Question 1

Which of the following forms of business generally provides all owners with limited liability, while avoiding federal taxation of income at the entity level? A Subchapter C corporation. A Subchapter S corporation. Partnership. Limited partnership.

Accepted Answer

A Subchapter S corporation. If the requirements of a Subchapter S corporation are met, the corporate entity pays no federal income tax. All income is passed through to the shareholders. Although the shareholders enjoy limited liability, they do pay personal income tax on dividends received.

Question 2

Which of the following parties generally has the most management rights? A minority shareholder in a corporation listed on a national stock exchange. A limited partner in a general partnership. A member of a limited-liability company. A limited partner in a limited partnership.

Accepted Answer

A member of a limited-liability company. Members of LLCs have substantial management rights, although they may choose not to exercise them.

Question 3

Tim and Sarah wish to form an accounting firm. They are not confident in their own abilities and wish to choose a form of organization that will shield them from personal liability for their own malpractice. Which of the following would succeed for them? LLP LLC Both of the above. Neither of the above.

Accepted Answer

Neither of the above. No form of business organization excuses an accountant from liability for his or her own malpractice.

Question 4

Consuelo is a limited partner who has become ensnared in various activities of her limited partnership. She is worried that her activities may cause her to be liable as a general partner. Which of the following activities may subject her to personal liability? Working for the partnership as a file clerk. Attending meetings of the partners. Guaranteeing a partnership loan. None of the above.

Accepted Answer

None of the above. None of the activities listed in A, B, and C is sufficient to render Consuelo personally liable; all are consistent with her role as a limited partner.

Question 5

Which of the following statements describes the same characteristic for both an S corporation and a C corporation? Both corporations can have more than 100 shareholders. Both corporations have the disadvantage of double taxation. Shareholders can contribute property into a corporation without being taxed. Shareholders can be either citizens of the U.S. or foreign countries.

Accepted Answer

Shareholders can contribute property into a corporation without being taxed. C is the best answer, because shareholder contributions are not taxable in either form. Remember that S-Corporations cannot have foreign shareholders.

Question 6

The corporate veil is most likely to be pierced and the shareholders held personally liable if The corporation has elected S corporation status under the Internal Revenue Code. The shareholders have commingled their personal funds with those of the corporation. An ultra vires act has been committed. A partnership incorporates its business solely to limit the liability of its partners.

Accepted Answer

The shareholders have commingled their personal funds with those of the corporation. The corporate veil is almost never pierced, and investors almost never lose more than their investment. Only when shareholders use a corporation for their own (usually fraudulent) personal use is there even a remote possibility that the veil will be pierced. When shareholders have heavily commingled personal funds and corporate funds, the rare exception to the rule may arise. Remember courts will never PTV for public issuing corporations.

Question 7

Which of the following statements is correct regarding a limited liability company's operating agreement? It must be filed with a central state agency. It must be in writing. It is designed to forestall and resolve disputes among the owners. It is necessary for a limited liability company to exist.

Accepted Answer

It is designed to forestall and resolve disputes among the owners. This is the purpose of an LLC operating agreement, which is why it is a good idea that these be in writing and filed with the state (although this is not required).

Question 8

Sal wishes to form a business entity that he will own and control all by himself. Which of the following is not a good choice for him? Sole proprietorship. General partnership. LLC. Corporation.

Accepted Answer

General partnership. A partnership requires at least one other person or entity to be Sal's partner in ownership and management of the firm, so this is not a good choice.

Question 9

The partners of College Assoc., a general partnership, decide to dissolve the partnership and agree that none of the partners will continue to use the partnership name. Under the Uniform Partnership Act, which of the following events will occur on dissolution of the partnership? Each partner's existing liability will be discharged. Each partner's apparent authority will continue.

Accepted Answer

NO YES. Simply deciding to dissolve a partnership does not dissolve liability. If money is owed on contracts, tort judgments, or otherwise, the partners are still responsible for them. Apparent authority does continue after partners have decided to dissolve the partnership. Notice must be given to others (by contact for those with which the partnership has actually done business and by publication for everyone else) before apparent authority stops.

Question 10

Which of the following actions may be taken by a corporation's Board of Directors without stockholder approval? Purchasing substantially all of the assets of another corporation. Selling substantially all of the corporation's assets. Dissolving the corporation. Amending the articles of incorporation.

