MT Bar Business Organizations 1 — Questions and Answers
Question 1: Under the Montana Business Corporation Act, a corporation is formed upon:
- Adoption of bylaws by the board
- Filing of articles of incorporation with the Montana Secretary of State (Correct answer)
- Issuance of shares to shareholders
- Execution of a shareholder agreement
Correct answer: Filing of articles of incorporation with the Montana Secretary of State
A Montana corporation comes into existence upon the effective date of its articles of incorporation filed with the Secretary of State under MCA § 35-1-207.
Question 2: The business judgment rule in Montana protects corporate directors from liability when they:
- Act in self-interest on transactions involving the corporation
- Make informed, good faith decisions in the honest belief they act in the corporation's best interest (Correct answer)
- Fail to attend any board meetings in a fiscal year
- Approve transactions without reviewing financials
Correct answer: Make informed, good faith decisions in the honest belief they act in the corporation's best interest
The business judgment rule presumes directors acted on an informed basis, in good faith, and in the honest belief the decision was in the corporation's best interest.
Question 3: Under Montana law, piercing the corporate veil to impose personal liability on shareholders typically requires:
- Any shareholder with more than 10% ownership
- A showing that the corporate form was used to perpetrate fraud or that the corporation was merely an alter ego of the shareholder (Correct answer)
- Insolvency of the corporation alone
- Failure to file annual reports
Correct answer: A showing that the corporate form was used to perpetrate fraud or that the corporation was merely an alter ego of the shareholder
Montana courts pierce the corporate veil only when shareholders use the corporation as a sham to commit fraud or where the corporation is so controlled as to be the shareholders' alter ego.
Question 4: A Montana limited liability company provides members with limited liability protection, meaning members are generally:
- Personally liable for all LLC debts
- Not personally liable for LLC debts and obligations (Correct answer)
- Liable up to the amount of their capital contribution only
- Liable for contracts but not torts
Correct answer: Not personally liable for LLC debts and obligations
Members of a Montana LLC are generally not personally liable for the debts and obligations of the LLC beyond their capital contribution, similar to corporate shareholders.
Question 5: Under Montana partnership law, partners in a general partnership are:
- Liable only to the extent of their capital contribution
- Jointly and severally liable for all partnership obligations (Correct answer)
- Liable only if they personally participated in the act
- Protected from personal liability for contract debts
Correct answer: Jointly and severally liable for all partnership obligations
In a Montana general partnership, each partner is jointly and severally liable for all partnership debts and obligations under MCA § 35-10-307.
Question 6: Under the Montana Business Corporation Act, shareholders generally have the right to inspect corporate records:
- Without restriction at any time
- Upon written demand for a proper purpose (Correct answer)
- Only at annual meetings
- Only through a court order
Correct answer: Upon written demand for a proper purpose
Montana shareholders have a statutory right to inspect books and records upon written demand stating a proper purpose under MCA § 35-1-1113.
MT Bar Business Organizations 1
Under the Montana Business Corporation Act, a corporation is formed upon: