FL Bar Business Entities

Question 1

Under Florida corporate law, the business judgment rule protects directors from liability for business decisions made in good faith, with due care, and:

Accepted Answer

In the honest belief that the decision was in the best interests of the corporation

Answer

Florida's business judgment rule (§ 607.0830) immunizes directors who act in good faith, in a manner they reasonably believe is in the corporation's best interest, with the care an ordinarily prudent person would exercise.

Question 2

Piercing the corporate veil to hold shareholders personally liable requires proof that the corporate form was used to:

Accepted Answer

Perpetuate fraud, promote injustice, or where the corporation was a mere instrumentality of the shareholder

Answer

Florida courts pierce the corporate veil when the corporation is used as a mere instrumentality or alter ego of the shareholder to perpetuate fraud or injustice, and when the shareholder dominates and controls the entity.

Question 3

In a general partnership, each partner is liable for partnership debts:

Accepted Answer

Jointly and severally with all other partners

Answer

In a Florida general partnership (FRUPA), each partner is jointly and severally liable for all partnership obligations — personal assets are at risk.

Question 4

A Florida LLC member's interest in the LLC is generally not subject to a charging order, which means a creditor of the member:

Accepted Answer

Can only obtain a charging order entitling them to the debtor-member's distributions, not governance rights

Answer

Florida's charging order (§ 605.0503) is the exclusive remedy for a member's judgment creditor — it entitles the creditor only to the debtor-member's economic distributions, not management or voting rights.

Question 5

Shareholders in a Florida close corporation may have a reasonable expectation of employment or management participation, and a majority shareholder who freezes out a minority shareholder may be liable for:

Accepted Answer

Breach of fiduciary duty owed to the minority

Answer

Florida courts recognize that in a close corporation, majority shareholders owe minority shareholders a heightened fiduciary duty, and a freeze-out (excluding from management, cutting dividends) may constitute a breach.

FL Bar - Florida Bar Exam Practice Test

FL Bar - Florida Bar Exam Practice Test

FL Bar Business Entities