Accepted Answer

Purchasing substantially all of the assets of another corporation. Shareholders have the right to vote on many important corporate changes, including amendments to the articles of incorporation, dissolution, sale of all or substantially all of the corporation's assets, and mergers & consolidations. Choices B, C, and D are all on this list. Choice A is, therefore, the correct answer. Often, one corporation can buy all or substantially all of the assets of another company without there being any large qualitative change in the life of the purchasing corporation. Therefore, when a large corporation gobbles up the assets of a smaller corporation, the shareholders of the large buyer do not have the right to vote on the transaction. There would be a much greater impact on the life of the selling corporation and its shareholders would therefore have the right to vote on the transaction.

Question 11

Carr Corp. declares a 7% stock dividend on its common stock. The dividend Must be registered with the SEC pursuant to the Securities Act of 1933. Is includable in the gross income of the recipient taxpayers in the year of receipt. Has no effect on Carr's earnings and profits for federal income-tax purposes. Requires a vote of Carr's stockholders.

Accepted Answer

Has no effect on Carr's earnings and profits for federal income-tax purposes. The tax on corporate profits is the same, whether the profits are reinvested in the company or distributed to shareholders in the form of dividends. B is incorrect because stock dividends are taxable when sold, a cash dividend would be included in GI of the taxpayer in the year of receipt.

Question 12

An owner of common stock will not have any liability beyond actual investment unless the owner Paid less than par value for stock purchased in connection with an original issue of shares. Agreed to perform future services for the corporation in exchange for original-issue par-value shares. Purchased treasury shares for less than par value. Failed to pay the full amount owed on a subscription contract for no-par shares.

Accepted Answer

Paid less than par value for stock purchased in connection with an original issue of shares. When stock has a par value, it must be sold for at least that par value in an original issue. If it is sold for less, it is "watered stock." A shareholder who buys watered stock is liable to the corporation for the difference between the price actually paid and the par value of the shares purchased.

Question 13

To which of the following rights is a holder of a public corporation's cumulative preferred stock always entitled? Conversion of the preferred stock into common stock. Voting rights. Dividend carryovers from years in which dividends were not paid, to future years. Guaranteed dividends.

Accepted Answer

Dividend carryovers from years in which dividends were not paid, to future years. Cumulative preferred stock does not guarantee payment of a dividend in any particular year. However, if required dividends are not paid in any given year, they must be "made up" in the current year before any common shareholders receive a dividend. It is the "cumulative" portion of the description that is key here - that is what gives the right to carryover payments. The "preferred" portion gives the preference over common shareholders. Preferred stock brings a trade-off. A priority is given to preferred shareholders when dividends are paid, but they generally have no voting rights. Common shareholders have voting rights.

Question 14

Price owns 2,000 shares of Universal Corp.'s $10 cumulative preferred stock. During its first year of operations, cash dividends of $5 per share are declared on the preferred stock, but were never paid. In the second year, dividends on the preferred stock were neither declared, nor paid. If Universal is dissolved, which of the following statements is correct? Universal will be liable to Price as a secured creditor for $20,000. Price will have priority over the claims of Universal's bond owners. Price will have priority over the claims of Universal's unsecured judgment creditors.

Accepted Answer

Universal will be liable to Price as an unsecured creditor for $10,000. Cumulative preferred stock gives the holder the right to payment of dividends before common shareholders are paid. It does not guarantee that dividends will be declared, but if dividends are declared, they must be paid. Once a corporation declares dividends, the payments become corporate debt. Here, Price is owed $5 x 2,000 shares = $10,000. He is an unsecured creditor, because this debt has not been secured by a separate agreement that creates a security interest. His debt does not have priority over judgment creditors, bond owners, or secured creditors.

Question 15

Lewis, Clark, and Beal enter into a written agreement to form a partnership. The agreement requires that the partners make the following capital contributions: Lewis, $40,000; Clark, $30,000; and Beal, $10,000. It is also agreed that, in the event that the partnership experiences losses in excess of available capital, Beal will contribute additional capital to the extent of the losses. The partnership agreement is otherwise silent about division of profits and losses. Which of the following statements is correct? Profits are to be divided among the partners in proportion to their relative capital contributions. Profits are to be divided equally among the partners. Losses will be allocated in a manner different from the allocation of profits, because the partners contributed different amounts of capital. Beal's obligation to contribute additional capital would have an effect on the allocation of profit or loss to Beal.

