes his stuff tough, but 

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also honestly pretty 
fascinating, is understanding 

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why the rules are there, how 
they fit together, and 

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importantly, where those lines 
get blurry. 

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Exactly, and that's really our 
mission here in this deep dive. 

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You shared some fantastic source
materials with us. 

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Articles, notes even that that 
really relatable Reddit thread 

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grappling with these exact 
issues. 

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00:00:58,240 --> 00:01:00,240
Yeah, that was a good one. 
So we're going to take all of 

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that, try to distill it down, 
clarify the must know rules, the

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key distinctions, and really 
highlight the connections you 

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absolutely need to get for exam 
success. 

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Think of it like building that 
skyscraper, maybe one floor at a

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time, but making sure each floor
is solid. 

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Using those sources as our 
blueprint. 

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We should probably just jump 
right into the foundational 

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stuff. 
OK, sounds good. 

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Let's start with what feels like
the, I guess, the promised land 

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for business owners limited 
liability. 

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This is the baseline, right? 
The default for corporations and

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LLCS. 
That's the one. 

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It's the starting point. 
And the core idea here, which is

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like a massive shift from older 
business forms, is that the 

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owners, shareholders and 
corporation members in an LLC, 

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00:01:43,840 --> 00:01:46,400
they're generally shielded. 
Shielded from what exactly? 

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00:01:46,400 --> 00:01:48,800
For personal responsibility for 
the business's debt. 

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00:01:48,800 --> 00:01:52,320
So contractual debts, tort, 
liabilities of the business 

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itself. 
So OK, the business signs a 

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lease, can't pay, or maybe it 
gets sued for negligence. 

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The creditors? 
They can't usually come after 

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the owner's personal bank 
account or their house. 

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00:02:01,800 --> 00:02:06,280
Precisely. 
Your risk generally is capped at

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00:02:06,280 --> 00:02:07,800
whatever you've invested in the 
company. 

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00:02:08,240 --> 00:02:11,520
The law treats the entity as a 
separate legal person. 

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00:02:11,680 --> 00:02:14,600
OK. 
But this is a critical 

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distinction Pops up right away 
in your sources, especially 

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00:02:18,160 --> 00:02:21,040
there too that Reddit 
discussion. 

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00:02:21,160 --> 00:02:24,480
Limited liability for the 
business's debts doesn't mean 

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limited liability for the 
owner's own wrongdoing. 

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00:02:27,920 --> 00:02:30,000
Right, That example someone 
mentioned, the shareholder who 

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punches A pedestrian corporation
probably isn't liable for the 

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00:02:33,160 --> 00:02:35,200
punch, right? 
But the shareholder definitely 

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00:02:35,200 --> 00:02:37,120
is personally because they threw
the punch. 

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It's their own tort. 
Grim example, but yeah, it makes

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a point. 
Clearly the corporate shield 

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isn't for your own personal 
misbehavior outside the business

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context. 
Makes sense now, while limited 

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liability is the general rule 
for Core and LLC's, it's it's 

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not bulletproof. 
And this brings us to probably 

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one of the most heavily tested 
and frankly trickiest exception.

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Piercing the corporate veil. 
Just the name sounds dramatic. 

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00:02:59,520 --> 00:03:03,840
It is pretty dramatic piercing 
the corporate veil or PCV. 

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That's the court's power to 
essentially say, OK, we see the 

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corporate structure, but in this
specific situation, we're going 

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to ignore it. 
And they hold the shareholders 

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00:03:15,280 --> 00:03:19,640
of the owners personally liable 
for the business's debts, just 

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00:03:19,640 --> 00:03:22,240
as if that limited liability 
shield wasn't even there. 

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00:03:22,240 --> 00:03:24,720
So the court is basically 
pulling back the curtains saying

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Nope, this time you're 
responsible. 

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Exactly. 
Pulling back the curtains, a 

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good way to put it. 
Now, a really crucial point from

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your sources is that PCV is 
governed by state law here in 

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the US, OK? 
And while there isn't one single

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00:03:37,160 --> 00:03:40,040
perfectly consistent test 
everywhere, you definitely see 

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00:03:40,040 --> 00:03:42,800
common themes, common factors 
that courts look at. 

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00:03:42,920 --> 00:03:46,440
It's very much a factors test, 
not a simple checkbox exercise. 

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00:03:46,560 --> 00:03:48,560
OK, let's dig into those factors
then. 

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What kind of things make a court
even consider piercing? 

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00:03:51,360 --> 00:03:55,160
Well, a huge red flag is fraud. 
Using the corporate form 

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specifically to commit fraud or 
some other, you know, 

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00:03:57,480 --> 00:04:00,360
fundamental injustice. 
If the company was basically set

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00:04:00,360 --> 00:04:04,080
up or uses a sham just to cheat 
people, that weighs really 

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00:04:04,080 --> 00:04:08,120
heavily towards piercing. 
OK, so intentional fraud using 

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00:04:08,120 --> 00:04:10,000
the company structure is factor 
one. 

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00:04:10,440 --> 00:04:12,840
What else? 
Another big area often talked 

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00:04:12,840 --> 00:04:16,320
about under the hitting alter 
ego is where there's a serious 

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00:04:16,320 --> 00:04:18,839
lack of corporate formalities. 
Like what? 

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00:04:19,360 --> 00:04:24,400
Like mixing personal and 
business funds, commingling or 

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00:04:24,400 --> 00:04:26,520
maybe never holding board 
meetings, not keeping any 

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00:04:26,520 --> 00:04:29,800
records, basically treating the 
company bank account like your 

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00:04:29,800 --> 00:04:31,080
personal Piggy Bank. 
Right. 

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00:04:31,080 --> 00:04:32,920
Like paying your personal 
mortgage out of the company 

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00:04:32,920 --> 00:04:35,600
account or something. 
Exactly that Bob and ABC Corp 

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00:04:35,600 --> 00:04:39,240
example from the Reddit thread. 
That's spot on. 

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00:04:40,280 --> 00:04:44,720
If Bob is the only owner, he's 
the CEO, the board, everything. 

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00:04:44,720 --> 00:04:47,760
No other employees use the 
company money for personal 

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00:04:47,760 --> 00:04:49,800
stuff. 
Never writes anything down. 

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00:04:50,360 --> 00:04:52,760
A court might just say, look, 
Bob and ABC court are 

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00:04:52,760 --> 00:04:54,880
effectively the same entity. 
They're his alter ego. 

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00:04:54,880 --> 00:04:56,480
OK, but what about just being 
sloppy? 

