ACP Entity Formation & Corporate Governance 2

Question 1

Which document governs the internal operations of a limited liability company in most U.S. states?

Accepted Answer

Operating Agreement

Answer

The Operating Agreement governs the internal management, member rights, and operational rules of an LLC.

Question 2

A corporation's board of directors owes which primary fiduciary duties to the corporation?

Accepted Answer

Duty of care and duty of loyalty

Answer

Directors owe the duty of care (acting as a reasonably prudent person) and duty of loyalty (putting the corporation's interests first).

Question 3

What is a 'registered agent' in the context of corporate formation?

Accepted Answer

A person or entity designated to receive official legal and government correspondence on behalf of the entity

Answer

A registered agent has a physical address in the state of formation and accepts service of process and official notices on behalf of the entity.

Question 4

Under the business judgment rule, courts will generally defer to a board decision if the directors acted with all of the following EXCEPT:

Accepted Answer

In their own personal financial interest

Answer

The business judgment rule protects disinterested directors; a director acting in their own personal financial interest is conflicted and loses the rule's protection.

Question 5

Which type of corporate merger results in both original entities dissolving and forming a completely new entity?

Accepted Answer

Consolidation

Answer

In a consolidation, two or more corporations combine to form an entirely new entity, and all predecessor corporations cease to exist.

(ACP) Advanced Certified Paralegal Practice Test

(ACP) Advanced Certified Paralegal Practice Test

ACP Entity Formation & Corporate Governance 2