Business Associations Intro Cards

Question 1

The field of _______ ________ encompasses the law governing people who come together in groups to do business. It includes (ii) ________ and (iii) ______ ______, such as partnerships and limited liability corporations.

Answer 1

(i) business associations; (ii) corporations; (iii) unincorporated associations

Question 2

An (i) _____ acts on behalf of or in place of another. A (ii) ____ is the person for whom the (iii) _____ acts.

Answer 2

(i) agent; (ii) principal; (iii) agent

Question 3

An agency relationship may be established by (i) _____ _____ or by (ii) _______ of ____.

Answer 3

(i) mutual assent; (ii) operation of law

Question 4

To be a (i) ________ in an agency relationship, a person must have the capacity to (ii) _____ _______ rights and (iii) ______ ______ obligations (e.g., contract).

Answer 4

(i) principal; (ii) incur binding; (ii) incur binding

Question 5

Virtually anyone can be an (i) _____ in an agency relationship

Answer 5

(i) agent

Question 6

(i) ______ is the agent’s ability to affect the (ii) _______’s legal relationships with third parties or otherwise take actions that have (iii) ______ __________ for the (iv) ______

Answer 6

(i) authority; (ii) principal’s; (iii) legal consequences; (iv) principal

Question 7

An agent has (i) _____ _______ if the principal (ii) _____ _______, orally or in (iii) _______, that the agent may take action on the principal’s behalf.

Answer 7

(i) express authority; (ii) specifically states; (iii) writing

Question 8

An agent has (i) ___ ______ if it is not (ii) _____ ______, but (iii) _____ _____ from the principal’s conduct.

Answer 8

(i) implied authority; (ii) expressly granted; (iii) reasonably inferred

Question 9

(i) ______ authority is the authority that may be (ii) ____ _____ from the (iii) ______ of the particularly agency relationship or the position the agent holds.

Answer 9

(i) inherent; (ii) reasonably inferred; (iii) nature

Question 10

(i) _____ authority exists, if based on the principal’s (ii) ________ and _______, a third party could (iii) ____ _____ that the agent has actual authority. Agency by (iv) _____ is similar to (iv) _____ authority.

Answer 10

(i) apparent; (ii) conduct and manifestations; (iii) reasonably believe; (iv) estoppel; (v) apparent

Question 11

(i) ________ occurs if a principal, after the fact and fully knowing all the material facts, (ii) ________ _______ that the agent’s acts will bind him.

Answer 11

(i) ratification; (ii) manifests assent

Question 12

A (i) ______ and an (ii) _____ may be liable for contract the (iii) ___ enters, or for an agent’s (iv) _____ committed with the (v) _____ of ______.

Answer 12

(i) principal; (ii) agent; (iii) agent; (iv) tort; (v) scope of agency

Question 13

An agent and a principal may be liable to (i) ___ ______ for any (ii) _____ the agent enters on the principal’s behalf. Liability may depend on whether the principal is (iii) _______, ________, or ________.

Answer 13

(i) third parties; (ii) contracts; (iii) disclosed, unidentified, or undisclosed

Question 14

An agent is liable to a (i) ____ _______ harmed by the agent’s own (ii) ______ _______, regardless of whether the agent acts with any type of authority. A principal may be (iii) ______ liable to a (iv) ____ ____ harmed by an agent’s (v) ____ ______ done within the scope of authority. A principal may be (vi) ________ liable under the doctrine of (vii) ______ _______ if the agency relationship is a (viii) _____-________ relationship, and the agent commits the tort within the (ix) _______ of _____.

Answer 14

(i) third party; (ii) tortious donut; (iii) directly; (iv) third party; (v) tortuous conduct; (vi) vicariously; (vii) respondent superiur; (viii) master-servant; (ix) scope of employment

Question 15

Agents must fulfill a variety of _______ obligations in acting on behalf of principals.

Answer 15

Fiduciary

Question 16

An agent’s fiduciary duties to a principal include: (i) ____, (i) ______, and (iii) _____.

Answer 16

(i) loyalty; (ii) obedience; (iii) care

Question 17

If a principal and agent’s interest conflict, the agent must (i) _________ his interest to the principal’s. This is the duty of (ii) ________.

Answer 17

(i) subordinate; (ii) loyalty

Question 18

The duty of (i) ________ requires the agent to: act (ii) _______ within the scope of the agent’s (iii) ______ ______; comply with the principal’s (iv) ______ _________ in all acts or transactions on the principal’s behalf; and (v) ______ by the terms of (vi) _____ with the principal.

Answer 18

(i) obedience; (ii) solely; (iiii) actual authority; (iv) lawful instructions; (v) abide; (vi) contract

Question 19

The duty of (i) ______ requires that the agent act as (ii) _______, _______, and _______ as a normal, reasonable agent in (iii) ________ __________. This includes safeguarding the principal’s property, accounting for expenditures, and proving relevant information.

