CAS Bar Business Associations 3

Question 1

Under the California Revised Uniform Limited Liability Company Act (RULLCA), a member of an LLC is generally:

Accepted Answer

Shielded from personal liability for the LLC's debts and obligations

Answer

Personally liable for all LLC debts just like a general partner

Answer

Liable only up to their initial capital contribution to the LLC

Answer

Liable for LLC debts only if they participate in day-to-day management

Question 2

In a member-managed California LLC, which members have the authority to bind the LLC to a contract in the ordinary course of business?

Accepted Answer

Any member acting in the ordinary course of the LLC's business

Answer

Only the member holding the largest ownership interest

Answer

Only members specifically designated as managers in the operating agreement

Answer

Only members who receive approval by majority vote before each transaction

Question 3

Under California law, a 'close corporation' election allows qualifying corporations to:

Accepted Answer

Manage the business directly through shareholder agreements without a formal board of directors

Answer

Issue unlimited shares without SEC registration regardless of investor count

Answer

File a simplified form of articles of incorporation requiring only one page

Answer

Eliminate fiduciary duties among shareholders in all circumstances

Question 4

A promoter who enters into a contract on behalf of a corporation not yet formed is:

Accepted Answer

Personally liable on the contract unless the third party agrees to look solely to the corporation

Answer

Not personally liable since they acted on behalf of a future legal entity

Answer

Automatically released from all liability once the corporation is formally incorporated

Answer

Treated as an agent of the future corporation with no personal liability

Question 5

Under California corporate law, a board of directors may adopt a 'poison pill' shareholder rights plan as a takeover defense if:

Accepted Answer

The board acts in good faith on an informed basis in the best interest of the corporation and its shareholders

Answer

The plan is approved by unanimous consent of all board members

Answer

A majority of shareholders first ratify the plan at a special meeting

Answer

The corporation faces imminent insolvency or dissolution

Question 6

Under California Corporations Code §1600, a shareholder's right to inspect corporate books and records requires the shareholder to hold:

Accepted Answer

At least 5% of the outstanding shares OR to have been a shareholder for at least 6 months

Answer

At least 10% of the outstanding shares for a minimum of 1 year

Answer

Any amount of shares, since all shareholders have equal inspection rights

Answer

At least 25% of the outstanding shares regardless of holding period

Question 7

Under the California RULLCA, a member dissociates from an LLC by:

Accepted Answer

Providing express notice of their will to withdraw from the LLC

Answer

Filing a formal dissociation notice directly with the California Secretary of State

Answer

Transferring all of their membership interest to a qualifying third party

Answer

Missing three or more consecutive required member meetings