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00:04:56,480 --> 00:04:58,240
Like forgetting to hold the 
annual meeting. 

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00:04:58,680 --> 00:05:01,200
That's a really important nuance
for exams. 

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00:05:01,480 --> 00:05:03,760
The source is generally 
emphasized that just lacking 

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00:05:03,760 --> 00:05:06,880
formalities like missing some 
minutes usually isn't enough on 

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00:05:06,880 --> 00:05:08,680
its own. 
It typically needs to be 

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00:05:08,680 --> 00:05:12,320
combined with other things like 
that commingling of funds or the

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00:05:12,320 --> 00:05:16,240
fraud element or maybe serious 
undercapitalization. 

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00:05:16,640 --> 00:05:21,680
So forgetting minutes may be OK.
Forgetting minutes and paying 

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00:05:21,680 --> 00:05:23,640
for your vacation with the 
company card? 

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00:05:24,080 --> 00:05:25,760
Much riskier. 
Much riskier, yeah. 

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00:05:25,920 --> 00:05:28,240
You mentioned under 
capitalization, what's that? 

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00:05:28,240 --> 00:05:29,840
Right. 
Under capitalization, yeah. 

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00:05:30,000 --> 00:05:32,440
That just means the business 
wasn't set up with enough money 

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00:05:32,440 --> 00:05:36,320
in the 1st place to reasonably 
cover its likely debts or 

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00:05:36,320 --> 00:05:38,480
potential liabilities from its 
operations. 

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00:05:39,000 --> 00:05:41,400
It's another factor courts might
throw into the mix. 

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00:05:41,600 --> 00:05:44,920
And does it matter who is trying
to Pierce The Veil? 

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00:05:45,040 --> 00:05:47,160
Like does the type of creditor 
make a difference? 

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00:05:47,160 --> 00:05:49,480
It often does, yeah. 
You'll hear it said that 

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00:05:49,480 --> 00:05:53,200
piercing is maybe more likely in
tort cases compared to contract 

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00:05:53,200 --> 00:05:54,280
cases. 
Why is that? 

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00:05:54,520 --> 00:05:57,080
Well, the thinking is tort 
creditors are usually 

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00:05:57,080 --> 00:05:59,440
involuntary. 
They didn't choose to interact 

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00:05:59,440 --> 00:06:01,480
with the company, they got hit 
by the company truck, for 

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00:06:01,480 --> 00:06:03,560
example. 
Contract creditors, on the other

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00:06:03,560 --> 00:06:06,720
hand, they voluntarily chose to 
do business with the company. 

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00:06:07,360 --> 00:06:11,360
They had a chance, arguably, to 
check the company's finances, 

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00:06:11,680 --> 00:06:14,200
maybe ask for a personal 
guarantee from the owner if they

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00:06:14,200 --> 00:06:15,200
were worried. 
Makes sense. 

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00:06:15,640 --> 00:06:18,560
So if the veil does get pierced,
Bottom line. 

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00:06:18,600 --> 00:06:22,440
Bottom line. 
The shield is gone, the owners 

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00:06:22,440 --> 00:06:25,880
become personally liable for 
that business debt, and yeah, 

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00:06:25,880 --> 00:06:27,920
their personal assets are 
potentially on the line. 

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00:06:27,920 --> 00:06:30,080
That's what could happen to Bob 
in that Reddit example. 

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00:06:30,600 --> 00:06:33,360
But it's also worth noting, like
the Wikipedia source mentions, 

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00:06:33,360 --> 00:06:37,280
with that Adam Z Cape Industries
case from English law actually 

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00:06:37,280 --> 00:06:40,000
winning a piercing case, 
especially against a big parent 

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00:06:40,000 --> 00:06:43,160
company for what its subsidiary 
did, it can be really tough. 

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00:06:43,160 --> 00:06:46,320
In practice, courts do respect 
the corporate form unless 

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00:06:46,320 --> 00:06:48,280
there's pretty clear abuse like 
fraud. 

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00:06:48,480 --> 00:06:51,160
OK, so that covers the world 
where limited liability is the 

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00:06:51,160 --> 00:06:53,440
norm and piercing is the big 
exception. 

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00:06:53,880 --> 00:06:57,280
But what about those business 
types where personal liability 

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00:06:57,280 --> 00:06:59,320
is? 
Well, the default setting. 

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00:06:59,480 --> 00:07:02,520
Right, that takes us straight 
into general partnerships here. 

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00:07:02,680 --> 00:07:05,000
Flip the script. 
The partners are typically 

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00:07:05,000 --> 00:07:07,400
personally on the hook for the 
business's obligations. 

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00:07:07,640 --> 00:07:10,120
OK, personally liable is the 
starting point. 

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00:07:10,120 --> 00:07:12,880
Exactly. 
And to really understand why, 

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00:07:13,360 --> 00:07:15,720
you have to understand a 
fundamental concept that 

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00:07:15,720 --> 00:07:19,040
underpins partnerships agency. 
Agency. 

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00:07:19,160 --> 00:07:22,040
How does that connect? 
Well, as one of your sources, 

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00:07:22,120 --> 00:07:25,520
Law Shelf explains really 
clearly, partnerships basically 

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00:07:25,520 --> 00:07:28,840
grew out of agency law. 
Their governing principles come 

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00:07:28,840 --> 00:07:32,080
from agency theory. 
In a general partnership, every 

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00:07:32,080 --> 00:07:34,920
single partner is considered an 
agent for all the other 

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00:07:34,920 --> 00:07:37,760
partners, and also an agent for 
the partnership itself. 

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00:07:37,840 --> 00:07:40,120
OK, so each partner can act for 
the whole group? 

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00:07:40,360 --> 00:07:42,880
Precisely. 
And that agency relationship, 

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00:07:43,120 --> 00:07:46,720
that's the direct cause of 
partnership liability because 

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00:07:46,720 --> 00:07:50,000
each partner is an agent agent, 
their actions, as long as 

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00:07:50,000 --> 00:07:52,720
they're acting within the scope 
of the partnership business, can

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00:07:52,720 --> 00:07:55,280
bind the entire partnership. 
Bind them how? 

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00:07:55,400 --> 00:07:58,840
Like signing contracts. 
Signing contracts, yes, but also

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00:07:58,840 --> 00:08:00,480
committing torts in the course 
of business. 

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00:08:00,840 --> 00:08:04,040
And crucially, those actions 
don't just bind the partnership 

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00:08:04,040 --> 00:08:07,040
entity, they make the other 
partners personally liable too. 