Answer 19

(i) care; (ii) diligently, carefully, and competently; (iii) similar circumstances

Question 20

A principal owes the duties of (i) ____ ______ and (ii) _____ to the agent and must observe the (iii) _____ and (iv) ______ terms of (v) _______ with the agent.

Answer 20

(i) good faith; (ii) indemnity; (iii) express; (iv) implied; (v) contract

Question 21

The principal must deal with the agent (i) ______ and avoid doing anything that might (ii) _____ ________ ____ the agent without fault on the agent’s part. This is the principal’s duty of (iii) _____ _____.

Answer 21

(i) fairly; and (ii) reasonably foreseeable harm; (iii) good faith

Question 22

A principal must compensate the agent for (i) ___, (ii) ______, or (iii) _______ incurred while acting as an agent. This is the duty of (iv) ______.

Answer 22

(i) hurt; (ii) loss; (iii) damage; (iv) indemnity

Question 23

A (i) __________ is an association of two or more persons or entities carrying on as co-owners of a business for (ii) ______.

Answer 23

(i) partnership; (ii) profit

Question 24

A (i) _______ ________ is distinct from its constituent (ii) ________, but it is not a (ii) _____ person in the same sense as a corporation

Answer 24

(i) general partnership; (ii) partners; (iii) juridical

Question 25

If two or more persons come together as (i) __-_____ of a business for profit, and no other type of association is legally formed, a (ii) _____ _________ is formed by default.

Answer 25

(i) co-owners; (ii) general partnership

Question 26

Within a (i) _____ _________, persons who qualify as (ii) _______ are those who have a right to receive a (iii) _____ of the ________ and participate in (iv) ______ and _________ the business. A (v) ______ may also contribute (vi) ______.

Answer 26

(i) general partnership; (ii) partners; (iii) share of the profits; (iv) controlling and managing; (v) partner; (vi) capital

Question 27

The types of general partnership include: (i) partnership __ ______ (where ________ is not find by the terms of the agreement); partnership for a _____ _____; and partnership for a _______ ________ or ____ _______, which exists for a discrete project

Answer 27

(i) at will, duration; (ii) definite term; (iii) particular undertaking, joint venture

Question 28

Partners may enter into a (i) ______ ________ via (ii) ____, _____, or _______ (iii) ______, but no such (iv) ______ _______ is always necessary to form a partnership.

Answer 28

(i) partnership agreement; (ii) oral, written, or implied (iii) contract; (iv) partnership agreement

Question 29

In a general partnership, partners are (i) _______ liable for partnership obligations, whether (ii) ____ or (iii) ____.

Answer 29

(i) personally; (ii) contract; (iii) tort

Question 30

If a partner’s act is (i) _______ for (ii) _______ on the (iii) ________’s ________ in its (iv) ______ ______, then the act binds the partnership.

Answer 30

(i) apparently; (ii) carrying; (iii) partnership’s business; (iv) ordinary course

Question 31

A general partnership may (i) ____ and be (ii) _____ in its own name. A general partnership and the partners themselves are (iii) ______ for harm arising from the partners’ (iv) ______ and other wrongful acts committed with (v) _______ ______ or in the (vi) _____ _____ of the partnership’s business.

Answer 31

(i) sue; (ii) sued; (iii) liable; (iv) torts; (v) actual authority; (vi) ordinary course

Question 32

Typically, partners in a partnership are ______ and ______ liable for obligations.

Answer 32

Jointly and severally

Question 33

Partners owe (i) _____ ______ to each other, including (ii) _____ and (iii) ______. A partner must not: deal with the partnership as an (iv) ____ ______; use or (v) _____ the partnership’s (vi) _____ ________; (vii) ____ with the partnership in the conduct of its business; (vii) or _____ a partnership opportunity.

Answer 33

(i) fiduciary duties; (ii) care; (iii) loyalty; (iv) adverse party; (v) exploit; (vi) confidential information; (vii) compete; (viii) appropriate

Question 34

A partner may transact with the general partnership in his (i) ____ _______ as if he were a (ii) _____ _______. But, if the partner derives any (iii) ______ _______ from carrying on or winding up the business, he must (iv) _____ the ______ to the (v) _______.

Answer 34

(i) individual capacity; (ii) third party; (iii) personal benefit; (iv) relinquish the benefit; (v) partnership

Question 35

The partner’s fiduciary duty of (i) ____ holds that the partner must refrain from (ii) ____ ______ or (iii) _____ conduct, (iv) __________ misconduct, or a (v) ____ _____ of law related to partnership business. A partnership may (vi) ____ eliminate the duties of (vii) _____, ___, or ___ _____ and ___ ____, though it may modify the duties in some cases.

Answer 35

(i) care; (ii) grossly negligent; (iii) reckless; (iv) intentional; (v) knowing violation; (vi) not; (vii) loyalty, care, or good faith and fair dealing

Question 36

A general partnership may own (i) ____ in its name. (ii) _____ owned by the partnership is not individual property. A partner may use or possess the (iii) _____, but only on the partnership’s behalf.

