MD Bar Business Organizations Flashcards

Under Maryland law, what is the primary purpose of a shareholders' agreement?

Answer: To customize shareholder rights and obligations beyond what corporate statutes provide by default

A shareholders' agreement allows shareholders to tailor governance rights, transfer restrictions, and voting arrangements that the default corporate statutes do not automatically provide.

What does the 'duty of loyalty' require of Maryland corporate directors?

Answer: Directors must not personally profit at the corporation's expense and must act in the corporation's best interest

The duty of loyalty requires directors to subordinate their personal financial interests to those of the corporation and to avoid self-dealing transactions.

Under the Maryland General Corporation Law, what constitutes a 'quorum' at a shareholder meeting?

Answer: A majority of shares entitled to vote, unless the charter specifies otherwise

A quorum at a Maryland shareholders' meeting is generally a majority of shares entitled to vote, unless the charter establishes a different threshold.

In Maryland corporate law, which of the following best describes a 'foreign corporation'?

Answer: A corporation incorporated outside Maryland that is authorized to do business in Maryland

A foreign corporation is one incorporated in another state or jurisdiction that has qualified to conduct business in Maryland.

Under the Maryland Uniform Partnership Act, what happens to a general partnership when one partner withdraws?

Answer: The remaining partners may continue the partnership if permitted by the partnership agreement

Modern Maryland partnership law allows the remaining partners to continue the partnership business after a withdrawal if the partnership agreement provides for continuation.

In Maryland, which is a primary advantage of forming an LLC rather than a corporation?

Answer: LLCs offer pass-through taxation by default, avoiding entity-level tax

LLCs enjoy pass-through taxation by default, meaning income and losses flow directly to members' individual returns without first being taxed at the entity level.