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00:08:07,200 --> 00:08:11,880
Whoa, like that Nadia and Colby 
design firm example. 

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00:08:12,320 --> 00:08:16,160
Nadia signs some huge, maybe 
risky contract for the firm 

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00:08:16,160 --> 00:08:18,960
while Colby's away. 
Colby is personally on the hook 

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00:08:18,960 --> 00:08:21,080
for that debt, even if he knew 
nothing about it. 

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00:08:21,240 --> 00:08:24,560
Absolutely. 
If Nadia had the authority or a 

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00:08:24,560 --> 00:08:27,720
parent authority to sign it for 
the partnership, Colby's liable.

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00:08:28,160 --> 00:08:32,159
And it gets even more 
potentially impactful because of

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00:08:32,159 --> 00:08:34,280
something called joint and 
several liability. 

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00:08:34,280 --> 00:08:36,720
Joint and several. 
Yeah, Brady Ware mentioned this.

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00:08:36,919 --> 00:08:40,240
It means each partner can be 
held individually responsible 

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00:08:40,240 --> 00:08:43,280
for the entire amount of a 
partnership debt, not just their

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00:08:43,280 --> 00:08:45,680
proportional share. 
Wait the entire amount. 

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00:08:45,680 --> 00:08:49,200
The entire amount a creditor can
choose to sue just one partner, 

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00:08:49,200 --> 00:08:51,760
maybe the one with the deepest 
pockets for the full debt. 

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00:08:52,000 --> 00:08:53,960
That partner would then have to 
try and get contributions from 

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00:08:53,960 --> 00:08:56,000
the others, but the creditor 
gets paid first. 

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00:08:56,360 --> 00:09:00,080
Wow, OK, that is that's a stark 
contrast to limited liability. 

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00:09:00,080 --> 00:09:03,000
That's genuinely scary. 
It's a fundamental risk you take

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00:09:03,000 --> 00:09:05,760
on in a general partnership. 
It's why people often opt for 

189
00:09:05,760 --> 00:09:07,680
LLC's or corporations if they 
can. 

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00:09:07,720 --> 00:09:09,960
Is there any exception to this 
broad liability? 

191
00:09:10,240 --> 00:09:14,000
There's one key exception, 
typically criminal liability. 

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00:09:14,760 --> 00:09:18,080
Generally, one partner isn't 
criminally liable for another 

193
00:09:18,080 --> 00:09:20,520
partner's crime just because 
they're partners, unless of 

194
00:09:20,520 --> 00:09:22,560
course they participated in the 
crime somehow. 

195
00:09:22,560 --> 00:09:24,720
OK, that makes sense. 
You don't go to jail because 

196
00:09:24,720 --> 00:09:27,160
your partner did something 
illegal without you knowing, 

197
00:09:27,200 --> 00:09:30,200
right? 
Civil liability is broad, but 

198
00:09:30,200 --> 00:09:33,200
criminal liability usually 
requires personal involvement. 

199
00:09:33,400 --> 00:09:35,640
OK. 
So major personal liability 

200
00:09:35,640 --> 00:09:39,000
risk, how do you actually, how 
do you form one of these 

201
00:09:39,000 --> 00:09:42,480
partnerships? 
Do you need lawyers and filings?

202
00:09:42,480 --> 00:09:46,000
This is another absolutely 
critical point for exams, and 

203
00:09:46,000 --> 00:09:48,640
one where people sometimes get 
tripped up, while having a 

204
00:09:48,640 --> 00:09:51,680
formal written partnership 
agreement is incredibly smart. 

205
00:09:51,760 --> 00:09:55,320
Highly recommended. 
As TC Group notes, it's not 

206
00:09:55,320 --> 00:09:57,600
always legally required to form 
a general partnership. 

207
00:09:58,240 --> 00:10:01,160
Really, the most basic legal 
requirement to be a partner is 

208
00:10:01,160 --> 00:10:03,360
simply having the capacity to 
contract. 

209
00:10:03,360 --> 00:10:06,600
Just standard contract law stuff
like being an adult mentally 

210
00:10:06,600 --> 00:10:09,160
competent. 
Exactly that John and Evan 

211
00:10:09,160 --> 00:10:12,240
example is good. 
John's 23, he has capacity. 

212
00:10:12,720 --> 00:10:14,920
Evan, the 16 year old computer 
whiz. 

213
00:10:15,600 --> 00:10:19,560
Brilliant maybe, but lacks 
capacity to form a binding 

214
00:10:19,560 --> 00:10:21,760
partnership. 
His agreements would be 

215
00:10:21,760 --> 00:10:23,800
voidable. 
OK, but no written agreement 

216
00:10:23,800 --> 00:10:25,920
required. 
That sounds inherently risky. 

217
00:10:26,280 --> 00:10:29,240
Could you like, accidentally 
become someone's partner? 

218
00:10:29,240 --> 00:10:32,000
You absolutely could. 
This is the key insight. 

219
00:10:32,440 --> 00:10:36,160
A partnership can be implied by 
law just based on how people 

220
00:10:36,160 --> 00:10:39,440
act, even without a formal 
document, or even without them 

221
00:10:39,520 --> 00:10:42,480
fully intending. 
The legal consequences if two or

222
00:10:42,480 --> 00:10:44,760
more people start carrying on a 
business together, sharing 

223
00:10:44,760 --> 00:10:47,840
profits, acting like partners, 
the law might just say looks 

224
00:10:47,840 --> 00:10:49,240
like a partnership, smells like 
a partnership. 

225
00:10:49,680 --> 00:10:52,920
It's a partnership that Bush V 
Taylor case highlights courts 

226
00:10:52,920 --> 00:10:54,960
looking at the party's intent 
and actions. 

227
00:10:55,040 --> 00:10:58,040
And this leads to that idea of 
partnership by estoppel. 

228
00:10:58,040 --> 00:11:00,200
Precisely. 
Estoppel means you're prevented 

229
00:11:00,200 --> 00:11:02,280
or is stopped from denying 
something. 

230
00:11:02,680 --> 00:11:05,920
So here you can be treated as a 
partner with all the liability 

231
00:11:05,920 --> 00:11:08,560
that entails, even if you didn't
technically agree to be 1 

232
00:11:08,680 --> 00:11:11,600
because of how you acted or what
you allowed others to believe. 