Answer 36

(i) property; (ii) property; (iii) property

Question 37

Each partner has (i) _____ rights in the (ii) _______ and ______ of the partnership. Generally, a partner is not entitled to (iii) ________ for (iv) _____ _______ to the partnership.

Answer 37

(i) equal; (ii) management and conduct; (iii) compensation; (iv) services rendered

Question 38

Subject to the (i) _______ ________, each partner is entitled to a (ii) ________ of the partnership (iii) ______ and has the right to receive (iv) __________ from the partnership. Each partner must share in the partnership (v) ___________ in proportion to his share of the (vi) _______. These rules apply without regard to (vii) ______ _______.

Answer 38

(i) partnership agreement; (ii) share; (iii) profits; (iv) distributions; (v) losses; (vi) profits; (vii) capital contributions

Question 39

Each partner is entitled to review the partnership’s (i) _____ and _____ during (ii) ______ _______ ____. The (iii) ____ and ____ must be kept at the partnership’s (iv) _____ _____ ______.

Answer 39

(i) books and records; (ii) normal business hours; (iii) books and records; (iv) chief executive offices

Question 40

(i) _________ from a partnership means that a partner ceases to be a partner

Answer 40

Disassociation

Question 41

In most states, a partner may (i) ________ by his (ii) _____ withdrawal, and (iii) _____ set forth in the (iv) _____ _______, his (v) __________, his (vi) _____ _____, such as bankruptcy, or his (vii) ______ or _____.

Answer 41

(i) disassociate; (ii) volitional; (iii) events; (iv) partnership agreement; (v) expulsion; (vi) financial distress; (vii) death or incapacity

Question 42

A (i) _____ partner is no longer a partner but may owe certain duties and exercise certain rights toward the partnership, including the (ii) _______ duties of (iii) ____ and _______ regarding matters prior to his (iv) _______.

Answer 42

(i) disassociated; (ii) fiduciary; (iii) loyalty and care; (iv) disassociation

Question 43

If a (i) _________ event occurs, the partnership (ii) _____-___ and (iii) _______. Termination does not affect liability for obligations.

Answer 43

(i) dissolution; (ii) winds-up; (iii) terminates

Question 44

Events that can cause the dissolution of a partnership include: (i) a partner’s ________ in a partnership (ii) __ _____; dissolution related to partnership for a (iii) ____ ______; an event specified in the (iv) ____ _______; (v) the partner’s business becoming (vi) _______; or (vii) ___ _____ upon application by a partner or transferee

Answer 44

(i) withdrawal; (ii) at will; (iii) definite term: (iv) partnership agreement; (v) illegal; (vi) judicial dissolution

Question 45

The process of winding-up a general partnership includes: (i) ________ and ________ actions and proceedings; (ii) _______ and ________ the partnership business; (iii) ________ of and ________ partnership property; (iv) discharging partnership ___________; (v) distribution of _________ to the ________; (vi) ______ _______ regarding the partnership.

Answer 45

(i) prosecuting and defending; (ii) settling and closing; (iii) disposing of and transferring; (iv) liability; (v) assets, partners; (vi) settling disputes

Question 46

In winding-up, partners may not enter into any (i) ____ ________ or engaging in (ii) ____ ______; they are limited to (iii) ____ _______.

Answer 46

(i) new transactions; (ii) new business; (iii) old business

Question 47

If a partnership winds-up and its assets are insufficient to satisfy its liabilities, (i) ___ _____ must (ii) _________ to the deficiency in (iii) _______ to his share of the partnership (iv) _______.

Answer 47

(i) each partner; (ii) contribute; (iii) proportion; (iv) losses

Question 48

A (i) _______ partnership contains at least one general partner and at least one (ii) _______ partner, formed in compliance with state statute.

Answer 48

(i) limited; (ii) limited

Question 49

To form a limited partnership, a (i) _______ of _______ partnership must be filed with the state’s office for (ii) ____ ____________, usually the (iii) _______ of _____.

Answer 49

(i) certificate of limited; (iii) business organization; (iii) secretary of state

Question 50

A (i) ________ partner in a limited partnership has the same (ii) _____ and ______ as a partner in a general partnership, with (iii) _______ _____ owed to the limited partners and the partnership largely paralleling responsibilities in a general partnership. A (iv) _______ partner participates in the (v) ________ and _______ of the partnership business and is (vi) _______ and ______ ______ for obligations.

Answer 50

(i) general; (ii) rights and duties; (iii) fiduciary duties; (iv) general; (v) management and conduct; (vi) jointly and severally liable

Question 51

A (i) ________ partner contributes (ii) _______ in exchange for an (iii) _________ _______ in the limited partnership, and typically does not participate in (iv) _______ the business. If a limited partner participates in (v) __________ the business, he may be liable for obligations as a (vi) _______ ________. A (vii) ______ partner may have the right to (viii) ______ on certain matters and (ix) ________ partnership (x) _______.

