BA

Question 1

General Partnership Rule

Answer 1

A partnership is an association of two or more persons who carry on as coowners a business for profit.

Partners = personally liable - can be held jointly and severally liable

Question 2

Limited Partnership

Answer 2

Formed by filing certificate with state

GP - personally liable
LP - not personally liable unless serve as GP

Question 3

Corporation by Estoppel

Answer 3

An entity or person dealing with a business as a corporation may be estopped from denying its corporate status and seek personal liability from the owner.

Question 3

Implied Authority

Answer 3

Authority partner reasonably believes they have as a result of actions of the partnership

Question 4

GP Contractual Liability

Answer 4

Liable for contracts entered into by a partner if partner has authority

Question 5

Apparent Authority

Answer 5

Exists if partnership holds partner out as possessing certain authority or an act by the partner induces another to reasonably believe authority exists

Question 6

Partnership Tort Liability

Answer 6

Liable for torts committed by partners/employees in ordinary course of partnership business or with authority of partnership

Question 7

Promoter Liability

Answer 7

A promoter is personally liable for contracts entered into prior to incorportion UNLESS:
1. Novation - corp & other party agree to substitute corp for the promoter, or
2. Adoption - corp adopts contract and agrees to take liability with promoter

Question 8

Piercing the Corporate Veil

Answer 8

Must pierce corporate veil to hold individual investors or shareholders personally liable

Factors:
1. Alter ego - observe corporate formalities?
2. Undercapitalization - at time of formation
3. Fraud

Question 9

Corporation Liability for Contracts

Answer 9

Corporation liable for contracts entered into by its agents or officers on behalf of corporation

Question 10

Corporation Liability for Torts

Answer 10

2 Theories
1. Vicarious liability - liable for tort committed by officer/agent acting within scope of employment
2. Directly liable to a third party harmed by officer/agent conduct if (1) authorizes/ratifies agent’s conduct; (2) negligently hires/supervises, or (3) delegates non-delegable duty

Question 11

Duty of Care - Corporation

Answer 11

Directors have duty to act with care of an ordinarily prudent person and to make decisions in good faith

Defenses:
1. Reliance - entitled to rely on employees/officers/experts
2. Business Judgment Rule

Question 12

Business Judgment Rule

Answer 12

Rebuttable presumption that a director reasonably believed his actions were in the best interest of the corporation

SH can overcome by showing:
1. Did not act in good faith
2. Not informed to extent necessary
3. Not objective and had material interest in decision
4. Failed to timely investigate a matter

Question 13

Duty of Loyalty

Answer 13

1. Self-Dealing
2. Usurping Corporate Opportunities

Question 14

Self-Dealing

Answer 14

If director engages in transaction to benefit himself

Safe Harbor Rule
1. Disclose all material facts to board and get approval from majority of disinterested directors
2. Disclose all material facts to SHs and get approval from majority of disinterested SHs, or
3. Transaction is fair to corp at time it was made

Question 15

Shareholder Lawsuits

Answer 15

1. Direct Action - if breach of FD
2. Derivative Suit

Question 16

Shareholder Derivative Suit Requirements

Answer 16

1. Standing - must have been SH at time of the harm, hold shares throughout litigation, and fairly and adequately represent interest of corporation
2. Demand or demand futility - must ask board to bring suit first

Question 17

2 Steps to Terminating a Partnership

Answer 17

1. Dissolution - triggered by an event
2. Winding up - discharging liabilities

Question 18

Corporation Rule

Answer 18

A corporation is formed by filing articles of incorporation with the Sec. of State and provides limited liability to board members, officers, and shareholders.