233
00:11:11,600 --> 00:11:14,040
How would that happen? 
Well, if you share profits and 

234
00:11:14,040 --> 00:11:18,160
losses, that's strong evidence. 
Or like in the O'Brien and Jerry

235
00:11:18,160 --> 00:11:21,600
Engineers case mentioned. 
Or that Tony and Linda ski lodge

236
00:11:21,600 --> 00:11:24,400
example. 
If Linda keeps telling 

237
00:11:24,400 --> 00:11:27,640
suppliers, Oh yeah, Tony's my 
partner in the lodge, and Tony 

238
00:11:27,640 --> 00:11:30,280
knows she's saying this and 
doesn't correct her, A supplier 

239
00:11:30,280 --> 00:11:33,800
who relies on that statement 
might be able to hold Tony 

240
00:11:33,800 --> 00:11:38,280
personally liable as a partner 
by estoppel if the partnership 

241
00:11:38,280 --> 00:11:41,480
doesn't pay its bills, even if 
Tony and Linda never signed a 

242
00:11:41,480 --> 00:11:43,880
piece of paper. 
And the massive danger there is 

243
00:11:43,880 --> 00:11:46,960
suddenly being on the hook for 
debts or taxes you had no idea 

244
00:11:46,960 --> 00:11:48,720
you were responsible for. 
Exactly right. 

245
00:11:48,840 --> 00:11:51,720
Which just hammers home why 
having that written partnership 

246
00:11:51,720 --> 00:11:54,240
agreement is so vital. 
It forces you to think through 

247
00:11:54,240 --> 00:11:56,320
and define the relationship. 
Who does what? 

248
00:11:56,600 --> 00:11:58,200
How are profits and losses 
split? 

249
00:11:58,400 --> 00:12:01,600
Who manages things? 
It avoids those nasty surprises.

250
00:12:01,800 --> 00:12:04,000
OK, so let's say you have a 
partnership, maybe even a 

251
00:12:04,000 --> 00:12:06,280
written agreement. 
How does the day-to-day stuff 

252
00:12:06,280 --> 00:12:08,120
work? 
Like who owns the computers? 

253
00:12:08,120 --> 00:12:10,520
The desks. 
Generally, the ownership and 

254
00:12:10,520 --> 00:12:13,040
operation rest with the partners
themselves. 

255
00:12:13,600 --> 00:12:17,120
Property that's bought for the 
business or contributed to it is

256
00:12:17,120 --> 00:12:19,440
usually considered partnership 
property. 

257
00:12:19,760 --> 00:12:22,120
And you mentioned a difference 
between contributing something 

258
00:12:22,120 --> 00:12:24,400
versus just letting the 
partnership use it. 

259
00:12:24,560 --> 00:12:28,080
Yes, the partners intent when 
property comes into the business

260
00:12:28,080 --> 00:12:30,120
is key. 
Remember Leon's desk? 

261
00:12:30,400 --> 00:12:33,280
If Leon formally contributes his
desk as capital to the 

262
00:12:33,280 --> 00:12:36,040
partnership, it becomes 
partnership property. 

263
00:12:36,040 --> 00:12:38,000
OK. 
But if he just says, hey, you 

264
00:12:38,000 --> 00:12:41,520
guys can use my spare desk for a
while, it probably remains his 

265
00:12:41,520 --> 00:12:44,200
personal property just being 
loaned or licensed to the 

266
00:12:44,200 --> 00:12:45,920
partnership. 
And why does that distinction 

267
00:12:45,920 --> 00:12:48,320
matter? 
It matters mainly for creditors.

268
00:12:48,840 --> 00:12:51,360
A partner's personal creditor 
can usually go after the 

269
00:12:51,360 --> 00:12:54,360
partners interest in the 
partnership, like their share of

270
00:12:54,360 --> 00:12:57,760
profits or their capital account
balance, but that personal 

271
00:12:57,760 --> 00:13:00,760
creditor generally cannot seize 
specific items of partnership 

272
00:13:00,760 --> 00:13:03,920
property like that Des Leon 
contributed as capital. 

273
00:13:04,040 --> 00:13:06,960
Got it. 
What about default rules if the 

274
00:13:06,960 --> 00:13:09,560
agreement doesn't say anything 
about how decisions are made or 

275
00:13:09,560 --> 00:13:11,520
how profits are shared? 
Good question. 

276
00:13:11,920 --> 00:13:16,000
If the agreement is silent, the 
Uniform Partnership Act, the UPA

277
00:13:16,280 --> 00:13:20,320
reference by law shelf kicks in 
with default rules and the main 

278
00:13:20,320 --> 00:13:23,440
ones are first. 
Each partner gets an equal vote 

279
00:13:23,440 --> 00:13:27,240
in managing the partnerships 
business. 2nd profits are split 

280
00:13:27,240 --> 00:13:29,720
equally among the partners 
regardless of capital 

281
00:13:29,720 --> 00:13:32,720
contributions or effort. 
Equally, even if one partner 

282
00:13:32,720 --> 00:13:35,640
does way more work, even. 
Then yes, that's the default. 

283
00:13:35,840 --> 00:13:39,200
If partners want something 
different like profit split 7030

284
00:13:39,480 --> 00:13:43,080
or maybe only managing partners 
get a vote, they absolutely must

285
00:13:43,080 --> 00:13:45,960
put that explicitly in their 
agreement and everyone has to 

286
00:13:45,960 --> 00:13:46,600
agree to it. 
OK. 

287
00:13:46,960 --> 00:13:49,480
That equal split default is 
definitely something to remember

288
00:13:49,480 --> 00:13:50,560
for exams. 
Now. 

289
00:13:50,680 --> 00:13:53,160
Taxes. 
How does the IRS treat 

290
00:13:53,160 --> 00:13:55,200
partnerships? 
Partnerships generally get 

291
00:13:55,200 --> 00:13:56,800
what's called pass through 
taxation. 

292
00:13:56,800 --> 00:13:58,880
This is a big advantage. 
Pass through. 

293
00:13:58,880 --> 00:14:01,200
Yeah, the partnership entity 
itself doesn't pay federal 

294
00:14:01,200 --> 00:14:03,840
income tax. 
Instead, all the profits or 

295
00:14:03,840 --> 00:14:07,000
losses are passed through 
directly to the individual 

296
00:14:07,000 --> 00:14:09,000
partners. 
They then report their share of 

297
00:14:09,000 --> 00:14:11,680
the income or loss on their 
personal tax returns. 

298
00:14:12,000 --> 00:14:15,280
Brady Ware, Law Shelf, TC Group 
all highlight this. 

299
00:14:15,280 --> 00:14:17,800
So it's tax like you're 
self-employed basically. 