Answer 51

(i) limited; (ii) capital; (iii) ownership stake; (iv) controlling; (v) controlling; (vi) general partner; (vii) limited; (viii) vote; (ix) inspect; (x) recrods

Question 52

In a limited partnership, the (i) _____ ______ governments the parties’ rights to (ii) ________.

Answer 52

(i) partnership agreement; (ii) distributions

Question 53

A (i) _________ partnership may be (ii) _____, _____-__, and terminated the same as a general partnership.

Answer 53

(i) limited; (ii) dissolved, wound-up

Question 54

A limited partnership may dissolve: at a time specified in the (i) ___________ of _________ partnership or specified by the (ii) _________ ________; or by the (iii) ______ of the (iv) ________; or upon the (v) _______ of the general partner; or by (vi) _____ _______; or by filing a (vii) _________ of ________ with the (viii) ________ of _____.

Answer 54

(i) certificate of limited; (ii) partnership agreement; (iii) consent of the (iv) partners; (v) disassociation; (vi) judicial action; (vii) certificate of dissolution; (viii) secretary of state

Question 55

Termination of a (i) ________ partnership does not occur until the business is (ii) ____ ____. The rules regarding distribution of (iii) ________ and the general partner’s obligation to (iv) ______ ________ in excess of (v) ______ largely are the same as those governing general partnership.

Answer 55

(i) limited; (ii) wound-up; (iii) assets; (iv) satisfy obligations; (v) assets

Question 56

A (i) _______ ________ partnership is one that has obtained approval from the (ii) ______ and filed with the (iii) ________ of ______. In an (iv) _______, partnership are not (v) _____ ________ for obligations to (vi) _____ _______ solely due to their status as partners.

Answer 56

(i) limited liability; (ii) partners; (iii) Secretary of State; (iv) LLP; (v) personally liable; (vi) third parties

Question 57

A (i) _____ is a (ii) ____ ______, meaning it is a legal entity distinct from its owners, (iii) ________, and (iv) ______, formed under the laws of a state.

Answer 57

(i) corporation; (ii) juridical person; (iii) directors; (iv) managers

Question 58

Hallmarks of the (i) _______ form are the separation of (ii) _________ and (iii) _______ and (iv) _______ ____ for (v) _______, directors, managers, and employees

Answer 58

(i) corporate; (ii) ownership; (iii) control; (iv) limited liability; (v) shareholders

Question 59

A corporation’s shareholders generally are (i) __ _____ for the corporation’s (ii) ____ or (iii) ______ beyond their (iv) _____ ______ or the cost to acquire their share.

Answer 59

(i) not liable; (ii) acts; (iii) debts; (iv) capital contribution

Question 60

Under the doctrine of (i) ________ _________, corporations are separate, distinct (ii) _____ _______ with many rights and duties of natural persons. Corporations may own (iii) _______, enter (iv) _______, claim (v) _______ ___________, make (vi) _____ _____, and (vii) ____ and be ______.

Answer 60

(i) corporate personhood; (ii) legal entities; (iii) property; (iv) contracts; (v) constitutional rights; (vi) political contributions; (vii) sue and be sued.

Question 61

Typically, a corporation is composed of a (i) ____ of ______, (ii) __________, (iii) _______, and (iv) ________.

Answer 61

(i) board of directors; (ii) officers; (iii) shareholders; and (iv) employees

Question 62

A corporation’s (i) ________ __ _______ is entrusted with the control of the corporation.

Answer 62

(i) board of directors

Question 63

A corporation’s (i) _________ are entrusted with daily administration

Answer 63

(i) officers

Question 64

A corporation’s (i) _________ own, but do not manage, the corporation.

Answer 64

(i) shareholders

Question 65

A corporation must have a (i) ______ _______, stated in its (ii) _______ of ________.

Answer 65

(i) lawful purpose; (ii) articles of incorporation

Question 66

A corporation may be founded by filing (i) _______ __ _______ with the (ii) ______ __ ______ (generally). The corporation’s (iii) ________ then adopt (iv) ________ to manage the business.

Answer 66

(i) certificate of incorporation; (ii) Secretary of State; (iii) directors; (iv) bylaws

Question 67

If (i) _______ corporation owns a (ii) ______ _______ (usually a majority) of stock in another corporate, that corporation is a (iii) _________.

Answer 67

(i) parent; (ii) controlling percentage; (iii) subsidiary

Question 68

A (i) _______ corporation is a corporation in any state other than one in which it is (ii) _________. Generally, a (iii) _______ corporation must register with the (iv) ______ __ ______.

Answer 68

(i) foreign; (ii) incorporated; (iii) foreign; (iv) secretary of state

Question 69

Courts may (i) ________ __ _______ _____ by setting aside the principles of (ii) ____ -_____ and disregarding the corporate entity in the interests of (iii) ______.

Answer 69

(i) pierce the corporate veil; (ii) limited-liability; (iii) equity.