Accepted Answer

Profits are to be divided equally among the partners. If there is no specific agreement on the sharing of profits, then profits are divided equally among the partners. They take the same share, regardless of how much capital they put in initially or at any other time.

Question 16

Which of the following may not own shares in an S corporation? Individuals. Estates. Trusts. Corporations.

Accepted Answer

Corporations. 1. Number of shareholders Subchapter S corporation can have No more than 100 2. Which types of entities cannot be shareholders no non-individuals, exceptions apply for estates and trusts. 3. Citizenship of shareholders no non-resident aliens 4. How much of corporation’s income can come from passive income An S corporation's election will also terminate if, for each of three consecutive years, (i) its passive investment income exceeds 25% of gross receipts and (ii) it has accumulated earnings and profits. Also, S-corps cannot have more than one class of stock

Question 17

The law of joint ventures is similar to that of 1. Limited liability companies. 2. Limited partnerships. 3. General partnerships. 4. Corporations.

Accepted Answer

General partnerships. The law of joint ventures is very similar to partnership law with some exceptions. For example, the death of one joint venturer does not automatically dissolve the venture. However, most of the law is like that involving partnerships, such as the fiduciary duties and unlimited liability for debts.

Question 18

Which of the following statements concerning cumulative preferred stock is correct? 1. Upon the dissolution of a corporation the preferred shareholders have priority over unsecured judgment creditors. 2. Preferred stock represents a type of debt security similar to corporate debentures. 3. If dividends are not declared for any year, they become debts of the corporation for subsequent years. 4. Upon the declaration of a cash dividend on the preferred stock, preferred shareholders become unsecured creditors of the corporation.

Accepted Answer

Upon the declaration of a cash dividend on the preferred stock, preferred shareholders become unsecured creditors of the corporation.

Question 19

Preferred Stock

Accepted Answer

Preferred stock is given preferred status as to liquidations and dividends, but dividends are still discretionary. 1. Usually nonvoting stock 2. Dividend rate is generally a fixed rate 3. Cumulative preferred means that if a periodic dividend is not paid at the scheduled time, it accumulates and must be satisfied before common stock may receive a dividend 4. These arrearages are not liabilities of corporation until declared by board of directors 5. Noncumulative preferred means that if the dividend is passed, it will never be paid 6. Held to be implicitly cumulative unless different intent shown

Question 20

What business entity can be voluntarily dissolved and terminated without filing a dissolution document with the state of organization? 1. A corporation. 2. A general partnership. 3. A limited liability limited partnership. 4. A limited partnership.

Accepted Answer

A general partnership is a common law entity, which does not require the filing of a dissolution document with the state. Emphasis is on Limited Liability, when this is present, a filing is required.

Question 21

Cabrillo is a limited partner in the Ferrell Limited Partnership. When Cabrillo joined the firm, she put in $10,000 as a capital contribution. During the past year, she got involved in the management of Ferrell partnership. A client, who knew of Cabrillo’s involvement in managing Ferrell, was severely injured when an employee of Ferrell negligently dropped a steel beam on the client. The client brought suit against Ferrell Limited Partnership and all of its partners. What is Cabrillo’s potential liability? 1. None because Cabrillo is a limited partner. 2. None, unless it can be shown that Cabrillo was personally supervising the employee. 3. $10,000 because Cabrillo is a limited partner. 4. Unlimited personal liability.

Accepted Answer

Unlimited personal liability. Because Cabrillo got involved in the management of Ferrell Limited Partnership and the client knew this, Cabrillo does not enjoy limited liability but has personal, unlimited liability for this lawsuit.

Question 22

Acorn and Bean were general partners in a farm machinery business. Acorn contracted, on behalf of the partnership, to purchase 10 tractors from Cobb Corp. Unknown to Cobb, Acorn was not authorized by the partnership agreement to make such contracts. Bean refused to allow the partnership to accept delivery of the tractors and Cobb sought to enforce the contract. Cobb will 1. Lose because Acorn's action was beyond the scope of Acorn's implied authority. 2. Prevail because Acorn had implied authority to bind the partnership. 3. Prevail because Acorn has apparent authority to bind the partnership. 4. Lose because Acorn's express authority was restricted, in writing, by the partnership agreement.

