IL Bar Business Associations

Question 1

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

Accepted Answer

Filing articles of incorporation with the Illinois Secretary of State

Answer

Filing articles with the county clerk where the principal office is located

Answer

Obtaining a federal employer identification number before filing

Answer

Having at least three incorporators sign the articles

Question 2

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

Accepted Answer

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

Answer

With absolute certainty that the decision will benefit shareholders

Answer

Only after consulting with outside legal counsel on every decision

Answer

In a manner that guarantees profits for the corporation

Question 3

Which of the following best describes piercing the corporate veil?

Accepted Answer

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

Answer

The corporation merging with another entity to form a new legal person

Answer

A shareholder's personal liability being shielded by the corporate form

Answer

The process of converting a corporation to an LLC

Question 4

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

Accepted Answer

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

Answer

Members owe no fiduciary duties as a default rule

Answer

Members have unlimited power to eliminate all fiduciary duties in the operating agreement

Answer

Fiduciary duties in an LLC are identical in all respects to those owed by corporate directors

Question 5

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

Accepted Answer

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

Answer

A general partnership requires filing a certificate of partnership with the Secretary of State

Answer

General partners have limited liability for all partnership debts

Answer

A general partner's liability is capped at the amount of their capital contribution

Question 6

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

Accepted Answer

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

Answer

Made a decision that resulted in a profit for the corporation

Answer

Were personally interested in the outcome of the transaction

Answer

Obtained shareholder ratification of the decision after the fact

Question 7

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

Accepted Answer

Transfer of management rights and voting rights in partnership affairs

Answer

Transfer of economic rights such as the right to receive profits and distributions

Answer

Transfer of the right to receive a specific liquidation distribution

Answer

Assignment of the right to receive a single identified payment