Question 70

Courts will generally only (i) ____ ___ _______ ____ if the corporate form has been abused, to cheat (ii) ______, through such acts as the (iii) ________ of shareholder and corporate (iv) ______, by severely (v) ________ the corporation, by manipulating its (vi) ________ and _________, or by using the corporate form to facilitate (vii) ____ or _____.

Answer 70

(i) pierce the corporate veil; (ii) creditors; (iii) commingling; (iv) assets; (v) undercapitalizing; (vi) assets and liabilities; (vii) crime or fraud.

Question 71

Corporations have the power to: (i) _____ and be _____; make and amend (ii) ______; acquire, hold, or dispose of (iii) __________; make (iv) _________, incur _______, and secure __________; (v) ______ and invest; be a (vi) ______ in a different association; (vii) donate to _______; and (vii) _______ and hire _____, _______, and ______.

Answer 71

(i) sue and be sued; (ii) bylaws; (iii) property; (iv) make contracts, incur debts, and secure obligations; (v) lend; (vi) partner; (vii) charity; (viii) appoint, directors, officers, and employees.

Question 72

The ownership of the corporation is divided into (i) _____ __ _______, represented by (ii) ______ _______.

Answer 72

(i) shares of stock; (ii) transferrable certificates

Question 73

(i) _______ stock is the stock issue by corporation under its authority

Answer 73

(i) capital

Question 74

(i) ________ stock entitles a shareholder to receive (ii) ______ from profits and to (iii) _____ on corporate matters

Answer 74

(i) common; (ii) dividend; (iii) vote

Question 75

(i) ________ stock entitles shareholders to receive (ii) _______ before common stockholders, and typically have no (iii) _______ rights.

Answer 75

(i) preferred; (ii) dividends; (iii) voting

Question 76

A (i) _______ is a pre-incorporation agreement to buy shares in a corporation once it is formed.

Answer 76

(i) subscription.

Question 77

After incorporation, the board of directors may cause the corporation to issue new shares of stock in exchange for (i) _______, (ii) _______ _____.

Answer 77

(i) consideration; (ii) return value.

Question 78

In a few states, corporations are compelled to set a (i) _____ value, called the (ii) ____ ______, below which newly issued shares may (iii) ____ ___ _______. Newly issued stock less than (iv) ___ ______ is called (v) ___ _____.

Answer 78

(i) monetary; (ii) par value; (iii) not issue stock; (iv) par value; (v) water stock

Question 79

A (i) _______ right is the (ii) _______’s right to buy a percentage of newly issued stock equal to the (iii) _______’s current percentage ownership

Answer 79

(i) preemptive; (ii) shareholder’s; (iii) shareholder’s

Question 80

Shareholder’s ability to (i) _________ their stock may be limited to legal restriction or restrictions in the (ii) ______ ___ _______, (iii) _______, or other agreement.

Answer 80

(i) transfer; (ii) articles of incorporation; (iii) bylaws

Question 81

A corporation may (i) ________ its own outstanding shares, usually at (ii) _____ ______, to increase the amount of stock it owns, to reissue stock for (iii) ______, or as a preliminary step to (iv) ______-_______. (v) _________ shares are called (vi) _________ shares.

Answer 81

(I) reacquire; (ii) market prices; (iii) capital; (iv) going-private; (v) reacquired; (vi) treasury

Question 82

Debt securities are called (i) ______. A (ii) _______ represents a debt owing from the (iii) ________ to the holder. (iv) _______ are typically backed by a (v) _______, _______ or other interest in the property. Types of (vi) ______ included: bearer, registered, mortgage, convertible, debentures, and guaranteed debt securities.

Answer 82

(i) bond; (ii) bond; (iii) corporation; (iv) bonds; (v) mortgage, lien; (vi) bonds

Question 83

A (i) _______ is a stock (ii) ______, an agreement between the corporation and the (iii) ______-holder that the holder may purchase stock at that (iv) ____.

Answer 83

(i) warrant; (ii) option; (iii) option; (iv) price

Question 84

Every corporation must have a (i) ______ __ ________ with at least (ii) ____ _______, unless the shareholders agree (iii) ________ to (iv) _____ the requirement.

Answer 84

(i) board of directors; (ii) one member; (iii) unanimously; (iv) waive

Question 85

All (i) _________ _____ must be exercised by the board of directors under its (ii) _______, and all (iii) ___________ ______ must be managed by the board and subject to its oversight.

Answer 85

(i) corporate power; (ii) authority; (iii) corporate affairs

Question 86

The (i) _______ __ ________ and (ii) ______ prescribe the qualifications a person must meet to be a (iii) ______.

Answer 86

(i) articles of incorporation; (ii) bylaws; (iii) director

Question 87

The (i) ______ ___ _________ is typically elected (ii) __________ at the (iii) ________’s meeting. The corporation may set (iv) ______ for directors, specify the number of directors, or provide for a (v) _______ (______) board.

