Biz Ass

Question 1

De facto Corporation

Answer 1

A de facto corporation
1) attempted to incorporate in good faith,
2) is otherwise eligible to incorporate, and
3) subsequently acted like a corporation in good
faith

Question 2

De Jure Coproation

Answer 2

one that is formed in accordance with the law. To be valid, the articles of incorporation must be filled with the appropriate state office, which is usually the secretary of the state. Upon filling the articles, the corporation comes into existence unless the articles specify a future date to begin

Question 3

A benefit of incorporating is the investor are shielded from personal liability and are only at risk to the extent of their investment. The corporate shield can however be pierced and the corporation existence being ignored and the shareholders of the corporation being personally liable. Courts will look to the

Answer 3

totality of the circumstances to determine if the conditions are such that the veil should be pierced. Factors of the courts will consider alter ego, inadequate capitilizaiton and fraud.

Question 4

Ultra Vires

Answer 4

When a corporation that has stated a narrow business purpose in its articles of incorporation subsequently engages inactivities outside that stated purpose, the corporation has engaged in an ultra vires act. When a third party enters into atransaction with the corporation that constitutes an ultra vires act for the corporation, the third party generally cannotassert that the corporation has acted outside those powers in order to escape liability.

Question 5

Duty of care - partners

Answer 5

A partner owes a duty of care to the partnership and other parts to refrain from engaging in negligent, reckless or unlawful conduct. A partnership may pursue a Legal action against a partner for a breach of the partnership agreement or for violating a duty owed to the partnership that caused the harm.

Question 6

BJR

Answer 6

presumption that directors acted in an informed
matter in the best interests of the corporation. The BJR presumes that directors acted in good faith and protects them from liability for basic corporate decisions. BJR can be rebutted through a showing of bad faith, self-dealing, gross negligence
towards their duties, and more

Question 7

A director owes a corporation a duty of loyalty which includes the duty

Answer 7

not to engage in a transaction in which the director would stand to personally benefit (i.e., self-dealing).

A director who engages in self-dealing may nonetheless avoid liability under the so-called “safe harbor” rules

Question 8

Promoter liability

Answer 8

A promoter is someone who enters into a contract, prior to incorporation, for the benefit fo the to-be corporation, such as lease and vendor agreement, to help bring the corporation into existence. A promoter is personally liable for the contracts that it knowingly enters into regardless of if it was for the benfit of the corporation.

Question 9

Pre Incorporation liability

Answer 9

Corporaiton will only be liable if they adopt the contract or create a novation

Question 10

Fundamental change dissolution

Answer 10

A transfer involving all, or substantially all, of the corporation’s assets outside the usual and regular course of business is afundamental corporate change for the transferor corporation.

Question 11

Approval procedure for the fundamental change dissoultion

Answer 11

follows the approval procedure for a merger,except that only the transferor corporation’s board of directors and shareholders are entitled to vote on the transaction.

Question 12

Agency

Question 13

GP

Answer 13

A general partnership (GP) is defined as an associate of two or more persons carry on as co-owners of a business for profit. There is not requirement that the parties subjectively intend to form a partnership, only that they intend to run a business as co-owners. Moreover, there are no formalities required to form a GP. Courts generally look to the intent of the parties to determine whether a GP exists.

Question 14

LP

Answer 14

is a partnership formed by two or more persons that has at least one general partner and at least one limited partner. A limited partner’s liability for partnership debts is limited to the amount of her capital contribution to the partnership. To form a limited partnership, a certificate of limited partnership must be filed with the state.

Question 15

LLP

Answer 15

To become an LLP, a partnership must file a statement of qualification with the SOS. A partnership becomes an LLP at the time of filing of the statement or on the date specified in the statement. The advantage of operating as an LLP is that the partners are not personally liable for the LLP’s obligations

Question 16

Corporations federal securities law 105

Question 17

Corporations federal securities law 106

Question 18

Liability in a GP is

Answer 18

all partners are jointly and severally liable for all obligations of the partnership, whether the obligations arise in contract or tort.

Question 19

Actual express authority

Answer 19

Express Authority is that authority contained within the four corners of the partnership agreement, those expressly granted by the partnership, or a statement of authority filed with the state

Question 20

Actual Implied authority

Answer 20

Implied authority is authority the partner reasonably believe they have as a result of the actions of the partnership

Question 21

apparent authority

Answer 21

Apparent authority exists if the partnership holds a partner out as possessing certain authority or under RUPA, an act by the partner that was within the scope of the partnership business, thereby inducing others to reasonably believe that authority exists

Question 22

Novation

Answer 22

a substitute agreement between all relevant parties to extinguish the orginal contract, thereby releasing the orginal obligor of liability

Question 23

Express adoption

Answer 23

. Once adopted, the corporation becomes liable on the K. However, adoption does not relieve the promoter of liability absent a novation. Express adoption occurs when the corporation has expressly assumed the liability

Question 24

Implied adoption

Answer 24

whereas implied adoption may occur when the corporation accepts the benefit of the transcation from the promoter

Question 25

Corporation by estoppel

Answer 25

At common law, one dealing with a business as a corporation may be estopped from denying its corporate status. Typically, this applied to K and tort victims

Question 26

Inadequate capitlization

Answer 26

When the corporation is inadequately capitalized, so at the time of formation there is not enough unencumbered capital to reasonable cover prospective liabilities, the court may pierce the corporate veil.

