Agency Created by Express Agreement: What it Means for Your Business

As a business owner, you may have heard the term “agency created by express agreement” thrown around in legal circles. But what exactly does it mean, and how can it impact your company? In this article, we`ll delve into the basics of agency created by express agreement, and why it`s important to understand its implications.

First, let`s define what we mean by “agency.” Essentially, agency is a legal relationship in which one party (the agent) is authorized to act on behalf of another party (the principal). This can take many forms, from an employee handling routine tasks for their boss, to a real estate agent representing a homeowner in a sale.

Now, let`s add the term “created by express agreement.” This means that the agency relationship was formed explicitly, through a written or verbal agreement between the principal and the agent. This agreement may specify the scope of the agency, the duties of the agent, and any compensation or other terms.

So, why is this important? Well, for starters, agency created by express agreement carries with it certain legal responsibilities and liabilities. If an agent acts within the scope of their authority and in good faith, they may be shielded from liability for any harm that results from their actions. However, if they exceed their authority or act negligently, the principal could be on the hook for any damages.

Additionally, understanding the nature of agency created by express agreement can help you protect your business`s interests. For example, if you`re hiring an outside consultant to handle a project for you, you`ll want to be clear about the scope of their authority and how much control you`ll retain over the project. You`ll also want to have a written agreement in place that outlines these terms, to ensure that everyone is on the same page.

Similarly, if you`re acting as an agent for another party, you`ll want to be clear about your duties and the scope of your authority. You`ll also want to ensure that you`re adequately compensated for your services, and that you have appropriate insurance coverage in case anything goes wrong.

In some cases, agency created by express agreement can also have tax implications. For example, if you hire an independent contractor to perform work for you, you`ll need to determine whether they`re truly an independent contractor or if they should be classified as an employee. The IRS has specific criteria for making this determination, and misclassifying a worker can result in significant tax penalties.

In summary, agency created by express agreement is a legal relationship in which one party acts on behalf of another based on a clear agreement between them. Understanding the nature of this relationship can help you protect your business`s interests and avoid legal and financial liabilities. If you have questions about agency or any other legal issues affecting your business, be sure to consult with an experienced attorney.