Answer 87

(i) board of directors; (ii) annually; (iii) shareholder’s; (iv) terms; (v) staggered (classified)

Question 88

Typically, the (i) ______ __ _______ must act at a (ii) ______, either a regular (iii) ______ or a special (iv) ______. If there is a (v) _______, then an affirmative vote of the majority of the board of directors will constitute an act for the entire board of directors. A corporation’s board may act by (vi) _____ _____ without a meeting. A board may delegate its power to a (vii) _______ of _______.

Answer 88

(i) board of directors; (ii) meeting; (iii); (iv) meeting; (v) quorum; (vi) unanimous consent; (vii) committee of directors.

Question 89

A director’s ________ ________ is to act in (ii) __ ___ and in a manner the director (iii) _____ __________ to be in the (iv) ____ ________ of the (v) ________, its businesses, and its (vi) _________.

Answer 89

(i) fiduciary duty; (ii) good faith; (iii) reasonably believes; (iv) best interest; (v) corporation; (vi) shareholders

Question 90

The (i) ______ __ ______ holds that a director must discharge his duties with the (ii) _____ __ ______ that a (iii) ______ _____ in the (iv) _____ _____ would deem appropriate under the (v) _________. This requires directors to make (vi) _______ ________ and to actively (vi) _______ the corporation’s affairs.

Answer 90

(i) duty of care; (ii) degree of care; (iii) reasonable person; (iv) same position; (v) circumstances; (vi) informed decisions; (vii) monitor

Question 91

If a director is sued for a bad decision that allegedly breached the duty of care, a court will (i) _______ _____ that the director acted in (ii) _____ _____, upon (iii) _______ _____, and in the (iv) _______ _____ that the act was in the corporation’s _____ ______. It is the plaintiff’s burden to prove otherwise.

Answer 91

(i) rebuttable presume; (ii) good faith; (iii) reasonable information; (iv) honest belief; (v) best interests

Question 92

If a director knows (i) ____ _______ to the other director’s (ii) _____, and that the other directors are unaware of the (iii) _______, the director has a (iv) _____ __ _______ to (v) ________ the facts.

Answer 92

(i) facts material; (ii) duties; (iii) facts; (iv) duty of candor; (v) disclose

Question 93

Directors must put the interests of the corporation and the shareholders ahead of their own; this is the (i) ______ __ _____. Directors must avoid (ii) _____ __ _____ and must not take (iii) _____ _______ of business (iv) _______ that should be offered to the (v) ________.

Answer 93

(i) duty of loyalty; (ii) conflicts of interest; (iii) personal advantage; (iv) opportunities; (v) corporation

Question 94

A corporation may be permitted, or required, to (i) _______ a director for (ii) _______ arising out of (iii) __________ brought against the (iv) _____ __ _______. A corporation may also (v) _______ the director (vi) ______ to pay reasonable expenses incurred in litigation defense.

Answer 94

(i) indemnify; (ii) losses; (iii) litigation; (iv) board of directors; (v) advance; (vi) funds

Question 95

Every corporation must have (i) _______, entrusted with the daily operations of the corporation. The (ii) _____ __ _______ appoints (iii) ______, and may also (iv) _____ them. An officer owes the same (v) ______ duties to the corporation and its shareholders that a (vi) ______ would owe.

Answer 95

(i) officers; (ii) board of directors; (iii) officers; (iv) remove; (v) fiduciary; (vi) director

Question 96

Generally, (i) _______ and (ii) ______ are not (iii) _______ liable for corporation obligations.

Answer 96

(i) directors; (ii) officers; (iii) personally

Question 97

Typical shareholder rights include the right to (i) _____ at (ii) _______ meetings, to (iii) ______ directors, to approve or disapprove of corporate changes, to receive (iv) ______ and ________, and to (v) ____ the corporation books and (vi) _____.

Answer 97

(i) vote; (ii) annual; (iii) elect; (iv) distributions and dividends; (v) inspect; (vi) records

Question 98

Each corporation must hold at least one (i) _____ meeting, to (ii) ______ _________. It may also hold special meetings.

Answer 98

(i) annual; (ii) elect directors

Question 99

Voting for directors can take many forms. In (i) ______ voting, each share eligible to vote may be voted in favor of one candidate for each directorship up for election. In (ii) ______ voting, a shareholder may multiply the number of shares he owns by the number of (iii) _____ open.

Answer 99

(i) straight; (ii) cumulative; (iii) seats

Question 100

The board of directors has the authority to declare (i) _____ to shareholders. A (ii) _______ can be in (iii) _____ or other (iv) _______. Examples of (v) ______ include (vi) ______, stock _________ or _______, and _______ dividends.

Answer 100

(i) distributions; (ii) distribution; (iii) cash; (iv) property; (v) distributions; (vi) dividends, stock repurchases or redemptions, and liquidation dividends.

Question 101

If a shareholder (i) _______ from an (ii) _________ corporate action that will fundamentally change the existence or nature of his share, he may seek the right of (iii) _________. The right of (iv) ________ compels the corporation to (v) ___-______ the stock at an (vi) _______ or (vii) _______ determined (viii) ____ ____ _____. Actions that may trigger (ix) ________ rights include: (x) ______; (xi) share ______; (xii) _______ sales; and (xiii) changes to the _____ of ______ implementing a (xiv) _____ ______ ______

Answer 101

(i) dissents; (ii) extraordinary; (iii) approval; (iv) appraisal; (v) buy-back; (vi) appraised; (vii) judicially; (viii) fair market value; (ix) appraisal; (x) merger; (xi) exchange; (xii) asset; (xiii) articles of incorporation; (xiv) reverse stock split

Question 102

A (i) __________ _______ may affect the corporation’s governance, management, and affairs in ways (ii) ________ with the usual rules allocating power between the (iii) _______ and _________, such as by eliminating the board of directors

Answer 102

(i) shareholders agreement; (ii) inconsistent; (iii) directors and shareholders

Question 103

Rule (i) ____ of the (ii) ______ and ______ _______’s rules and regulations prohibit fraud in any transaction to buy or sell securities.

Answer 103

(i) 10b-5; (ii) Securities and Exchange Commission’s

Question 104

Under the classical theory of (i) ______ _______, a person commits (ii) _______ _______ if he: (iii) ____ or _____ securities on the basis of (iv) _____, (v) ________ information acquired in his fiduciary capacity; if he does not reveal that information to the (vi) _____ _____ to the transaction; and he is under a (vii) _____ _____ to the other party to (viii) _______ the ________.

Answer 104

(i) insider trading; (ii) insider trading; (iii) buys or sells; (iv) material; (v) nonpublic; (vi) other party; (vii) fiduciary duty; (viii) disclose the information

Question 105

Under the (i) ________ ________ of (ii) ______ _____, a person commits (iii) _____ _____ by dealing in securities on the basis of (iv) _____, ________ information if the person’s use of that (v) ________ violates a fiduciary duty to the (vi) ______ of the information.

Answer 105

(i) misappropriation theory; (ii) insider trading; (iii) insider trading; (iv) material, nonpublic; (v) information; (vi) source

Question 106

Under the (i) _____-_______ theory of (ii) ______ _____, a (iii) _____ may be liable for (iv) ____ _____ along with the (v) ________ if the (vi) _____’s disclosure of information to the (vii) ______ was a breach of the (viii) ______’s fiduciary duties, and the (ix) ________ knew (or had reason to know) of the (x) ______.

Answer 106

(i) tipper-tippee; (ii) insider trading, (iii) tippee; (iv) insider trading; (v) tipper; (vi) tipper’s; (vii) tippee; (viii) tipper’s; (ix) tippee; (x) breach

Question 107

Under the (i) _______-__-_______ theory of (ii) _____ ______, a person who trades on (iii) ______, ______ information in breach of fiduciary duty may (iv) ______ ________ by (v) _______ _________ his plans to trade on the information and all (vi) ______ _______ ahead of time, to the object of the fiduciary duty.

Answer 107

(i) disclose-or-abstain; (ii) insider trading; (iii) material, nonpublic; (iv) escape liability; (v) fully disclosing; (vi) material information

Question 108

A (i) ____ ______ is a corporation with fewer than a specified number of (ii) ________, stock in which is (iii) _____ _______ _______ and subject to one ore more (iv) ______ ________. (v) ______ corporations are typically small, family-run businesses. (vi) _______ may manage the corporation directly. Generally, (viii) _______ in a close corporation owe the same (ix) _______ _______ that (x) ________ in a (xi) _______ ______ owe one another.

Answer 108

(i) close corporation; (ii) shareholders; (iii) not publicly traded; (iv) transfer restrictions; (v) close; (vi) shareholders; (viii) shareholders; (ix) fiduciary duties; (x) partners; (xi) general partnership

Question 109

(i) _______ changes to the corporation may require (ii) _______ approval. These changes include: (iii) _______ the articles of incorporation; (iv) _______ the bylaws; (v) _____; (vi) ______ sales; (vii) ________; (viii) _____ exchanges; and (ix) ________

Answer 109

(i) fundamental; (ii) shareholder; (iii) amending; (iv) amending; (v) merger; (vi) asset; (vii) consolidations; (viii) share; (ix) recapitalizations

Question 110

A (i) _________ is where holders of (ii) _____ or _______ exchange their existing shares for new securities.

Answer 110

(i) recapitalization; (ii) debt or equity securities

Question 111

(i) _________ does not immediately end a (ii) _______’s existence. The corporation may finish (iii) ________ business it had (iv) ____________ when (v) _______ took effect. It may not undertake any (vi) ________ ___ business unrelated to the winding-up.

