Business Organization Types Flashcards
7 cards from real CLA/CP Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Organization Types flashcards as text
What is the term for a shareholder's agreement provision that restricts a shareholder's ability to transfer shares to outside parties?
Answer: Right of first refusal
A right of first refusal requires a selling shareholder to offer existing shareholders the opportunity to purchase the shares before selling to an outside party.
A benefit corporation (B corp) differs from a traditional corporation primarily because:
Answer: Its directors must consider social and environmental impact alongside profit
A benefit corporation is a statutory entity type that requires directors to consider the interests of employees, community, and environment, not just shareholder profit.
Under the Uniform Partnership Act, when no partnership agreement addresses profit sharing, profits are divided:
Answer: Equally among all partners
The UPA default rule is that partners share profits equally regardless of their capital contributions, unless the partnership agreement provides otherwise.
Which of the following best describes a 'series LLC'?
Answer: A single LLC statute that allows the creation of separate cells with distinct assets and liabilities
A series LLC, authorized in some states, allows one LLC to create internal cells (series) each with its own members, assets, and limited liability shield.
A 'close corporation' is typically characterized by:
Answer: A small number of shareholders, no public market for shares, and active owner-management
A close (or closely held) corporation has few shareholders, restrictions on share transferability, and owners who typically also manage the business.
When a general partner in a limited partnership loses their general partner status, what must happen to maintain the LP's existence?
Answer: A new general partner must be admitted or limited partners must consent to continue
Most state LP statutes allow a limited partnership to continue if a new general partner is admitted or if the remaining partners consent to continuation within a specified period.
A 'statutory close corporation' may be permitted to operate WITHOUT which typical corporate formality?
Answer: A board of directors and formal director meetings
Some states allow statutory close corporations to operate without a board of directors, permitting shareholders to manage the business directly without typical director formalities.