FL Bus Orgs Flashcards

Question

Buy-Out of Dissociated Partner in Lieu of Dissolution **Partnerships**

Answer 1

If P does not dissolve, P _must_ buy out dissociated partner. 1. **Dissociated partner remains liable for debts incurred before dissociation** (unless creditor and remaining partners agree to release) 2. \*\*Can be liable after dissociation up to one year after dissociation **if 3rd party reasonably believed that dissociated partner was a partner and had no notice fo dissociation. NOTE:** Can see compensation directly from dissociated partner. 3. Dissociated partner may file a **Statement of Dissociation (effective _90 days after filed_.)** 4. **Right to Indemnity**: P must indemnify bought out partner against all P liabilities regardless if occurred before or after dissociation.

Answer 2

Step 1: $10,000 assets - $5,000 loan to X = $5,000. Step 2: $5,000 remaining assets - $6,000 capital to X = -$1,000, which is a loss. Step 3: The $1,000 loss is shared equally ($500 each) between X and Y. Because X’s capital cannot be repaid in full, X is entitled to $500 contribution from Y.

Answer 3

1. A P may convert to or merge with another entity. 2. Requires **unanimous consent**. 3. Conversion requires a filing of a **Certificate of Conversion.** 4. Merger requires a **Certificate of Merger.** 5. **Effect**: Partners remain jointly and severally reliable for all P debts incurred before conversion / merger.

Answer 4

1. An LLC is a partnership governed by RUPA. 2. \*\*Identical to general partnership except liability. * Partners are NOT personally liable for partnership debts simply because they are partners (unlike general P's, where partners are jointly and severally liable.)

Answer 5

1. Any general partnership can become an LLP. (To approve the change, same rules apply that apply to Partnership Agreement amending (unanimous vote by default.) 2. **Requires Statement of Qualification filing with dept. of state.** 3. **Name of LLP must end with “LLP”** (LLP, RLLP, Limited lLiability Partnership, or Registered Limited liability Partnership) 4. **Requires filing of annual report** (must include name & address of CEO, name and address of agent, and Federal Employer ID #, if any. * Failure to file annual report = Dept. of State **MAY** revoke Statement of Qualification. * Revocation does NOT mean dissolution; **only affects status as an LLP**. * LLP has **two years** to apply for reinstatement; effect is retroactive (as if never revoked).

Answer 6

= a partnership of two or more persons with at least one general and one limited partner. 1. **General Partner:** Same as a general partner in a general partnership. 2. **Limited Partner**: Passive investors with limited liability, do not participate in management, and not an agent.

Answer 7

1. Mandatory filing of **Certificate of Limited Partnership** with Dept. of State. (NOTE: Unlike GP, an LP cannot be filed informally) * If not filed, only a general partnership exists. * **Must contain**: Name of LP, name and business address of every GENERAL partner, office address, and the name and address and written acceptance of registered agent. * Must be signed by all GENERAL partners (limited partners not required to sign or even be named in any LP filings). 3. Name of LP must include “LP” identifier. 4. Name of LP must be distinguishable from all other registered LPs. 5. Annual report filing is MANDATORY.

Answer 8

1. Joint and several liability (just like GP) 2. Dual capacity - can be both a general and limited partner. 3. Dissociation: Same as GP, except: * A general partner cannot rightfully dissociate expressly before LP is terminated. * General partner can be expelled by unanimous vote by all * General partners cannot be brought out. Only economic interest is transferred.

Answer 9

1. Not personally liable, but may lose contribution if LP fails. 2. No personal liability even if limited partner's name used in LP name. 3. No personal liability, even if they participate in management. 4. IMPORTANT: Limited partners have **NO VOTING RIGHTS ON ORDINARY BUSINESS MATTERS (matters involving management).** 5. **NO POWER OR RIGHT TO BIND.** 6. **Not duty of care or duty off loyalty. Only obligation of good faith and fair dealing.** 7. **Right to Information:** Can inspect all required information upon demand for any purpose. Must be granted within 10 days. * For all other (not required) information, such as financial records, limited partner must show a purpose reasonably related to this interest as a limited partner and describe info sought with particularity. 7. **Approval Rights**: Limited partners have approval rights in the following cases: * Amending partnership agreement * Admission of new partners (must be unanimous by default) * Dissolution (must be unanimous by default)

Answer 10

1. IMPORTANT: LP partners share in profits and losses in proportion t other contributions (unlike GP's, where it is shared equally by default).

