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Corporations MEE > Special Types of Corporations > Flashcards

Special Types of Corporations Flashcards

1
Q

Define

Closely held/Close Corporation

A
  • only has a few SHs
  • stock not publicly traded
  • more relaxed style of governance
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2
Q

Define

Foreign Corporation

A
  • incorporated in another state
  • must register and seek a certificate of authority from the current state
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3
Q

Define

Professional Corporation

A

the purpose is statutorily limited to the rendering of a professional service

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4
Q

Define

S Corporation

A

Corporation avoids double taxation by passing income and expenses through to its SHs, who are then taxed directly

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5
Q

Define

Benefit Corporation

A
  • for profit
  • corporate purpose is creating social/enviromental benefit rather than maximizing shareholder profit
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6
Q

Define

Limited Liability Corporation (LLC)

A

enjoys the pass-through tax advantage of a partnership and limited liability of a corporation

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7
Q

How is a LLC created?

A

Filing of articles of organization with the state

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8
Q

What must be in an LLCs articles of organization?

A
  • LLCs name
  • mailing address
  • and if there are no members upon filing - a statement to that effect
  • **does not come into existence **until it has at least one member

Some states allow de facto and estoppel if there was good faith

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9
Q

What is an operating agreement?

A

Operating agreement is in addition to the articles of incorporation and is made between the owners/shareholders of an LLC

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10
Q

In what way is an operating agreement made?

A

can be oral, in a record, or implied by conduct

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11
Q

What applies if there is no operating agreement?

A

statutory default provisions apply when there is not and operating agreement or if the operating agreement is silent

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12
Q

What are the minimum and maximum membership requirements for an LLC?

A

minimum - one member
maximum - none

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13
Q

How does one become a member of an LLC?

A

Must have consent of all other LLC members

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14
Q

What does a transfer of a membership require?

A

the consent of all LLC members

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15
Q

What rights do a transferee acquire?

A

the transferee only acquires the transferor’s right to share in the LLC’s profits and losses, not a right to participate in the LLC’s management

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16
Q

Does termination of membership automatically trigger dissolution of an LLC?

A

No

LLC may elect to liquidate the fair value of that person’s interests

17
Q

Unless determined in an operating agreement, how are profits and losses allocated?

A

allocations are made according to each member’s contributions to the LLC

18
Q

Do members of an LLC have the same right to inspectas Shareholders?

A

Yes

19
Q

What are the two ways management can occur for a LLC?

A

Direct (by members)
Centralized (by one or more managers who need not be members)

20
Q

Are members generally liably for the LLC’s obligations?

A

No

21
Q

Are managers of an LLC personally liable for obligations incurred on behalf of the LLC?

A

No

22
Q

When is piercing the veil in an LLC appropriate?

A
  • undercaptalization
  • commingling assets
  • confusion of business affairs
  • deception of creditors
23
Q

What is the mere instrumentality test?

For piercing the veil

A

1) members dominated the entity such that the LLC has no will of its own
2) members used that domination to commit a fraud or wrong and
3) the control and wrongful action proximately caused an injury

24
Q

What is the unity of interest and ownership test?

Used for piercing the veil

A
  • the LLC did no thave an existence independent of the members because there was such a unity of interest and ownership between the entity and the members that the failure to pierce the veil would be unjust or inequitable
25
Q

What duties are owed by member or manager of an LLC?

A

owe duties or loyalty and care to the LLC and its members

26
Q

What duties of loyalty are owed?

A
  • Must members account to the LLC for any benefit derived by the member related to the LLC’s business
  • refrain from dealing with the LLC on behalf of one having an adverse interest
  • refrain from competing with the LLC (Non-compete)
27
Q

T/F: the duty of care to LLC is subject to the BJR not liable for simple negligence

A

True

28
Q

Do managers have the authority to bind the LLC?

A

Yes

29
Q

When may members withdraw from an LLC?

A

Can withdraw at any time

30
Q

How can members withdraw from an LLC?

A

for any reason without written notice

31
Q

Does a withdrawal necessarily trigger dissolution and winding up?

A

No

32
Q

What does a direct suit try and do?

For an LLC

A

enforce a member’s rights as a member under the operating agreement and state LLC statute

33
Q

What is required for a Direct suit?

A

there must be an actual or threatened injury that is not just a result of an LLC injury

34
Q

What is a derivatice action?

A

an action by a member on behalf of the LLC to enforce the rights of the LLC

35
Q

What is required for a derivative suit?

For an LLC

A

must show that a demand was made or that demand would be futile

36
Q

When does an LLC disolve?

A
  • merge with another LLC/business entity
  • mutual consent of members
  • lack of members for 90 consecutive days
  • cour order
  • events provided in operating agreement
37
Q

When may members seek involuntary dissolution?

A

if a controlling member acts in a way that is oppressive and directly harmful to the member seeking the order

  • the action by controlling member must violate member’s reasonable expectations
38
Q

When winding up what must an LLC do?

A
  • discharge the LLC’s debts, obligations, or other liabilities, and
  • settle and close the LLC’s activities, and marshal and distribute the LLC’s assets
  • may perform acts necessary or appropriate to the winding up

Corporations MEE (7 decks)

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