300
00:14:18,000 --> 00:14:20,560
Pretty much, yeah. 
It avoids the potential double 

301
00:14:20,560 --> 00:14:23,520
taxation you can sometimes see 
with corporations where the 

302
00:14:23,520 --> 00:14:26,920
corporation pays tax on its 
profits and then shareholders 

303
00:14:26,920 --> 00:14:29,080
pay tax again when they receive 
dividends. 

304
00:14:29,240 --> 00:14:30,960
That sounds simpler, maybe 
better. 

305
00:14:31,040 --> 00:14:34,800
It often is simpler, but there's
a really important catch, a 

306
00:14:34,800 --> 00:14:37,480
potential pitfall here that 
catches students out. 

307
00:14:38,560 --> 00:14:41,480
Partners are taxed on their 
share of the partnership's 

308
00:14:41,480 --> 00:14:44,120
income, whether or not they 
actually receive that money in 

309
00:14:44,120 --> 00:14:45,840
cash. 
Wait, say that again. 

310
00:14:46,000 --> 00:14:47,800
You pay tax on money you didn't 
get. 

311
00:14:48,200 --> 00:14:51,160
Potentially, yes. 
That Law Shelf P partnership 

312
00:14:51,160 --> 00:14:52,680
example illustrates it 
perfectly. 

313
00:14:53,160 --> 00:14:55,680
The partnership made operating 
profits, but instead of 

314
00:14:55,680 --> 00:14:58,520
distributing the cash, they used
it all to buy a building. 

315
00:14:59,280 --> 00:15:02,200
The partners still had taxable 
income allocated to them based 

316
00:15:02,200 --> 00:15:04,680
on their share of those profits.
Even though their bank accounts 

317
00:15:04,680 --> 00:15:07,480
didn't see a dime for the 
partnership that year, they 

318
00:15:07,480 --> 00:15:09,920
still owed taxes on that phantom
income. 

319
00:15:10,240 --> 00:15:12,800
Ouch, that's a major point to 
flag. 

320
00:15:13,040 --> 00:15:15,960
You could have a big tax bill 
with no cash distribution to pay

321
00:15:15,960 --> 00:15:18,240
it with. 
Exactly, That's why well run 

322
00:15:18,240 --> 00:15:20,920
partnerships usually make 
regular tax distributions to the

323
00:15:20,920 --> 00:15:24,840
partners specifically to cover 
their estimated tax liabilities 

324
00:15:25,040 --> 00:15:26,600
arising from the partnership 
income. 

325
00:15:27,040 --> 00:15:29,760
And partners also pay 
self-employment taxes on that 

326
00:15:29,760 --> 00:15:31,800
income. 
Yes, that's the other piece. 

327
00:15:32,080 --> 00:15:35,240
Partnership income pass through 
to partners is generally subject

328
00:15:35,240 --> 00:15:38,120
to self-employment, taxes, 
Social Security and Medicare 

329
00:15:38,120 --> 00:15:40,960
here in the US. 
Similar concept to the National 

330
00:15:40,960 --> 00:15:43,800
Insurance mentioned in the UK. 
Sources from TC Group. 

331
00:15:43,960 --> 00:15:46,280
OK. 
And TC Group also mentioned that

332
00:15:46,280 --> 00:15:49,640
things like getting sick pay 
from the partnership doesn't 

333
00:15:49,640 --> 00:15:52,320
automatically make you an 
employee for tax purposes. 

334
00:15:52,360 --> 00:15:54,160
Right. 
The overall test still looks at 

335
00:15:54,160 --> 00:15:57,320
whether your income is tied to 
the firm's profits and if you 

336
00:15:57,320 --> 00:16:00,320
share in the economic risk, not 
just whether you get certain 

337
00:16:00,320 --> 00:16:02,480
benefits. 
It's about the substance of the 

338
00:16:02,480 --> 00:16:04,480
relationship. 
So we started the section 

339
00:16:04,480 --> 00:16:07,320
talking about how partnerships 
are rooted in agency theory. 

340
00:16:07,640 --> 00:16:10,760
But agency itself is way broader
than just partnerships, isn't 

341
00:16:10,760 --> 00:16:11,880
it? 
Oh, absolutely fundamental. 

342
00:16:12,240 --> 00:16:14,320
Think about it. 
A corporation is just a legal 

343
00:16:14,320 --> 00:16:17,480
construct, right? 
A piece of paper, essentially. 

344
00:16:17,720 --> 00:16:19,760
It can't physically do anything 
on its own. 

345
00:16:20,160 --> 00:16:21,880
It has to act through human 
beings. 

346
00:16:21,880 --> 00:16:24,120
It's agents. 
These could be officers, 

347
00:16:24,120 --> 00:16:27,720
directors, employees, even 
outside lawyers or accountants 

348
00:16:28,240 --> 00:16:31,760
acting on its behalf. 
Agency is the legal mechanism by

349
00:16:31,760 --> 00:16:35,120
which any business entity, 
corporation, LLC, whatever 

350
00:16:35,560 --> 00:16:38,680
interacts with the outside world
and creates legal rights and 

351
00:16:38,680 --> 00:16:42,240
responsibilities for itself. 
So agency is really the bedrock 

352
00:16:42,240 --> 00:16:44,800
for how all businesses operate 
legally. 

353
00:16:45,280 --> 00:16:49,000
Who are the key players involved
in an agency relationship? 

354
00:16:49,600 --> 00:16:52,080
Women Learning outlines the 
three main parties clearly. 

355
00:16:52,520 --> 00:16:55,440
You have the principal, that's 
the person or entity the agent 

356
00:16:55,440 --> 00:16:57,000
is acting for. 
You have the agent, the one 

357
00:16:57,000 --> 00:16:59,240
doing the acting, and you have 
the third party. 

358
00:16:59,240 --> 00:17:01,560
That's the person or entity the 
agent is dealing with on the 

359
00:17:01,560 --> 00:17:04,160
principal's behalf. 
OK, Principal agent, third 

360
00:17:04,160 --> 00:17:05,440
party. 
And the law governs the 

361
00:17:05,440 --> 00:17:07,560
relationships between all of 
them, Principal and agent, 

362
00:17:07,560 --> 00:17:09,720
Principal and 3rd party and 
agent third party. 

363
00:17:09,960 --> 00:17:12,400
And the sources mentioned 
different kinds of agents. 

364
00:17:12,680 --> 00:17:14,720
They do. 
It's useful to know the main 

365
00:17:14,720 --> 00:17:17,480
types. 
A general agent has pretty broad

366
00:17:17,480 --> 00:17:21,280
authority to handle a series of 
transactions for the principal 

367
00:17:21,280 --> 00:17:23,720
over time. 
Think of a store manager who 

368
00:17:23,720 --> 00:17:27,720
hires employees, orders 
inventory, deals with customers.

369
00:17:27,720 --> 00:17:29,680
Broad authority. 
OK, General Agent. 

370
00:17:29,880 --> 00:17:31,600
What else? 
Then there's a special agent. 

371
00:17:32,240 --> 00:17:35,080
Their authority is much 
narrower, usually limited to a 

372
00:17:35,080 --> 00:17:39,160
single transaction or a specific
task, like hiring a real estate 

373
00:17:39,160 --> 00:17:41,400
agent just to sell one 
particular house. 

374
00:17:41,800 --> 00:17:43,240
Makes sense. 
What about a sub agent? 

375
00:17:43,440 --> 00:17:46,280
A sub agent is basically an 
agent hired by another agent. 

376
00:17:46,720 --> 00:17:49,520
If the principal gives the first
agent permission to delegate 

377
00:17:49,520 --> 00:17:52,120
tasks, the person they hire 
becomes a sub agent. 

378
00:17:52,680 --> 00:17:55,640
Interestingly, the sub agent 
usually owes duties to both the 

379
00:17:55,640 --> 00:17:57,280
original agent and the 
principal. 

380
00:17:57,320 --> 00:17:59,520
Okay. 
And agency coupled with an 

381
00:17:59,520 --> 00:18:02,440
interest that sounds a bit more 
complex. 

382
00:18:02,440 --> 00:18:04,840
It is a bit specific. 
This happens when the agent 

383
00:18:04,840 --> 00:18:08,000
doesn't just have authority, but
also has some kind of ownership 

384
00:18:08,000 --> 00:18:10,760
or security interest in the 
subject matter of the agency 

385
00:18:10,760 --> 00:18:13,240
itself. 
Like what Maybe a lender who is 

386
00:18:13,240 --> 00:18:16,640
also given the authority to sell
the property if the borrower 

387
00:18:16,640 --> 00:18:20,000
defaults. 
The key legal effect is that the

388
00:18:20,000 --> 00:18:23,720
principal often can't easily 
terminate this type of agency if

389
00:18:23,720 --> 00:18:25,240
it would harm the agents 
interest. 

390
00:18:26,280 --> 00:18:28,840
That literary agent example who 
gets a Commission and collects 

391
00:18:28,840 --> 00:18:31,920
the money might also fit here. 
They have a direct financial 

392
00:18:31,920 --> 00:18:33,320
stake. 
Got it. 

393
00:18:33,680 --> 00:18:36,680
Now, a distinction that feels 
like it comes up everywhere in 

394
00:18:36,680 --> 00:18:39,920
business law and definitely on 
exams, employee versus 

395
00:18:39,920 --> 00:18:42,640
independent contractor. 
Absolutely critical distinction,

396
00:18:42,880 --> 00:18:45,040
and Lumen explains the core test
well. 

397
00:18:45,720 --> 00:18:48,360
The fundamental difference boils
down to the principal's right to

398
00:18:48,360 --> 00:18:51,720
control the manner and means by 
which the agent performs the 

399
00:18:51,720 --> 00:18:52,720
work. 
Control. 

400
00:18:52,760 --> 00:18:56,440
Yes, with an employee, sometimes
called a servant in older cases.

401
00:18:56,680 --> 00:18:59,480
The employer has the right to 
control not just the result, but

402
00:18:59,480 --> 00:19:02,880
also how the work gets done, the
physical conduct, the hours, the

403
00:19:02,880 --> 00:19:04,600
methods. 
Think of your typical office 

404
00:19:04,600 --> 00:19:05,320
worker. 
OK. 

405
00:19:05,480 --> 00:19:08,840
And an independent contractor. 
With an independent contractor 

406
00:19:08,840 --> 00:19:12,960
or IC, the principle controls or
directs only the final result of

407
00:19:12,960 --> 00:19:15,640
the work, not the specific 
methods used to get there. 

408
00:19:16,320 --> 00:19:19,640
The IC is generally autonomous 
in how they erform the task. 

409
00:19:20,200 --> 00:19:22,000
Think of hiring a plumber to fix
a leak. 

410
00:19:22,880 --> 00:19:25,960
You care that the leak is fixed,
not how they hold the wrench. 

411
00:19:26,000 --> 00:19:29,400
And why is nailing this down so 
incredibly important? 

412
00:19:29,680 --> 00:19:32,920
Huge legal consequences hinge on
this classification. 

413
00:19:33,160 --> 00:19:36,080
For the principal employer, it 
impacts things like do they have

414
00:19:36,080 --> 00:19:38,720
to withhold income taxes? 
Do they have to pay payroll 

415
00:19:38,720 --> 00:19:41,400
taxes like Social Security, 
Medicare, employer portions? 

416
00:19:41,800 --> 00:19:43,680
Are they liable for state 
unemployment insurance? 

417
00:19:43,920 --> 00:19:46,280
Do they need to provide workers 
compensation coverage? 

418
00:19:46,280 --> 00:19:49,120
Wow OK. 
And also crucially, vicarious 

419
00:19:49,120 --> 00:19:50,880
liability. 
Is the principal automatically 

420
00:19:50,880 --> 00:19:53,160
liable if the agent commits A 
tort while working? 

421
00:19:53,520 --> 00:19:56,320
Generally yes for employees 
acting within the scope of 

422
00:19:56,320 --> 00:19:58,720
employment. 
Much less likely for ICS. 

423
00:19:58,720 --> 00:20:01,920
So employers might want to 
classify workers as ICS to save 

424
00:20:01,920 --> 00:20:03,880
money. 
Sometimes, yes. 

425
00:20:04,320 --> 00:20:07,960
There's definitely an incentive 
to misclassify employees as ICS 

426
00:20:07,960 --> 00:20:11,160
to avoid those costs and 
liabilities, but the key thing 

427
00:20:11,160 --> 00:20:14,240
to remember is that the law 
determines the status based on 

428
00:20:14,240 --> 00:20:17,040
the facts of the relationship, 
not just what the contract 

429
00:20:17,040 --> 00:20:19,560
labels the person. 
You can't just slap an 

430
00:20:19,560 --> 00:20:22,360
independent contractor label on 
someone and call it a day. 

431
00:20:23,600 --> 00:20:26,440
Courts look behind the label at 
the reality of the control 

432
00:20:26,440 --> 00:20:29,200
exerted. 
They use a multi factor test 

433
00:20:29,440 --> 00:20:32,360
looking at things like who 
supplies the tools in workplace?

434
00:20:32,760 --> 00:20:34,760
Is the payment by the hour or by
the job? 

435
00:20:35,240 --> 00:20:37,440
Is the work part of the 
principal's regular business? 

436
00:20:37,800 --> 00:20:40,080
How much skill is required? 
The duration of the 

437
00:20:40,080 --> 00:20:42,760
relationship? 
Those case examples, like 

438
00:20:42,760 --> 00:20:45,920
Robinson the salesman in General
accident the golf ball shagger, 

439
00:20:46,280 --> 00:20:48,000
show courts digging into these 
facts. 

440
00:20:48,360 --> 00:20:50,680
So how do these agency 
relationships actually get 

441
00:20:50,680 --> 00:20:52,840
started? 
Most commonly by agreement 

442
00:20:52,840 --> 00:20:54,400
between the principal and the 
agent. 

443
00:20:54,840 --> 00:20:57,600
This agreement can be expressed,
written or spoken, or can be 

444
00:20:57,600 --> 00:21:00,640
implied just by their conduct. 
Does the agent have to be paid? 

445
00:21:00,920 --> 00:21:04,040
No, actually an agency 
relationship can be gratuitous, 

446
00:21:04,280 --> 00:21:06,120
meaning the agent isn't 
compensated. 

447
00:21:06,760 --> 00:21:08,800
That Abe and Byron errand 
example. 

448
00:21:08,800 --> 00:21:11,640
Abe asks Byron to run an errand.
Byron agrees. 

449
00:21:12,320 --> 00:21:15,640
Even if Byron isn't paid, an 
agency relationship is formed 

450
00:21:15,800 --> 00:21:19,520
and Byron owes Abe duties like 
loyalty and care. 

451
00:21:20,360 --> 00:21:22,560
Interesting. 
Are there formal requirements 

452
00:21:22,560 --> 00:21:25,600
like needing a written contract?
Usually, no. 

453
00:21:25,800 --> 00:21:28,120
Oral agency agreements are 
perfectly valid for most 

454
00:21:28,120 --> 00:21:29,760
purposes. 
However, there's a big exception

455
00:21:29,760 --> 00:21:32,640
called the Statute of Frauds. 
Ah, the Statute of Frauds, 

456
00:21:32,680 --> 00:21:35,160
right? 
Certain types of contracts must 

457
00:21:35,160 --> 00:21:38,560
be in writing to be enforceable.
If an agent is being authorized 

458
00:21:38,560 --> 00:21:40,640
to enter into one of those 
contracts on behalf of the 

459
00:21:40,640 --> 00:21:44,280
principal, like a contract for 
the sale of land in most states,

460
00:21:44,600 --> 00:21:47,760
or a contract that can't 
possibly be performed within one

461
00:21:47,760 --> 00:21:51,280
year, then the agents authority 
often also needs to be in 

462
00:21:51,280 --> 00:21:52,800
writing. 
This is sometimes called the 

463
00:21:52,800 --> 00:21:55,080
equal dignity rule. 
OK, so if the underlying 

464
00:21:55,080 --> 00:21:57,560
contract needs writing, the 
agents authority might need 

465
00:21:57,560 --> 00:21:59,120
writing too. 
Generally, yes. 

466
00:21:59,720 --> 00:22:03,240
Also, contracts for the sale of 
goods over $500 under the UCC 

467
00:22:03,240 --> 00:22:06,680
need some writing, so that could
impact an agent's need for 

468
00:22:06,680 --> 00:22:09,240
written authority too. 
And what about capacity? 

469
00:22:09,680 --> 00:22:14,560
Do both the principal and agent 
need to be legally competent? 

470
00:22:15,120 --> 00:22:18,240
Yes, capacity matters. 
The principal must have 

471
00:22:18,240 --> 00:22:21,920
contractual capacity. 
If the principal is a minor, for

472
00:22:21,920 --> 00:22:25,280
example, any contract the agent 
makes on their behalf is 

473
00:22:25,280 --> 00:22:27,280
typically voidable by that minor
principal. 

474
00:22:28,240 --> 00:22:31,560
The agent also needs sufficient 
capacity to act on behalf of the

475
00:22:31,560 --> 00:22:34,400
principal. 
They don't necessarily need full

476
00:22:34,400 --> 00:22:37,560
contractual capacity themselves 
for all purposes, but 

477
00:22:37,560 --> 00:22:40,880
critically, someone who is 
legally incompetent, like due to

478
00:22:40,920 --> 00:22:44,720
severe mental illness, generally
cannot act as an agent to bind 

479
00:22:44,720 --> 00:22:46,360
the principal. 
OK, that makes sense. 

480
00:22:46,760 --> 00:22:49,600
We've covered a lot of the core 
ground, the different entities, 

481
00:22:49,600 --> 00:22:52,240
the liability spectrum from 
partnerships to corporations, 

482
00:22:52,240 --> 00:22:55,440
the huge exception of piercing 
the veil, and the fundamental 

483
00:22:55,440 --> 00:22:58,080
role of agency. 
Your sources also briefly 

484
00:22:58,080 --> 00:23:00,680
touched on a few other points 
about the corporate life cycle. 

485
00:23:00,680 --> 00:23:02,600
Right, just to round things out,
there's the whole area of 

486
00:23:02,600 --> 00:23:04,840
corporate governance that really
looks at the internal power 

487
00:23:04,840 --> 00:23:07,880
structure, the relationships and
rules governing the executives, 

488
00:23:07,880 --> 00:23:09,920
the board of directors and the 
shareholders. 

489
00:23:09,920 --> 00:23:12,760
Key concepts there. 
Director duties are huge, 

490
00:23:13,800 --> 00:23:17,760
especially the duty of loyalty, 
the duty to act in the best 

491
00:23:17,760 --> 00:23:20,640
interest of the corporation and 
avoid conflicts of interest. 

492
00:23:21,400 --> 00:23:24,880
That Old Aberdeen Railway case 
is a classic illustration of how

493
00:23:24,880 --> 00:23:27,400
strictly courts can view 
potential conflicts. 

494
00:23:28,280 --> 00:23:31,600
Shareholders also have key 
rights like voting for directors

495
00:23:31,600 --> 00:23:33,600
and approving major corporate 
changes. 

496
00:23:33,600 --> 00:23:35,480
Like selling the whole company. 
Exactly. 

497
00:23:35,720 --> 00:23:38,960
Selling all or substantially all
of the corporation's assets 

498
00:23:39,120 --> 00:23:41,040
usually requires shareholder 
approval. 

499
00:23:41,960 --> 00:23:45,280
Defining what substantially all 
means has led to case law like 

500
00:23:45,280 --> 00:23:47,560
gimbal and cats. 
Corporate finance also got a 

501
00:23:47,560 --> 00:23:49,440
quick mention. 
Yeah, it's the basics. 

502
00:23:49,800 --> 00:23:53,600
Companies need money. 2 main 
ways to get it Equity financing,

503
00:23:53,600 --> 00:23:56,560
which means selling ownership 
stake shares to investors, and 

504
00:23:56,560 --> 00:23:59,400
debt financing, which means 
borrowing money through loans or

505
00:23:59,400 --> 00:24:01,840
bonds. 
Debt often has tax advantages 

506
00:24:01,840 --> 00:24:03,760
because interest payments are 
usually deductible. 

507
00:24:03,880 --> 00:24:06,440
And lastly, dissolution, the end
game. 

508
00:24:06,560 --> 00:24:08,320
Right. 
When a company ceases 

509
00:24:08,320 --> 00:24:12,120
operations, especially if it's 
insolvent, can't pay its debts, 

510
00:24:12,320 --> 00:24:16,320
it goes through dissolution and 
winding up or liquidation. 

511
00:24:17,040 --> 00:24:20,200
This can be compulsory, forced 
by creditors or regulators, or 

512
00:24:20,200 --> 00:24:22,800
voluntary, initiated by the 
owner shareholders. 

513
00:24:22,800 --> 00:24:25,240
What happens then? 
A liquidator is appointed. 

514
00:24:25,560 --> 00:24:29,080
Their job is to gather all the 
company's assets, sell them off,

515
00:24:29,320 --> 00:24:32,320
pay off the company's debts 
according to a specific priority

516
00:24:32,320 --> 00:24:35,760
order set by law, and then, if 
there's anything leftover, 

517
00:24:35,960 --> 00:24:37,720
distribute the surplus to the 
owners. 

518
00:24:38,800 --> 00:24:40,680
OK. 
That really covers a huge amount

519
00:24:40,680 --> 00:24:43,160
of ground pulling together all 
those different sources you 

520
00:24:43,160 --> 00:24:46,960
shared, we've traced the 
liability line from, you know, 

521
00:24:46,960 --> 00:24:50,320
the deep personal risk in 
general partnerships all the way

522
00:24:50,320 --> 00:24:52,720
to the protective shield of 
limited liability in 

523
00:24:52,720 --> 00:24:56,080
corporations and LLC. 
'S and crucially, that major 

524
00:24:56,080 --> 00:24:59,120
exception, piercing the 
corporate veil when that shield 

525
00:24:59,120 --> 00:25:00,000
fails. 
Right. 

526
00:25:00,440 --> 00:25:03,120
And we also saw how agency isn't
just a partnership thing. 

527
00:25:03,120 --> 00:25:05,560
It's the engine that makes all 
businesses run, how they make 

528
00:25:05,560 --> 00:25:08,000
contracts, how they become 
liable through the actions of 

529
00:25:08,000 --> 00:25:10,080
their their people. 
Exactly, it connects everything.

530
00:25:10,200 --> 00:25:12,960
So for anyone listening who's 
prepping for that business 

531
00:25:12,960 --> 00:25:17,080
association's exam, really 
nailing these core concepts is 

532
00:25:17,080 --> 00:25:20,640
just non negotiable, isn't it? 
You have to know the default 

533
00:25:20,640 --> 00:25:23,640
rules for each entity. 
You have to know those specific 

534
00:25:23,640 --> 00:25:26,800
factors for piercing the veil, 
the different types of agents, 

535
00:25:26,800 --> 00:25:29,920
the liability consequences. 
Definitely those distinctions, 

536
00:25:29,920 --> 00:25:33,680
limited versus personal 
liability, employee versus IC, 

537
00:25:33,960 --> 00:25:36,560
implied versus formal 
partnership, those are the 

538
00:25:36,560 --> 00:25:38,920
pressure points where exam 
questions love to live. 

539
00:25:39,440 --> 00:25:42,920
Being able to spot those issues 
in a fact pattern and apply the 

540
00:25:42,920 --> 00:25:45,520
right rules is key. 
Absolutely practice applying 

541
00:25:45,520 --> 00:25:47,720
them to hypos. 
And maybe as you're reviewing 

542
00:25:47,720 --> 00:25:49,920
all this, step back for a second
and think about this bigger 

543
00:25:49,920 --> 00:25:51,560
picture theme running through it
all. 

544
00:25:51,960 --> 00:25:54,440
Business law is always doing 
this balancing act, isn't it? 

545
00:25:54,480 --> 00:25:56,640
How so? 
Well, on one side, it's trying 

546
00:25:56,640 --> 00:26:01,040
to encourage business, encourage
risk taking by offering ways to 

547
00:26:01,040 --> 00:26:02,920
limit personal financial 
disaster. 

548
00:26:02,920 --> 00:26:05,280
That's limited liability. 
That's the different entity 

549
00:26:05,280 --> 00:26:06,920
choices. 
Right, promoting commerce. 

550
00:26:07,120 --> 00:26:09,040
But on the other side, the the 
law has to provide 

551
00:26:09,040 --> 00:26:11,800
accountability when businesses 
mess up or owners abuse the 

552
00:26:11,800 --> 00:26:14,080
system. 
That's where piercing the veil 

553
00:26:14,080 --> 00:26:16,320
comes in. 
That's agency liability holding 

554
00:26:16,320 --> 00:26:18,920
principles responsible. 
Promoting commerce versus 

555
00:26:18,920 --> 00:26:20,920
ensuring justice or 
accountability. 

556
00:26:21,040 --> 00:26:24,000
Exactly. 
So how do courts and 

557
00:26:24,000 --> 00:26:25,920
legislatures strike that 
balance? 

558
00:26:26,000 --> 00:26:28,520
It shifts over time. 
It differs by jurisdiction. 

559
00:26:29,000 --> 00:26:31,760
Thinking about that constant 
tension between encouraging 

560
00:26:31,760 --> 00:26:34,680
enterprise and demanding 
responsibility, what does that 

561
00:26:34,680 --> 00:26:37,720
tell us about what society 
values and how the law shapes 

562
00:26:37,720 --> 00:26:39,400
our economy? 
It's definitely something 

563
00:26:39,400 --> 00:26:41,040
interesting to keep mulling 
over.