Answer 11

General Partners: * A general partner has power, but no right to expressly before LP is terminated. * General partner can be expelled by unanimous vote by all * General partners cannot be brought out. Only economic interest is transferred. * After dissociation generally not liable, except liable to creditor who reasonably believed w/o notice still partner for up tp two years Limited Partners: * Can dissociate by express will (power, but not the right) * No right to buy out, only transfer economic rights

Answer 12

Dissolves upon event in partnership agreement for upon consent of all general and limited partners, or: * General partner dissociates, no general partner remains and a new one is not been admitted by unanimous consent after 90 days. * No more limited partners remain after 90 days of dissociation.

Answer 13

* Identical to limited partnership EXCEPT general partners also have limited liability. * LLLP must simply be identified as such on certificate. * Name of LLLP must include LLLP.

Answer 14

An LLC is a hybrid entity that is neither a partnership nor corporation, but combined features of both. 1. Owners are called “members”. Can have only one member unlike partnerships. 2. Can be member-managed (default) or manager-managed (if stated in articles of organization or operating agreement). 3. Member-managed operates like an LLP; Manager-managed operates like an LP with manager members [like general partners] and members [limited partners].)

Answer 15

1. **Mandatory filing- MUST filed Articles of Organization** * LLC name (must contain “LLC”, be distinguishable from other LLCs, and not imply connection to government.) * Name and address of principle officer * Name, address and written acceptance of registered agent * Signature of at least one member. 2. **Operating Agreement**: Not required to be filed. Similar to Partnership Agreement. Can be oral, written or implied.

Answer 16

1. Members and managers are not personally liable for LLC debts simply for being a member or manager.

Answer 17

Any manager or member may petition the court t dissolve the LLC due to assets be misapplied or wasted, or members for managers are acting unlawfully or fraudulently.

Answer 18

= A separate legal business entity with a perpetual duration formed under a state statute. 1. Can engage in any lawful purpose and has the same powers as an individual to carry out all things necessary to carry out its business affairs. 2. Has freely transferable shares. 3. **Owners of corporation = shareholders.** 4. **Shareholders:** Vote on certain major corp actions (such as mergers) and elect directors. **Shareholder do NOT manage corp.** 5. **Directors:** Make policy decisions and manage corp business affairs together as a board for directors. 6. Officers: Board elects officers to manage day-to-day operations and implement its policies. 7. **Corp's internal affairs are governed by state statute _in state it is incorporated._**

Answer 19

Foreign corps MUST qualify first before transacting business in FL by: 1. Obtaining a Certificate of Authority from the Dept. of State, and 2. Maintaining a registered office and agent in FL. 3. **NOTE:** “Transacting business” means intrastate business in Florida. More than just min. contacts. The following do NOT constitute transacting business: * Handling court proceedings * Occasional, short-term business * Holding a board for shareholder meeting in FL * Owning a FL subsidiary 4. **CONSEQUENCES:** * Liable for taxes, fees and fines for all years in state without authority * Does not effect validity of contracts entered into in FL * Cannot sue/maintain any FL court proceeding * Can still be sued in FL

Answer 20

Yes, because at this point Bama hasn’t transacted business in Florida. Owning land in Florida, without more, is not transacting business. Holding a board meeting in Florida is not transacting business.

Answer 21

**Mandatory Provisions: MUST CONTAIN:** 1. Name/address of corp 2. Name/address of each incorporator 3. Name/address of registered agent 4. Number of shares the corp is authorized to issue **Optional Provisions:** 1. Names of initial board members 2. Par value of authorized shares 3. Purpose of corp 4. Any other provisions relating to internal affairs

Answer 22

Corporations may conduct any lawful purpose subject to any limitations in its articles of incorporation. * An ultra vires act is one outside the corps powers or purpose as set forth in its articles. * **If committed, a shareholder or attorney general may seek an injunction.** * **DOES NOT AFFECT VALIDITY OF A CONTRACT ENTERED INTO BY CORP.**

Answer 23

Either the incorporators or directors (if named in the articles) must hold a meeting to elect directors (if not named in the articles), appoint officers and adopt bylaws.

Answer 24

A promoter for promoters (i.e. whoever entered into contract on behalf of the corp) is liable jointly and severally if more than one promoter) for the contract entered into before the articles of incorporation were filed UNLESS: * 3rd party enters into novation (new K) with the corp. after incorporated and releases promoter. * Corp does not automatically become liable once incorporated. Only becomes liable upon adoption or ratification. * **Even upon ratification or adoption, promoter STILL reliable as well until novation.**

Answer 25

Ariana only. Ariana is a promoter, as she entered into the lease before Queso Blanco Co. was formed. Queso Blanco Co. isn’t liable at this point because it hasn’t adopted the lease either expressly or impliedly. While Bianca and Camila acted as incorporators, they did not act as promoters.

Answer 26

1. De Jure: Fancy way of saying that a corporation exists and was properly formed. 2. De Facto: Common law defense that protects a shareholder from liability where defective corporation prevents a de jure corp from being formed. Exists when: * There was a good faith attempt to incorporate; and * There has been actual use of corporate powers.

Answer 27

Answer D accurately states the rule for de facto corporation. Need both a good faith attempt (John and James drafted articles) AND actual use of corporate powers.

Answer 28

1. **Authorized Shares**: Articles must state number of shares authorized to be issued (sold) without amending articles. Must amend if it wants to issue more. 2. **Issued Shares**: Once authorized shares are sold, they are issued. 3. **Outstanding Shares**: once shares are issued and not reacquired by the corp, they are outstanding. 4. **Corp Acquisition of its Own Shares**: A corp may buy back its own shares. * If privately held = authorized but unissued (or “cancelled shares”) * If publicly traded = shares remained issued but NOT outstanding (or “treasury shares”)

Answer 29

= an arbitrary minimum price for which a corp can issue its shares. * NOT the default rule; the question must state that the shares have a par value, otherwise they do not. * Can always sell shares for an amount higher than par value.

Answer 30

Preemptive rights give shareholders the right to buy proportional amount of the corp's unissued shares upon the board's decision to issue them. * Purpose is to avoid dilution. * NOT a default rule; preemptive rights MUST be provided in articles. * Must be issued for money. Cannot be issued to directors, officers for employees as compensation, or to shares issued for services. (Ex. Beyonce has no preemptive rights to buy uber shares in exchange for doing a commercial.)

Answer 31

No, Eduardo has no preemptive right to buy a proportional amount of new shares because preemptive rights are not specifically provided for in the articles. If Visage Livre’s articles do provide preemptive rights, how many shares is Eduardo entitled to buy? He may buy 3,000 of the 10,000 newly issued shares. Eduardo owns 30% of the outstanding shares (3,000 out of 10,000 shares outstanding), so he has a preemptive right to buy 30% of the new issue (i.e., 3,000 out of the 10,000 newly issued shares).

Answer 32

A corp may have different classes of shares with different voting rights, dividend rights, and rights upon liquidation. **NOTE: MUST BE STATED IN ARTICLES.** 1. **Common Shares**: Corp MUST have at least one class of voting common stock. * Common shareholders receive dividends (if any) after preferred shareholders. * Common shareholders receive whatever is left after preferred shareholders upon liquidation. 2. **Preferred Shares**: Have a preference before common shares to dividends and upon liquidation.

Answer 33

1. Directors have power to manage the corp. 2. NOT AGENTS OF CORP. 3. Must be natural persons, 18 years or older. 4. By default, **board sets its own compensation**. **MUST NOT BE EXCESSIVE (see Duty of Loyalty)** 5. Board must have one or more directors. (**NOTE:** Non-profits requires 3) 6. **One year term by default.** 7. Initial directors named in Articles. After that, **directors are elected by shareholders every annual shareholder's meeting.** (Can be staggered, meaning ⅓ are elected by shareholders at a time to prevent the entire board turning over at once.) 8. **Shareholder may remove directors with or without cause unless articles provide otherwise.** 9. Board vacancy may be filled by shareholders, or by majority vote of directors.

Answer 34

Two types: regular or special. * Can be called by the chair of the board, for the president. * No notice required for regular meeting. * Special meeting requires two days notice of date, time, and place (PURPOSE NTO REQUIRED IN NOTICE) * Directors waive notice if they attend, UNLESS they object at beginning and don't vote. * Quorum required (majority board attendance) for votes to be taken. Must be actually present when vote is taken. * Vote = majority * Directors CANNOT vote by proxy.

Answer 35

* = Agents of the corp. * **May resign at any time by giving notice to the board.** * **Board may remove officer at any time with or without cause.**

Answer 36

* Limited liability - not liable for corp's debt * Piercing the corporate veil: Court will pierce the veil and hold a shareholder personally liable if he is acting as a corporation. Plaintiff must show: * Alter ego (shareholders control the corp in a way that the court lacks independence.) * Shareholder used the corp for improper conduct. * Applies to parent-subsidiary relationships (piecing the veil of the subsidiary to hold parent company liable)

Answer 37

1. Corp **MUST** have an annual shareholders meeting 2. **Main purpose is to elect directors.** 3. Not required if directors elected by written consent in lieu of annual meeting. 4. **Special Shareholder's Meeting**: Special matters needing vote, such as merger, removal of director. 5. **Notice Required:** Date, time, and place; **10 - 60 days (no less than 10, no more than 60).** Purpose not required in notice **UNLESS** special meeting. 6. **Quorum:** Measured at start of meeting (counts even if shareholder leaves during meeting); Unless stated otherwise = majority of the shares entitled to vote. 7. **Voting by proxy allowed.**

Answer 38

1. Matters other than voting directors require _plurality voting_ (votes cast = more yes's than no's, abstentions are neutral) 2. Certain matters (such as merger, dissolution, selling fo assets) requires absolute _majority voting_ (majority of outstanding shares) 3. Voting for Directors: _Straight Voting (Default)_ - Number of votes = number of shares, director with more votes wins. 4. Cumulative Voting: Shareholders can allocate votes (split votes depending on number of shares) towards candidates. Must be in articles.

Answer 39

C Corp: Corporations that do not elect other wise are taxed pursuant to Chapter C of the IRS code. (NOTE: “Corporations Come In as C Corps.”) - C corps are taxed twice; the corporation’s net income is taxed, and the shareholder’s distributions (dividends) are taxed as well. S Corp: S corps are taxed once; corporation itself pays no income tax. All corporate income is deemed to be earned by the shareholders who, based on the number of shares owned, pay a proportional amount of the corporation’s income. -The net income of the corp is added to the shareholder’s personal income and taxed.

Answer 40

1. Be closely held corp (not publicly held); 2. Have no more than 100 individual shareholders who are also not nonresident aliens; 3. Not issued more than one class of stock (except for classes of common stock that differ only in voting rights)

Answer 41

FL Business Corporation Act (“FBCA”)

Answer 42

= acts that the corporation, through its board of directors) is not permitted to take because it is beyond the corp’s authority or beyond limitations set forth in its Articles of Incorporation

Answer 43

1. Alter Ego (shareholder controlled the corp to the extent that the corp had no independent existence and the shareholder acted as the alter ego of the corp) 2. Improper Conduct (corporation was used fraudulently or for an improper purpose); and 3. Improper use was the Proximate Cause of injury to claimant.

Answer 44

Preferred Stock = receives dividends as well as liquidation assets before common stock. Straight Preferred Stock: Basic preferred stock. Participating Preferred Stock: same benefits as straight preferred owners, but with a bonus. After the preferred and common stockholders receive their dividend, participating preferred stock holders are entitled to an additional amount equal to the dividend paid to common stock. Cumulative Preferred Stock: Also same benefits as straight preferred stock, except entitled to dividends during years when the corp does not issue dividends as all. Entitled to amount equal from years prior dividends.

Answer 45

Within the discretion of the board Can only be payed out of the corporation’s SURPLUS (difference between the corp’s NET ASSETS (total assets minus total liabilities) minus it’s stated capital (the value of the corp’s stock multiplied by # of outstanding shares)

Answer 46

Date used by the board to determine which shareholders are entitled to dividends Default: Date that the board authorized the distribution of dividends.

Answer 47

Directors who issue dividends in bad faith (failure to exercise reasonable business judgment) are jointly and severally liable to shareholders. Shareholder who are unaware that dividends were issued improperly have no liability for that distribution to corp’s creditors. HOWEVER, creditors may recover from shareholders dividends what rendered the corp insolvent.

Answer 48

= party who, prior to the corp’s formation, helped prepare the corp for commencing business and compliance for coming into existence. = partners prior to formation, therefore they owe a fiduciary duty to full disclosure to the corp and may not engage in self-dealing to the corp’s detriment. Corp is not liable for K’s entered into by promoter’s before corp’s existence unless the corp EXPRESSLY OR IMPLIEDLY RATIFIES THE K.