Accepted Answer

Prevail because Acorn has apparent authority to bind the partnership. Implied authority is authority that can be reasonably implied from actual authority and from the conduct of the principal. In a general partnership, the general partners usually have authority to buy and sell goods, receive money, and pay debts of the partnership. In this case, Acorn did not have actual authority to buy the tractors from Cobb. Therefore, there is no implied authority which comes from actual authority. However, the partnership is a farm machinery business, in which a general partner would have apparent authority to purchase tractors since Cobb was unaware of the limitation on authority and tractors are related to the partnership business.

Question 23

The principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation is known as 1. The clean hands doctrine. 2. The full disclosure rule. 3. The responsible person doctrine. 4. The business judgment rule.

Accepted Answer

The business judgment rule. As long as a director is acting in good faith s/he will not be liable for errors of judgment unless s/he is negligent.

Question 24

Generally, officers of a corporation 1. Are selected by the shareholders. 2. Are agents and fiduciaries of the corporation, having actual and apparent authority to manage the business. 3. May be removed by the board of directors without cause only if the removal is approved by a majority vote of the shareholders. 4. May declare dividends or other distributions to shareholders as they deem appropriate.

Accepted Answer

Are agents and fiduciaries of the corporation, having actual and apparent authority to manage the business. Officers: 1. Typically operate day-to-day business 2. An officer of the corporation is an agent and can bind corporation by his/her individual acts if within the scope of his/her authority 3. Officers and directors may be the same persons 4. Officers are selected by the directors for a fixed term under the bylaws 5. Officers have a fiduciary duty to corporation 6. Courts are recognizing a fiduciary duty owed by majority shareholders to minority shareholders when the majority shareholders have de facto control over the corporation Officers, like directors, are liable for own torts, even if committed while acting for corporation Corporation is also liable if officer was acting within the scope of his/her authority

Question 25

A corporation purchases back several shares of its own stock and classifies them as treasury stock. Which of the following is correct? 1. The corporation is the recipient of the dividends of the treasury stock. 2. The corporation may purchase the treasury stock at below par value. 3. The corporation may vote on the treasury stock. 4. Treasury stock is considered issued and outstanding.

Accepted Answer

The corporation may purchase the treasury stock at below par value. It is the original issue of the stock that normally must be sold at or above par value. Repurchases and resales normally can be accomplished without regard to par value.

Question 26

A limited partnership was formed with ten general partners and eight limited partners. In order to admit a new general partner, what approval is needed? 1. A majority of the general partners. 2. A majority of both the general partners and the limited partners. 3. All of the general partners. 4. All of the general partners and limited partners.

Accepted Answer

All of the general partners and limited partners. Approval of all partners is necessary to admit a new general partner, unless there are specific provisions in the limited partnership agreement stating otherwise. Admission of new limited partner requires written agreement of all partners unless partnership agreement provides otherwise.

Question 27

Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. As a result of Fein’s withdrawal and Gold’s admission to the partnership, Gold 1. Is personally liable for partnership liabilities arising before and after his admission as a partner. 2. Has the right to participate in the management of ABC. 3. Acquired only the right to receive Fein’s share of the profits of ABC. 4. Must contribute cash or property to ABC in order to be admitted with the same rights as the other partners.

Accepted Answer

Has the right to participate in the management of ABC. An incoming partner has the same rights as all of the existing partners. Thus, an incoming partner has the right to participate in the management of the partnership. Incoming partners new to partnership have same rights as previous partners 1. Requires consent of all partners to admit new partner 2. Profit sharing, loss sharing, and capital contributions are by agreement between all partners

Question 28

Grant, Lang, and Harrison formed a partnership several years ago. A client sued the partnership, Grant, and Lang, but not Harrison, for a breach of contract. The partnership does not have sufficient funds to pay for this breach of contract. Which of the following is correct? 1. The client may not recover beyond what the partnership can pay because Harrison was left off the lawsuit. 2. The client may recover from the partnership but not the partners because the partnership is a legal entity. 3. In addition to the partnership, the client may recover from both Grant and Lang because they have joint liability. 4. In addition to the partnership, the client may recover from Grant and Lang because they have joint and several liability.

