R6 M5 - Business Structures: Part II

Question 1

What is fiduciary duties?

Answer 1

The responsibility to act solely in the interest of another party.

For example, lawyers have a fiduciary duty to act in the best interest of their clients.

Question 2

John is a director of Crayola, Inc. As a corporate director, John is:

A. A principal
B. An agent
C. A fiduciary
D. A trustee.

Question 3

What are the steps that must take place for a corporation to be voluntarily dissolved?

Answer 3

1. Board Resolution
   A majority of the board of directors must put forth a resolution for a voluntary dissolution.
2. Notice
   The corporation must let all shareholders know what is happening even though some can’t vote on that decision.
3. Shareholder Approval
   The change must be approved by a majority of the shares (not unanimous) voted at the meeting.
4. Filing of Articles
   Document to put it into action and be filed with the state

Question 4

Which of the following must take place for a corporation to be voluntarily dissolved?

A.	Amendment of the certificate of incorporation.

B.	Unanimous vote of the stockholders.

C.	Approval by the officers of a resolution to dissolve.

D.	Passage by the board of directors of a resolution to dissolve.

Answer 4

Choice “D” is correct. For a corporation to dissolve, the directors must adopt a resolution recommending dissolution.

Choice “A” is incorrect. To dissolve, the certificate of incorporation need not be amended; rather, a certificate of dissolution must be executed and filed.

Choice “B” is incorrect. Generally, fundamental corporate changes such as dissolution need only be approved by a majority of the outstanding shares.

Choice “C” is incorrect. The officers are not required to approve resolutions for fundamental corporate changes. Approval is required from the board of directors and the stockholders.

Question 5

What does unanimous mean?

Answer 5

They all agree not one person disagree.

Question 6

The limited liability of the shareholders of corporation (limited liability protects the shareholder meaning what they invested may be lost not their personal assets that is not invested in the corporation) can be disregarded (ignored) if the shareholders:

Answer 6

If the issue of stocks is undercapitalized, fraudulently done and your personal asset is mixed with that of the corporation. This is known as corporate veil.

Question 7

What is the governing document for a Corporation and an LLC?

Answer 7

Article of incorporation - C corporation
Article of organization - LLC

Question 8

What is an operating agreement?

Answer 8

An agreement between members of an LLC

Question 9

What is voting trust agreement?

Answer 9

Shareholder gives his voting rights to another shareholder/ trustee to vote a certain way.