Attorney Corporate Attorney 3

Question 1

What is an operating agreement in the context of an LLC?

Accepted Answer

A governing document that outlines the ownership structure, management rules, and operating procedures of a limited liability company

Answer

An LLC operating agreement is the key governing document that establishes ownership interests, management structure, profit distributions, member rights, and procedures for the LLC.

Question 2

What is the difference between an S corporation and a C corporation for tax purposes?

Accepted Answer

C corporations pay corporate income tax at the entity level; S corporations pass income and losses through to shareholders' individual tax returns

Answer

C corporations are subject to double taxation — taxed at the corporate level and again when profits are distributed to shareholders — while S corporations are pass-through entities taxed only at the shareholder level.

Question 3

What is a secured transaction under Article 9 of the UCC?

Accepted Answer

A transaction in which a creditor obtains a security interest in a debtor's personal property as collateral for a loan

Answer

Article 9 of the UCC governs secured transactions in personal property, allowing creditors to obtain a security interest in a debtor's assets to protect their right to repayment.

Question 4

What is a material adverse change (MAC) clause in a merger agreement?

Accepted Answer

A provision allowing a party to walk away from a deal if a significant negative event materially impacts the target company before closing

Answer

A MAC clause permits the buyer to terminate a deal if the target company experiences a significant adverse development — financial, operational, or otherwise — between signing and closing.

Question 5

What is insider trading under US securities law?

Accepted Answer

Trading in a company's securities based on material, non-public information in breach of a duty of trust or confidence

Answer

Insider trading is the illegal practice of trading securities based on material non-public information by persons who owe a duty — such as corporate insiders or those who misappropriate information.

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Attorney Corporate Attorney 3