Accepted Answer

In addition to the partnership, the client may recover from Grant and Lang because they have joint and several liability. Under the Revised Uniform Partnership Act, the partners have joint and several liability for breaches of contract as well as for torts. This allows third parties to sue them together or separately.

Question 29

Which of the following can be an advantage of a limited liability company over an S corporation? 1. Double taxation of profits is avoided. 2. Owners receive limited liability protection. 3. Appreciated property can be distributed tax-free to an owner. 4. Incentive stock options can be used to compensate owners.

Accepted Answer

Appreciated property can be distributed tax-free to an owner. LLC follows partnership rules so it may distribute appreciated property tax-free. S-Corporation must recognize the gain on the appreciated property distributed to a shareholder.

Question 30

LLC - Details and Advantages

Accepted Answer

1. Laws for this form of business generally follow the Revised Uniform Limited Liability Company Act (RULLCA 2006) 2. LLC is not considered a corporation but a majority of states provide: All owners (often called members) have limited liability and therefore _no personal liability_ Typically, limited liability is retained even if members fail to follow usual formalities in conducting business (advantage vs. C-Corp.) LLC must be formed according to limited liability company statute of the state in which it is formed LLC is separate legal entity so can sue or be sued in own name The name of a LLC must include the words “limited liability company” or “limited company” or the abbreviation “L.L.C.”, “LLC”, “L.C.”, or “LC” to give notice to public 3. Member of LLC has no interest in any specific property in LLC but has interest (personal property interest) in LLC in general Member has right to distributions according to profit and loss sharing agreed upon in operating agreement Appreciated property can be distributed tax-free to an owner. (Advantage vs. S-Corp.) Member has management interest

Question 31

If a corporation does not follow the corporate formalities such as corporate meetings with relevant minutes...

Accepted Answer

The corporate veil can be pierced, thus the corporate entity is disregarded and then shareholders of company obtain personal liability for corporation’s debts. This is another important advantage of LLC because typically, limited liability is retained even if members fail to follow usual formalities in conducting business

Question 32

LLC - Member managed vs. Manager Managed

Accepted Answer

When LLC designated as _member_-managed LLC, all members have authority to bind LLC under agency law to contracts on behalf of LLC b.When LLC designated as _manage_r-managed LLC, only managers have authority to bind LLC to contracts for LLC _LLC is bound only to contracts that_ Either LLC has authorized under agency law, or Are made in the ordinary course of business

Question 33

Important S-Corporation Rules

Accepted Answer

When corporation elects to be Subchapter S corporation it can avoid double taxation by not paying tax at the corporate level Instead, the corporation income flows through to the income tax returns of the individual shareholders Shareholders report the income or loss even when income not distributed to them This flow-through may nevertheless be an advantage under some situations Rules involving the criteria needed to be met to be taxed as a Subchapter S corporation can change to one’s detriment, creating another potential disadvantage of needing to stay abreast of rule changes 1. Corporation must be incorporated in the US and have only one class of stock 2. Number of shareholders Subchapter S corporation can have is limited (no more than 100) 3. Shareholders are limited to individuals, estates, qualified trusts, and similar entities 4. Nonresident aliens cannot own shares 5. The corporation cannot have excessive amounts of passive income

Question 34

Which of the following corporate shareholder rights is enforceable by means of a derivative suit? 1. Compelling payment of properly declared dividends. 2. Enforcing access to corporate records. 3. Recovering damages to the corporation from a third party. 4. Protecting preemptive rights.

Accepted Answer

Recovering damages to the corporation from a third party. Shareholder sues on behalf of the corporation. Stockholder can also sue in his/her own behalf where his/her interests have been directly injured, for example: 1. Denial of right to inspect records 2. Denial of preemptive right if provided for

Question 35

The limited liability of the shareholder of a closely held corporation will most likely be disregarded if the shareholders 1. Lend money to the corporation. 2. Are also corporate officers, directors, or employees. 3. Undercapitalized the corporation when it was formed. 4. Formed the corporation solely to limit their personal liability.

