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PAST VA EXAMS > Business Organizations > Flashcards

Business Organizations Flashcards

1
Q

To form a corporation, one must file…

A

Articles of Incorporation.

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2
Q

Where should articles of incorporation be filed?

A

State Corporation Commission

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3
Q

When one files with the SCC, what must they also do?

A

pay the registration fee

applies to all entity filings.

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4
Q

Articles of incorporation must include….

A
  1. The name of the corporation;
  2. A designation that it is a corporation;
  3. The number of authorized shares; and
  4. The registered agent and office.
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5
Q

To form an LLC, parties must file…

A

Articles of Organization

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6
Q

Where should one file articles of organization?

A

State Corporation Commission

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7
Q

Articles of organization must include…

A
  1. The name of the LLC;
  2. An indication that the entity is an LLC;
  3. The registered agent and office; and
  4. The principal office of the LLC.
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8
Q

Can an LLC convert into a corporation?

A

YES

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9
Q

To form a general partnership, what must one file?

A

NO FILING is required to form a general partnership.

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10
Q

How is a partnership formed?

A

Parties must intend and operate a business for profit as co-owners.

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11
Q

To form a limited partnership, what must one file?

A

A certificate of limited partnership.

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12
Q

A certificate of limited partnership must include…

A
  1. The name of the limited partnership;
  2. A designation that it is a limited partnership;
  3. The name and address of each general partner.
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13
Q

A general partnership may be converted into a limited partnership by…

A

approval of all partners and filing of a certificate of limited partnership.

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14
Q

In a general partnership, what kind of liability do partners have for the debts of the partnership?

A

unlimited personal liability

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15
Q

If investors choose to operate their business as a general partnership, they will each be….

A

jointly and severally liable for the debts of the business.

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16
Q

A limited partnership has two classes of owners, they are…

A
  1. Limited partners; and
  2. General partners
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17
Q

Can all partners in a limited partnership be limited partners?

A

No – a limited partnership must have at least one general partner and at least one limited partner.

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18
Q

Limited partners enjoy…

A

limited liability, and are typically notr liable for debts of the partnership.

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18
Q

Unlike limited partners, general partners have…

A

unlimited personal liability for the debts of the partnership.

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19
Q

In Virginia, can the mandatory general partner, itself, be an LLC?

A

YES – this can effectively limit all personal liability for business debts for the limited partnership.

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19
Q

In a corporation are shareholders liable for the debts of the corporation?

A

Generally NO.

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20
Q

When will a shareholder be personally liable for corporate debts?

A

When the corporate veil is pierced.

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21
Q

When piercing the corporate veil, a court can disregard the corporate entity and hold shareholders personally liable for the debts of the corporation if the shareholders….

A

fail to observe the separateness of the corporation (i.e., alter ego) and use the corporation to perpetuate fraud or injustice.

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22
Q

To maintain limited liability protection in a corporation, shareholders should…

A

follow corporate formalities and not engage in fraud.

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23
Q

As with a corporation, members of an LLC can lose limited liability protection if they…

A

fail to treat the LLC as a separate entity and misuse the limited liability form to perpetrade a fraud or injustice.

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24
Q

Owners/shareholders in a corporation are issued stocks based on…

A

their percentage of ownership interest in the corporation.

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25
Q

Directors in a corporation may issue…

A

dividends, generally payable in cash.

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26
Q

Shareholders are issued dividends based on…

A

the number of shares they hold.

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27
Q

While corporate shareholders do not bear losses directly….

A

the value of their shares can be affected by corporate losses.

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28
Q

Unless the members in an LLC agree otherwise, profits and losses are allocated according to…

A

the value of each member’s contributions to the company.

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29
Q

The default rule for profit and loss sharing in a general partnership is that…

A

partners share profits equally and losses follow profits.

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30
Q

The default rule for profit and loss sharing in a limited partnership is that…

A

profits and losses are allocated according to the value in each partner’s contributions to the partnership.

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31
Q

What do managers in a manager-managed LLC do?

A

They have management rights and decision-making authority over day-to-day operations.

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32
Q

In a manager-managed LLC, who owes fiduciary duties?

A

The manager

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33
Q

Shareholders, directors, and officers are generally not liable for the debts of a corporation or….

A

for contracts signed as agents of a corporation.

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34
Q

Under Virginia Law, anyone who purports to act on behalf of a corporation while knowing that the entity has not been incorporated is…

A

personally liable unless the other party also knew that there was no corporation.

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35
Q

Directors of a corporation owe fiduciary duties of…

A

care and loyalty to the corporation.

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36
Q

The duty of loyalty includes…

A

the duty not to misappropriate or usurp a corporate opportunity.

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37
Q

In determining whether an opportunity belongs to a corporation and should be offered to the corporation before a director takes it for herself, a court will consider factors such as….

A

the similarly of the opportunity to the business of the corporation and how the director learned of the opportunity.

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38
Q

The business judgment rule is a….

A

presumption that the directors manage the corporation in good faith and in the best interests of the corporation and its shareholders.

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39
Q

Directors will not be liable for innocent mistakes of…

A

business judgment.

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40
Q

Directors are fiduciaries who owe the corporation…

A

duties of care and loyalty.

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41
Q

While the Virginia Code allows corporations to cap liability of officers and directors in articles of incorporation, such cap does not apply to…

A

willful misconduct.

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42
Q

A knowing misappropriation of corporate funds is clear….

A

willful misconduct.

43
Q

A director’s fiduciary duties are owed to…

A

the corporation, not individual shareholders.

44
Q

In Virginia, a cause of action accruing from a director’s breach of fiduciary duty must be brought as a….

A

shareholder derivative action on behalf of the corporation.

45
Q

Under Virginia’s Non-Stock Corporations Act, an action by the Board of Directors must be approved by….

A

a majority of the Directors in a vote taken when a quorum is present.

46
Q

A conflict of interest transaction is a…

A

transaction with the corporation in which a director has an interest that precludes him from being a disinterested director.

47
Q

A conflict of interest transaction is permissible if either:

A

(1) It is approved by disinterested directors or members after disclosure of material facts, or

(2) It is fair to the corporation.

48
Q

The sale of substantially all assets outside of the regular course of business is a….

A

fundamental corporate change.

49
Q

Fundamental corporate changes must be approved by…

A

two-thirds of all outstanding shares entitled to vote.

not just those represented in a meeting.

50
Q

If a property is the only asset a corporation owns outside of the regular course of business, it will constitute a sale of…

A

substantially all of the corporation’s assets.

51
Q

The dissociation of a partner by death from a partnership at will….

A

does not trigger dissolution and winding up of the partnership.

52
Q

A partnership is considered at will if…

A

the partners do not agree to a particular term or undertaking.

53
Q

If a partnership continues after a partner’s dissociation, the partnership…

A

must buy out the dissociated partner’s interest.

54
Q

A partner’s buy-out price is the greater of the partnership’s….

A

(1) Liquidation value, or (2) Going concern value,
on the date of dissociation.

55
Q

A partner’s dissociation does not discharge the partner’s liability for…

A

partnership obligations incurred before dissociation.

56
Q

After a dissociated partner’s interest is bought out by the partnership, the partnership must….

A

indemnify the dissociated partner for all partnership obligaitons, whether incurred before or after the partner’s dissociation.

56
Q

Although a dissociated partner is not generally liable for partnership obligations incurred after dissociation, the dissociated partner will be liable to….

A

3rd parties who transacted business with the partnership within one year of the dissociation and who reasonably believed the dissociated partner was still a partner.

57
Q

A sale of all, or substantially all, of the assets of a corporation is a….

A

fundamental corporate change.

58
Q

Under the Virginia Code, an exception exists that allows for a corporation to not follow procedural steps when effecting a sale of all or substantially of a corporation’s assets if….

A

all shareholders approve of the sale of assets.

59
Q

Is purchasing the assets of another corporation a fundamental corporate change?

A

No.

60
Q

Who must vote to approve a fundamental corporate change?

A

Shareholders

2/3 of all of the votes eligible to be cast

61
Q

Directors are liable for breaches of fiduciary duties only where they…

A

fail to exercise their good faith business judgment when acting on behalf of the corporation.

62
Q

A conflict of interest transaction will not be improper if…

A

the material facts are disclosed to the board and the transaction is approved by a sufficient number of distinerested directors.

63
Q

Partners in a general partnership have unlimited personal liability for the debts of the partnership, whether such debts arise from…

A

contract or tort.

64
Q

Limited liability for shareholders is not absolute, and shareholders may become liable for debts of the corporation if…

A

the corporate veil is pierced.

65
Q

A court should peirce the corporate veil of a corporation if shareholders have used the corporation to…

A
  1. Evade a personal obligation;
  2. Pepetuate a fraud or crime;
  3. Commit an injustice; or
  4. Gain an unfair advantage.
66
Q

In Virginia, piercing the corporate veil is a remedy which is…

A

extraordinary and rarely applied.

67
Q

Piercing the corporate veil is justified when the unity of interest is such that…

A

the separate personalities of the corporation and the individual shareholder no longer exist and to adhere to that separateness would work an injustice.

68
Q

A partnership is liable for the torts of a partner committed within…

A

the ordinary course of business.

69
Q

Each partner is jointly and severally liable for the debts of a partnership, but a creditor must seek to recover first from…

A

the partnership, before pursuing recovery from individual partners.

70
Q

In a limited liability partnership, partners (are/are not) personally liable for the debts of the business.

A

are not

71
Q

(TRUE/FALSE): A tortfeasor is always personally liable for his own negligence.

A

TRUE.

72
Q

(TRUE/FALSE): Malpractice is a form of negligence for which an individual partner will always be liable for his own bad act.

A

TRUE.

73
Q

(TRUE/FALSE): The Virginia Stock Corporation Act generally applies to Virginia Professional Corporations.

A

TRUE.

74
Q

Shareholders of Virginia Stock Corporations have broad latitude to enter into agreements concerning…

A

corporate governance, distrubutions, and the relationship among shareholders.

75
Q

An enforceable shareholders’ agreement must be set forth in either….

A

the articles, bylaws, or in a written agreement signed by all the shareholders.

76
Q

Corporate shareholder agreements are permitted to have the effect of….

A

operating a corporation like a partnership.

77
Q

To obtain judicial dissolution of a corporation, Plaintiff shareholders must prove either….

A
  1. Deadlock in the management of the corporation;
  2. Oppressive or illegal conduct by the majority; or
  3. Waste of corporate assets.
78
Q

To bring a shareholder derivative suit, one must….

procedurally

A
  1. Meet the standing requirement; and
  2. Make a written demand.
79
Q

To meet the standing requirement of a shareholder derivative suit, the shareholder must have….

A

(1) owned stock at the time of the alleged wrongdoing; and

(2) fairly and adequately represent the interests of the corporation.

80
Q

Prior to filing a shareholder derivative action, the shareholder must….

A

make written demand on the corporation.

81
Q

After making demand, a shareholder seeking to file a derivative suit must wait until the demand is rejected or…

A

until 90 days pass, unless they can show irreperable harm to the corporation.

82
Q

If a demand to a corporation for a derivative suit is rejected, the shareholder may file suit only if….

A

they allege that the demand was not properly rejected by a disinterested decision-maker.

83
Q

To rebut an officer’s defense of the business judgment rule, a shareholder-plaintiff has the burden of proving that directors…

A

in reaching the challenged decision, breached a fiduciary duty.

84
Q

How many votes is a shareholder entitled to vote?

A

One vote for each outstanding share of stock held, on each coporate matter submitted to a vote.

85
Q

A shareholder has the right to vote, free of…

A

duress and intimidation from corporate management.

86
Q

An employee-at-will may not be terminated for a reason which….

A

is in violation of public policy.

87
Q

Shareholders may remove directors at…

A

a meeting specifically called for that purpose.

88
Q

Does removal of a director need to be for cause?

A

NO.

89
Q

What measure of votes is required to remove a director of a corporation?

A

A majority vote of the shareholders.

90
Q

Under the Virginia Code, the court may judicially dissolve a corporation if the Plaintiff-shareholders prove that….

A

the controlling shareholders are engaging in oppressive conduct.

91
Q

In a proceeding for judicial dissolution, the corporation or a shareholder can elect to….

A

purchase the shares of the shareholders seeking judicial dissolution at fair value.

92
Q

Under the Virginia Nonstock Corporation Act, a member may inspect the minutes of Board meetings and obtain a list of the members, so long as….

A

the member acts with a proper purpose and gives notice.

93
Q

Limited partners can lose their limited liability if they participate in…

A

control of the business, or if the other party reasonably believes the limited partner is a general partner.

94
Q

HYPO: If a limited partner is put in charge, temporarily, and signs a contract with a third party who knows that he is a limited partner, will the limited partner be personally liable?

A

No, because the third party knew he was a limited partner.

95
Q

Can limited partners pursue a derivative action against a general partner for his breach of duties?

A

Yes.

96
Q

When a fiduciary breaches his duty, what is generally an appropriate remedy?

A

Disgorgement of profits

97
Q

Upon dissolution of a corporation, can the Board of Directors distribute assets to shareholders prior to creditors?

A

No – creditors should be paid before remaining assets are distributed to shareholders.

98
Q

If a corporation follows the statuatory procedure for resolving known claims against a dissolved corporation, then directors….

A

are not liable for distributions to shareholders.

99
Q

Directors who vote or assent to a distribution that violates the statutory procedure at dissolution are….

A

liable to the corporation and its creditors for the amount of the improper distribution.

100
Q

A corporate director is deemed to assent to an action taken at a meeting if the director…

A

is present and fails to either dissent or abstain.

101
Q

A creditor may pursue shareholders of a dissolved corporation for…

A

the corporate assets improperly distributed to them.

102
Q

The proper action a director may take to re-obtain improperly distributed assets from a shareholder is….

A

recoupment.

103
Q

If a director pays a corporate debt from her own personal assets, to the extent that they are all personally liable, she will have a claim against the other directors for….

A

contribution.

104
Q

After a corporation has filed its statement of intent to dissolve with the SCC, it must then…

A
  1. Immediately notice impending dissolution to each creditor; and
  2. Cease doing business, except as necessary for winding up.
105
Q

Although dissociated partners can have lingering liability after their dissociation where the partnership does not dissolve and wind up, the Virginia code does not provide for such lingering liability if…

A

the partnership dissolves.

106
Q

Although partners may not compete during the life of a partnership, they may…

A

prepare to compete.

PAST VA EXAMS (17 decks)

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