Alternative business org

Question 1

what are the requirements for closely held corp

Answer 1

1) unanimous election of shareholders evidenced by shareholders in Articles of Incorp or bylaws and
2) REASONABLE shared transfer limit

Question 2

consequences of a closely held corp

Answer 2

1) no piercing corporate veil EVEN if fail to observe corporate formalities
2) likely s corp status (taxed as partnership)
- no more than 100 owners of stock and only 1 class of stock

Question 3

what are professional corporations

Answer 3

licensed professionals (lawyers, accountants etc)

Question 4

whar are the requirements of professional corporations (P.C.)

Answer 4

1) file articles with named professional corporation or PC
2) shareholders mst be licensed professionals
3) corp may only practice ONE PROFESSION

Question 5

can there be more than 1 profession in a professional corp

Answer 5

NO

Question 6

what are the consequences of a professional corporation?

Answer 6

1) professionals are liable personally for their OWN malpractice
2) but the professionals are NOT liable personally for each other’s malpractice or the obligations of the corporation itself

Question 7

what is a Limited Liability Company

Answer 7

hybrid b/w corp and partnership in which owners are called members have same rights as limited liability as stock holders of corp plus benefits of partnership tax.

Question 8

are there any formation requirements for LLC

Answer 8

YES must file articles of organization and may adopt operating agreement

Question 9

how are LLC controlled

Answer 9

their choice.

1) members may decide to manage business or
2) members may delegate control to team of managers

Question 10

what is limited liquidity of LLC

Answer 10

a full membership interest MAY NOT be transferred w/o unanimous consent of members or as otherwise in articles

Question 11

what is the limited life of a LLC

Answer 11

will disclose upon unanimous consent of members or classified in articles of Org or operating agreement

Question 12

are are recognized fundamental corporate changes

Answer 12

1) merger (A becomes B)
2) consolidation (A and B become C)
3) dissolution
4) fundamental (not ministerial) amendments to articles
5) sale (not purchase) of substantially all of corporations assets

Question 13

5 steps needed for fundamental corporate changes

Answer 13

1) resolution by board at a valid meeting
2) notice of special meeting
3) approval by shares of stock of all shares entitled to vote and
(a) approval by majority of all shares entitled to vote and majority of each voting group that is adversely effected of change
4) possibility of dissenting shareholder right of appraisal
5) file notice with the state

Question 14

in IL what percent needs to vote of shareholders for fundamental corporate changes

Answer 14

2/3 approval of all entitled to vote and 2/3 of each voting groups hurt by change

Question 15

what is the X/C for corporate fundamental changes when shareholders dont need notice

Answer 15

no shareholder approval required for “short-form” merger where a parent corporation that owns 90% or more of the stock in its subsidiary merges with the subsidiary

Question 16

what is the possibility of dissenting shareholder right of appraisal

Answer 16

1) a shareholder who DOES NOT vote in favor of a fundamental change has the right to force the corporation to buy her shares at the fair value
2) actions by shareholder to perfect the right
(a) before shareholder vote, file written notice of objection and intent to demand payment;
(b) do not vote in favor of proposed change
(c) make prompt written demand to be bought out

Question 17

what happens if shareholder and corporation cannot agree on fair value of shares to buy out

Answer 17

court has power to appoint expert appraisal to value shares and appraisal is binding on parties

Question 18

in LLC can an operating agreement eliminate duty of loyalty

Answer 18

YES, as long as doing so is not “manifestly unreasonable”

Question 19

general what is LLC and operating agreement

Answer 19

LLC combines features of partnership with limited personal liability enjoyed by corporate shareholders.

• Allows LLC owners (members) to adopt operating agreements that control moswt aspects of LLC business and management as long as they are not contrary to law

Question 20

what does dissolution of LLC mean

Answer 20

an LLC that has been dissolved continues its existence, but is not allowed to carry on any business x/c as appropriate to wind up its affairs.

• In winding up, the LLC must discharge its debts, obligations, or other liabilities.
• A claim can be asserted against a dissolved LLC to the extent of the LLC’s undistributed assets.
• the LLC must notify its known claimaints in writing of the dissolution, describing the proper procedures and deadlines asserting a claim

Question 21

what happens if an LLC assets have already been sold and distrubted to its members w.o proper wound up and paying creditors

Answer 21

each member may be personally liable to the claimant to the extent of her proportionate share of the claim or to the extent of the assets distributed to the member, whichever is less.

• Members total liability for creditor claims may not exceed the total value of assets distributed to the member in dissolution

Question 22

alter ego of LLC to pierce the veil

Answer 22

intermingling of personal and business funds is often cited as a justification for piercing the veil in both corporate and LLC contexts

Question 23

What are the 2 ways to dissolve an LLC?

Answer 23

1) file articles of dissolution with state

2) an LLC may be dissolved upon the consent of all members without the need to file articles of dissolution

Question 24

What does it mean when an LLC has been dissolved

Answer 24

it continues its existence, but is not allowed to carry out on any business EXPECT as appropriate to wind up its affairs.

Question 25

What must an LLC do in winding up its affairs during dissolution?

Answer 25

LLC must discharge its debts, obligations, or other liabilities.

• A claim can be asserted against a dissolved LLC to the extent of the LLC’s undistributed assets.
• The LLC must notify its known claimants in writing of the dissolution, describing the proper procedures and deadlines for asserting a claim.

Question 26

Arguments against to not pierce the LLC veil

Answer 26

• absence of corporate formalities is insufficient.
• By statute LLC’s can run with fewer formalities than a corporation “sloppy administration” alone is not proper ground for piercing an LLC.

Question 27

For member managed LLC’s is there duty of loyalty?

Answer 27

YES. Members of a member- managed LLC have a fiduciary duty of loyalty to the LLC and the other members.

Question 28

Basically what is an LLC

Answer 28

1) like partnership dealing with control of business etc
2) like corporation where limited liability
3) like partnership where must wind up the business (operating agreement is huge)
4) like corporation for derivative suits.