An agent is a person or entity authorized to act on behalf of another individual or organization, often to negotiate, represent, or transact business activities.
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The agent business definition comes about when the business appoints a person to act on its behalf for a specified purpose. You can authorize an agency through an oral or written agreement, express or implied. Because agency relationships are contract-based, you can choose how to grant or limit your agent’s authority. In practice, the agent benefits you encounter will depend on what you need that agent to do.
Although a corporation is a distinct legal entity, it needs people to sign documents on its behalf. Only those with authorization to sign can legally bind the company. As such, a corporate director often meets the definition of an agent of the corporation. The corporation can always grant signing authority to others if needed.
Small businesses often hire a general agent to track leads and make sales. A general agent has broad legal authority to bind the business to new agreements. In these relationships, the agent owes a fiduciary duty to act in the best interest of the person who hired them, called the “principal.” A typical general agent is a manufacturing agent who completes sales in another country or region.
A special agent has the authority to act in a limited capacity for a particular purpose or task. A well-known special agent is a registered agent. Every business needs to have a registered agent on file with the state. When appointing a registered agent, the business grants them the limited authority to accept service of process on its behalf.
Historically, employees were considered “servants” of the “master.” In modern situations where the employer controls the employee’s work, these concepts continue to exist, even though the nomenclature is obsolete. When an employee works for an employer, they are considered the employer’s agent for liability purposes.
Some common agent examples include:
You create an agency anytime you authorize someone to take an action that incurs a cost on your behalf. Ultimately, you have legal responsibility for what the agent does.
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One of the most significant agent disadvantages is that broad grants of authority can have serious consequences for your business. Although you can create an agency relationship through an oral agreement, it’s advisable to have a written agency agreement. Many companies have fought legal battles over whether an agent had the legal authority to bind the business to an agreement. Save yourself the trouble and review your agency agreement with a professional before signing.
On this page, we learned what are agent types, including the corporate agent, general agent, special agent, and employees. If you appoint someone as your agent, the agent definition means they have the authority to make business decisions according to your terms. If you need someone to help because you cannot be there to run your business, you might benefit from having an agent.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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