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Flashcards in Organization Deck (37):

Owners of a limited liability company are known as



Two corporations that are issuers want to merge. Who must approve.

BOD of both corporations and normally a majority of the shareholders.


What types of liability are there in a professional corporation

Liability for acts of negligence (you screw up the audit)
Limited liability for debts


Advantage of limited liability over an S Corporation

Appreciated property can be distributed to an owner. LLC follows partnership rules. Scorp must recognize gain on appreciated property distributed to shareholder.


If you're a limited partner and you get involved in management what happens. What is your potential liability.

Now you're fully personally liable, unlimited liability. Client who is suing you has to know this.


Pre-incorporation contracts. Can the promoter (maker) of the contract be an agent when the principal (the newly incorporated entity) is not yet in existence? What is the exception to this.

Promoter can't be an agent pre-incorporation and is personally liability of he/she makes a contract.

Exceptions to the rule are when an ovation occurs or when the parties agree in advance not to hold the promoter liability.


Three basic rights in a partnership

Profits (interest)
Participation (Mgt Rights)


Which are the three basic rights are transferable or non-transferable in a partnership

Profits (interest) - Transferable
Property - Non-Transferable
Participation - Mgt Non-Transferable


When when a partnership agreement be in writing to be enforceable?

GROSS is the mneumonic

Only when statute of frauds applies e.g., partnership with specific term exceeding one year.
-Sale of Goods worth $500 or more (does not mean contribute capital more than $500)
-Real Estate Sales - not just if they intend or the purpose of the partnership is RE Sales
-Over one year req'd to perform contract (bilateral contract)
-Surety ship (guaranty debt of another)
-Statements in consideration of marriage (if u marry my daughter, I will make u vp of my company, marriage is the consideration)


In partnership unanimous consent required for what.

AGAST is the mneumonic.

Admitting a new partner
Guaranteeing the debts of a 3rd party (surety ship)
Admitting or submitting a legal claim in court or to arbitration
Sale or pledge of partnership property (sell goodwill)
Third parties are notified (aware) of a limit to the partner's actual authority


What is notation

Process by which the promoter is released from and the corporation is made liable for reincorporation contractual obligations.


What is the promoter



What is the promoter

person who forms the partnership


what is the RULPA

revised uniform limited partnership act


What is the ultra vires doctrine

Applies when corporation enters a contract outside the scope of it's express or implied authority as branded by it's Articles of incorporation.

State or shareholder has the right to object, but not a competitor.

Shareholder can institute a derivative action against directors and officers to recover damages of such ultra vires act.


What does RMBCA stand for

Revised Model Business Corporation Act


What s b included in the Articles of Incorporation under RMBCA?

number of shares authorized but not

name and address of reincorporation subscriber
name and address or corporation's promoter
election of C or S status


Corporate Equity Security - which
SH preemptive right
SH appraisal right
callable bond
share of callable preferred stock

preferred stock


Term for a partnership without a specified duration

partnership at will


what is a partnership by estoppel

individual who is not a partner makes a representation, or allows one, that he or she is a partner


Is there any such thing as a perpetual or an indefinite partnership



Provision for an appraisal buyout of dissenting shareholders - req'd' when there is a consolidation?

Yes, but do not require receipt of voting stock by all SH of original corps. Need approval of BOD of both, affirmative vote by majority of each corps.


Derivative Suit to enforce which shareholder rights.

recovering damages to corporation from a third party. Shareholder is suing on behalf of the corporation.


What does RUPA stand for

Revised uniform partnership act.


If you sue a partnership, and then you sue 2 or 3 partners, can you collect against the third partner.

Breach - go after the assets of the partnership, if still not enough can go after the two named partners you sued because they are joint and several liable. For some reason the unnamed third partner is not personally liable.


Sj chapter C corporation is a __________. corporation and subject to ____________ taxation.

regular, double taxation


What is a declared yet never paid dividend on preferred stock if the company goes bankrupt.

An unsecured creditor, same as debenture bond holders and other unsecured creditors.


Who has the right to inspect partnership records?

inactive partners but not former partners, employees or transferee of partnership interests


Shareholders approve officers or directors



What does RULPA stand for

Revised Uniform Limited Partnership Act


Can general partnerships convert to limited liability partnerships



Does a limited liability partnership have general partners?

Yes, there must be at least one general partner.


What's a C Corporation?

This is a regular corporation, double taxation.


What type of entity can you dissolve without filing a dissolution document?

General partnership, not corporation, LLC or limited partnership


If a promoter makes a contract before the principal (corporation) is in existence and then the corporation backs out, who is liable. The party with whom the promoter made the contract doesn't know it isn't in existence.

The promoter, unless notation occurs or they agree in advance that the promoter won't be held liable to the contract if the corp. changes it's mind.


What is a foreign corporation?

it's a corporation operating in another state from the state of incorporation


What does an LLC Allow

Limit personal liability
Avoid Double Taxation
Allow Indian participation