Question 27

Misrepresentation

Answer 27

Misrepresentation requires a false representation, scienter (knowledge), intent to induce, causation, justifiable reliance, and damages.

Question 28

shareholder direct action

Answer 28

In a shareholder direct action, a shareholder may sue the corporation for breach of a fiduciary duty owed to the shareholder by a director or an officer. Any recovery goes to the shareholder

Question 29

Director Duty of care

Answer 29

Directors have a duty to act with the care of an ordinary prudent person in a like position and similar circumstances and to make decisions in good faith. In deciding how to act, the director is required to use any additional knowledge or special skills that he possesses.

Question 30

Power to authroize dividends rest with the

Answer 30

bod

Question 31

Valid board action

Answer 31

for a BOD act at a meeting to be valid a quorum must be present. . Absent a higher level specified in the articles of incorporation or bylaws, the assent of a majority of the directors present at the time the vote takes place is necessary for board approval. There is no rule that gives directors with positions within the company more voting power than directors who are non-employees (i.e., outside directors). Therefore, a valid board action requires a quorum to be present and a majority vote.

Question 32

Quroum

Answer 32

A majority of all directors in office constitutes a quorum, unless a higher or lower number is required by the articles of incorporation or bylaws. To be counted for quorum purposes, a director must be present at the time that the vote is taken. Presence includes appearances made using communications equipment that allows all persons participating in the meeting to hear and speak to one another

Question 33

Right to inspection

Answer 33

A shareholder has a right to inspect and copy corporate records upon five days’ written notice.

Question 34

Although a shareholder may generally inspect the main records of the corporation, such as the bylaws and articles and the minutes of shareholder meetings, the shareholder must demonstrate a proper purpose before inspecting certain records, such as

Answer 34

the financial statements of the corporation, the accounting records of the corporation, and excerpts from minutes of any meeting of the BOD. This inspection right is usually restricted to normal business hours at the corporation’s principal place of business.

Question 35

Proper purpose to inspect

Answer 35

one that relates to the shareholder’s interest in the corporation.

Question 36

When a board acts in bad aith and abuses its discretion by refusing to declare a divend a court may order

Answer 36

the board to authroize a dividened

Question 37

To prevail in a suit to compel a dividend, a shareholder must prove

Answer 37

the existence of (i) funds legally available for the payment of a dividend and (ii) bad faith on the part of the directors in their refusal to pay.

Question 38

Shareholder deriative suit is when the shareholder

Answer 38

sues on behalf of the corporation for a harm suffered by the corporation, and any recovery generally goes to the corporation.

Question 39

Standing to bring the derivative suit requires the plaintiff to

Answer 39

be a shareholder at the time the action is filed and when the act or omission occurred that caused the harm. The plaintiff must make a written demand upon the BOD 90 days before filing unless it would be futile.

Question 40

A directors conflict of interest may enjoy protection if

Answer 40

(i) the director provided full disclosure of all material facts and the transaction was approved by either a majority vote of disinterested directors or a majority of the votes entitled to be cast by disinterested shareholders, or (ii) the director can show the transaction was substantively and procedurally fair to the corporation.

Question 41

Partnership profits and losses

Answer 41

If there is no agreement or the agreement is silent as to the division of the profits and losses, each partner is entitled to an equal share of the partnership profits and losses. When the agreement addresses only the division of partnership profits, partnership losses are shared in the same manner.

Question 42

Distribution of Partnership Assets

Answer 42

In winding up a partnership’s business, partnership assets are first applied to discharge partnership obligations to creditors (including partners who are creditors of the partnership) before being distributed to the partners. Each partner’s account must then be adjusted to reflect the profits and losses that result from the liquidation of the partnership assets. After these adjustments, any partners with a negative account balance must contribute to the partnership the amount necessary to bring the account balance to zero.

Question 43

Mangement rights of Partnerships

Answer 43

Each partner has equal rights in the management and conduct of the partnership.

Question 44

Partnership power to bind the partnership

Answer 44

A partner is an agent of the partnership for the purpose of its business and can contractually bind the partnership when the partner acts with either actual or apparent authority.

Question 45

Members

Answer 45

Members are owners of an LLC.

Question 46

Shareholders

Answer 46

owners of a corporaiton