Accepted Answer

Undercapitalized the corporation when it was formed. Normally the liability of shareholders of corporations is limited to their capital contribution. However, the court will "pierce the corporate veil" and hold the shareholders personally liable for the debts of the corporation if the corporate entity is being used to defraud people or to achieve other injustices. Thus, if the shareholders establish a corporation, knowing that it would have less capital than required for it to pay its debts, then the court will "pierce the corporate veil"and hold the shareholders personally liable.

Question 36

Mullin, a director of Royal Corporation, wishes to sell a plot of land to the corporation. She is willing to sell the land for the fair market value but is concerned about a potential conflict of interest as a director dealing directly with her own corporation. Which of the following is(are) the minimum steps necessary for Mullin to not have a conflict of interest as director of Royal corporation? I.She sells the plot of land to Royal in a fair and reasonable transaction for the corporation at the fair market value II.She discloses her ownership in the land to the board of directors and the board approves the transaction. III.She discloses her ownership in the land to the shareholders and a majority approves it. 1. I. 2. II. 3. I and III. 4. I, II, and III.

Accepted Answer

Only I is Sufficient! It is sufficient that the transaction be a fair and reasonable transaction for the corporation at the fair market value. Actually, statement III by itself would also be sufficient, but this was not one of the choices. _Both of the following in and of themselves would be sufficient_: 1. She sells the plot of land to Royal in a fair and reasonable transaction for the corporation at the fair market value 2. She discloses her ownership in the land to the shareholders and a majority approves it.

Question 37

Wilson and Thomas are partners. Wilson contributed $150,000 to the partnership, and Thomas contributed $50,000. Wilson does 40% of the work, and Thomas does 60%. They do not have a partnership agreement that addresses the sharing of profits and losses. By the end of the year, the partnership has earned a profit of $200,000. What is Wilson’s share of the profit under the Revised Uniform Partnership Act? 1. $80,000 2. $100,000 3. $115,000 4. $150,000

Accepted Answer

$100,000 RUPA provides that in the absence of a profit-sharing agreement, profits are shared equally by the partners.

Question 38

Which of the following corporate actions is subject to shareholder approval? 1. Election of officers. 2. Removal of officers. 3. Declaration of cash dividends. 4. Removal of directors.

Accepted Answer

Removal of directors.

Question 39

An S corporation must adhere to all of the following except having: 1. No more than 100 shareholders. 2. A nonresident alien as a shareholder. 3. An individual as a shareholder. 4. One class of stock.

Accepted Answer

A nonresident alien as a shareholder. A nonresident alien may not own shares of an S corporation When corporation elects to be Subchapter S corporation it can avoid double taxation by not paying tax at the corporate level Instead, the corporation income flows through to the income tax returns of the individual shareholders Shareholders report the income or loss even when income not distributed to them This flow-through may nevertheless be an advantage under some situations Some of the rules to watch out for involve 1. Number of shareholders Subchapter S corporation can have 2. Which types of entities cannot be shareholders 3. Citizenship of shareholders 4. How much of corporation’s income can come from passive income

Question 40

Sack Company has been doing business as a partnership, but the owners decided to incorporate Sack in Delaware. Sack has branch offices in Delaware and Pennsylvania. Which of the following is correct? 1. Sack must also incorporate in Pennsylvania because it has branch offices there. 2. Sack is a foreign corporation in Pennsylvania. 3. Sack is a domestic corporation in Pennsylvania. 4. Sack is a de facto corporation in Pennsylvania.

Accepted Answer

Sack is a foreign corporation in Pennsylvania. Since Sack is doing business in a state other than where it was incorporated, it is termed a foreign corporation in Pennsylvania. Types of Corporations 1. Domestic corporation is one which operates and does business within the state in which it was incorporated 2. Foreign corporation is one doing business in any state except one in which it was incorporated Foreign corporations, if "doing business" in a given state, are not exempt from many requirements and details that domestic corporations must meet 1. Corporation is doing business in that state if transactions are continuous rather than isolated transactions Foreign corporations file documentation similar to that for incorporation

Question 41

Which of the following documents would most likely contain specific rules for the management of a business corporation? 1. Articles of incorporation. 2. Bylaws. 3. Certificate of authority. 4. Shareholders’ agreement.

Accepted Answer

Bylaws are requirements adopted by the board of directors to guide management in performing its duties.

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