Business Associations Flashcards

Under Illinois law, which of the following is required for valid formation of a corporation?

Answer: Filing articles of incorporation with the Illinois Secretary of State

Under the Illinois Business Corporation Act, a corporation is formed by filing articles of incorporation with the Illinois Secretary of State.

Under the Model Business Corporation Act as adopted in Illinois, a director's duty of care requires that the director act:

Answer: In good faith with the care an ordinarily prudent person would exercise in like circumstances

The duty of care requires directors to act in good faith with the care that an ordinarily prudent person in a like position would exercise under similar circumstances.

Which of the following best describes piercing the corporate veil?

Answer: A court holding shareholders personally liable for corporate obligations by disregarding the corporate form

Piercing the corporate veil allows courts to hold shareholders personally liable for corporate obligations when the corporate form is used to perpetrate fraud or when corporate formalities are disregarded.

Under the Illinois Limited Liability Company Act, which of the following is true regarding members' fiduciary duties in a member-managed LLC?

Answer: Members owe duties of loyalty and care that may be modified but not eliminated by the operating agreement

The Illinois LLC Act imposes duties of loyalty and care on members of a member-managed LLC, and while these duties may be modified by the operating agreement, they cannot be entirely eliminated.

Which of the following statements accurately describes a general partnership under Illinois law?

Answer: A general partnership can be formed by agreement without any formal filing requirements

Under the Revised Uniform Partnership Act as adopted in Illinois, a general partnership is formed by agreement and does not require any formal state filing to be legally recognized.

Under the business judgment rule in Illinois, a court will defer to a board's business decision if the directors:

Answer: Acted on an informed basis, in good faith, and in the honest belief the action was in the corporation's best interest

The business judgment rule protects directors who act on an informed basis, in good faith, and with the honest belief that the action serves the best interests of the corporation.

Which of the following transfers of a partnership interest requires the consent of all other partners?

Answer: Transfer of management rights and voting rights in partnership affairs

Under partnership law, a partner may freely assign economic rights without consent of other partners, but transferring management and voting rights requires unanimous consent.