Answer 49

2 days notice is proper notice for special meetings, unless stated otherwise in articles of incorporation. Notice can be waived before or after meeting. Board members who were not properly provided notice but attend the meeting are deemed to have waived UNLESS they object at beginning of meeting and do not vote.

Answer 50

= a rebuttable presumption that directors and officers are better equipped than courts to make business judgments because they are more intimately familiar with the corporation’s affairs. Mere errors in business judgment are not actionable in themselves. Directors and officers who are disinterested and act with reasonable diligence and in good faith are shielded from personal liability and judicial review. Not protected by business judgment rule if their actions are: Fraudulent, illegal, or motivated by personal interest; Lack a rational business purpose; or Are grossly negligent and uninformed.

Answer 51

= directors and officers may not exploit information or opportunities acquired or made available as a consequence of their corporate position (even if obtained in their individual capacity) for personal gain, UNLESS: 1. The corp declines to pursue the opportunity after full disclosure; OR 2. The corp is, and will continue to be, unable to exploit the opportunity.

Answer 52

MUST BE BETWEEN 10 AND 60 DAYS PRIOR TO MEETING Must contain time, place, date, record date. Special meetings notice must indicate matters to be voted on No notice required for annual meetings because it is provided in the articles or bylaws.

Answer 53

1. Straight Voting: Allows shareholders to vote his or her number of shares for each candidate. 2. Cumulative Voting: Grants each share as many votes as there are directors to be elected, and allows the shareholder to allocate his votes as he chooses. (NOTE: allows for better representation for minority shareholders.) 3. Default Voting (by statute): Shareholders vote in proportion to their shares held. Formula for Cum. Voting: # of total shares voting / (# of directors to be voted +1) +1 = how many votes needed to elect a director

Answer 54

No preemptive rights under FBCA. Must be provided for in the articles of incorporation. Shares given to directors, officers, employees, etc. cannot have preemptive rights. When violated, court may award to shareholders: - equitable relief by ordering the corp to not sell the shares, or ordering the new purchaser to transfer the shares to the aggrieved shareholder; or -damages equal to the difference between the market value of the shares he would have received and the issuance price.

Answer 55

May transfer or sell freely, subject to reasonable restrictions. -Reasonable to require the corporation to have right of first refusal -prohibiting the sale to particular types of persons, such as competitors. -Unreasonable to require majority shareholder or board vote before sale. -prohibiting the sale to certain racial or ethnic groups.

Answer 56

= any transactions between the corporation and an interest shareholder (10% or more of stock) - includes transactions when: -fundamental corporate changes such as consolidations or mergers) - any sale or lease, mortgage or other disposition of assets worth 10% or more of the fair market value of the corp’s assets or the outstanding shares . Affiliated transactions can be approved by majority vote of disinterested directors, or affirmative vote of the shareholders of 2/3 of voting shares (NOTE: Does NOT count shares held by interested shareholders)

Answer 57

1. Shareholder suing the corporate fiduciaries on behalf of the corporation. 2. Claims where harm was done to the corp. instead of the shareholder individually. 3. Recovery / damages go to the corporation itself. 4. NOTE: Differs from direct actions, where shareholder is suing the fiduciaries either as individuals or as part of a class action, with the recovery going to the suing shareholders. 5. Shareholder must ordinarily demand that the board of directors commence the action to redress the alleged wrong; Board may refuse. If they agree, they take charge of the litigation, and the plaintiff may no longer bring a suit. 6. Settlement or dismissal of a derivative action must be approved by the court, and notice given to affected shareholders.

Answer 58

1. Board recommends the amendment to shareholders. 2. Shareholder approval needed; majority vote. 3. Board may adopt amendments without shareholder approval: - to extend duration of corp. - delete names and address of initial directors or the initial registered agent for service; - to delete the authorization of a class of shares if they haven’t been issued; - to change the par value of a class of shares; A

Answer 59

= offers to shareholders to buy their shares at a premium over the market price. Can be friendly or unfriendly. 1. No secret purchases. 5% or more ownership of a corporation requires disclosure within 10 days of the party’s identity and number of shares held, and their purpose in acquiring. 2. Defenses: Poison Pill = corp can issue rights and options to certain shareholder to buy additional shares.

FL Bus Orgs Flashcards

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