Business Entities Flashcards
6 cards from real FL BAR practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Business Entities flashcards as text
Under Florida corporate law, the business judgment rule protects directors from liability for business decisions made in good faith, with due care, and:
Answer: In the honest belief that the decision was in the best interests of the corporation
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.
Piercing the corporate veil to hold shareholders personally liable requires proof that the corporate form was used to:
Answer: Perpetuate fraud, promote injustice, or where the corporation was a mere instrumentality of the shareholder
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.
In a general partnership, each partner is liable for partnership debts:
Answer: Jointly and severally with all other partners
In a Florida general partnership (FRUPA), each partner is jointly and severally liable for all partnership obligations — personal assets are at risk.
A Florida LLC member's interest in the LLC is generally not subject to a charging order, which means a creditor of the member:
Answer: Can only obtain a charging order entitling them to the debtor-member's distributions, not governance rights
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.
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:
Answer: Breach of fiduciary duty owed to the minority
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.
Under the Florida Business Corporation Act, directors may declare dividends from which source?
Answer: Surplus (assets exceeding liabilities plus stated capital) or net profits
Florida § 607.06401 permits dividends from surplus (total assets minus total liabilities minus stated capital) or from the net profits of the current or preceding year — not from stated capital.