Answer 111

(i) dissolution; (ii) corporation’s; (iii) whatever; (iv) outstanding; (v) dissolution; (vi) signifiant new

Question 112

Proper corporation (i) _______ activities include: (ii) collecting and disposing of ______; taking steps to (iii) _____ _______’s claims against the corporation; (iv) ______ _______ to shareholders; and concluding any (v) _________

Answer 112

(i) dissolution; (ii) assets; (iii) discharge creditor’s; (iv) distribute assets; (v) litigation

Question 113

An (i) _______ is neither a corporation nor a partnership, though it is a separate legal person from its owners. An (ii) _____ may sue and be sued it its own name and do anything (iii) ______ and ________ _______ to carry out its affairs.

Answer 113

(i) LLC; (ii) LLC; (iii) lawfully and reasonably necessary

Question 114

In an LLC, (i) ______ hold equity ownership stakes in the LLC. A (ii) ______ is someone who, in a (iii) ______-_______ LLC direct and controls the LLC’s operations in the (iv) _____ _______ of its business. The (v) ______ _______ is a contract among the LLC’s (vi) ____ that governs: (vii) _______ among the (viii) ______; the powers and responsibilities of the (ix) ________; the LLC’s (s) ______ ______ and conduct; and procedures to (xi) _______ the (xii) _______ _________.

Answer 114

(i) member; (ii) manager; (iii) manager-managed; (iv) ordinary course; (v) management agreement; (vi) members; (vii) relations; (viii) members; (ix) manager; (x) business affairs; (xi) amend; (xii) operating agreement.

Question 115

To form an LLC, the organizers must file a (i) _____ __ ______ with the (ii) _____ __ _____.

Answer 115

(i) certificate of organization; (ii) secretary of state

Question 116

In a (i) _____-______ LLC, the (ii) _______ decides all matters relating to the LLC’s affair. In a (iii) _____-_______ LLC, each (iv) ______ has equal rights in managing the LLC. An LLC is presumed to be (v) _____-_______ by default, unless the (vi) ______ ______ indicates that it is to be (vii) ______-______.

Answer 116

(i)manager-managed; (ii) manager; (ii) member-manage; (iv) member; (v) member-managed; (vi) operating agreement; (vii) manager-managed

Question 117

In a (i) ______-______ LLC, the manager owes the LLC and its members the same fiduciary duties that apply to officers and directors of a corporation.

Answer 117

manager-managed

Question 118

In a (i) _____-_______ LLC, the (ii) ______s owe one another the same fiduciary duties as the (iii) _______ in the (iv) _____-______ LLC.

Answer 118

(i) member-managed; (ii) members; (iii) manager; (iv) manager-managed

Question 119

Like a corporation, each (i) _____ or (ii) _____ of an LLC is not (iii) _______ for the LLC’s obligations solely due o their status as a (iv) _______ or ________. A (v) _____ or _____ may be (vi) _________ liable under the doctrine of (vii) _____ _______.

Answer 119

(i) member; (ii) manager; (ii) liable; (iv) member or manager; (v) member or manager; (vi) personally; (vii) veil piercing

Question 120

(i) ______ have a right to distributions from the LLC, insofar as the LLC elects to make distributions. Subject to the (ii) _____ _______, the (iii) _____ are entitled to receive distributions (iv) ______ to their (v) _______. Distributions are not allowed if they would render the LLC unable to pay its (vi) ___________.

Answer 120

(i) members; (ii) operating agreement; (iii) members; (iv) equal; (v) shares; (vi) debts/creditors

Question 121

The rules for (i) _______ an LLC (winding-up) are similar to the rules governing winding up a corporation

Answer 121

(i) dissolution

Question 122

Corporate shareholders or LLC members can bring one of three types of lawsuits; (i) _______; (ii) ________; and (iii) ______ actions.

Answer 122

(i) direct; (ii) derivative; (iii) class actions.

Question 123

(i) _____ litigation is where a shareholder/member sues to recover for (ii) ______ to (iii) _______ in an (iv) _____ ____.

Answer 123

(i) direct; (ii) injury; (iii) himself; (iv) individual capacity

Question 124

(i) _______ litigation is where a shareholder sues to assert a claim on behalf of the (ii) ________ or the (iii) _____-at-______, usually because the (iv) _______ has (v) _____ __ ______ the claim.

Answer 124

(i) derivative; (ii) corporation; (iii) shareholders-at-large; (iv) corporation; (v) failed to assert

Question 125

A corporation (i) ___ _____ is a suit in which a (ii) ____ authorizes one named plaintiff (or a small group of plaintiffs) to (iii) ____ the interests of a larger group of (iv) ______ ______ persons.

Answer 125

(i) class action; (ii) court; (iii) represent; (iv) similarly situated

Question 126

In order for a corporate class (class action) to be certified, it must be: (i) _____; (ii) share _____ ______ of ____ or ____; claims by the (iii) ________ must be (iv) _______ of the class; and there must be a finding that the (v) _____ will (vi) _____ represent the class’s (vii) _____.

Answer 126

(i) numerous; (ii) common questions of law or fact; (iii) representative; (iv) typically; (v) representative; (vi) fairly; (vii) interests