CLA/CP Exam Business Organization Types 4

Question 1

What is the term for a shareholder's agreement provision that restricts a shareholder's ability to transfer shares to outside parties?

Accepted Answer

Right of first refusal

Answer

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.

Question 2

A benefit corporation (B corp) differs from a traditional corporation primarily because:

Accepted Answer

Its directors must consider social and environmental impact alongside profit

Answer

A benefit corporation is a statutory entity type that requires directors to consider the interests of employees, community, and environment, not just shareholder profit.

Question 3

Under the Uniform Partnership Act, when no partnership agreement addresses profit sharing, profits are divided:

Accepted Answer

Equally among all partners

Answer

The UPA default rule is that partners share profits equally regardless of their capital contributions, unless the partnership agreement provides otherwise.

Question 4

Which of the following best describes a 'series LLC'?

Accepted Answer

A single LLC statute that allows the creation of separate cells with distinct assets and liabilities

Answer

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.

Question 5

A 'close corporation' is typically characterized by:

Accepted Answer

A small number of shareholders, no public market for shares, and active owner-management

Answer

A close (or closely held) corporation has few shareholders, restrictions on share transferability, and owners who typically also manage the business.

CLA/CP Exam Practice Test

CLA/CP Exam Practice Test

CLA/CP Exam Business Organization Types 4