Business Relationships Flashcards
7 cards from real NYLE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Relationships flashcards as text
Under New York law, a general partner who withdraws from a partnership before its term expires is liable for damages caused by the wrongful withdrawal. Which statement best describes the withdrawing partner's continued liability to third parties?
Answer: The partner remains liable for partnership obligations incurred before withdrawal, and for later obligations to creditors who dealt with the firm before and had no notice of the withdrawal.
New York follows the 1914 Uniform Partnership Act (Partnership Law), not RUPA. A withdrawing partner dissolves the partnership; the partner stays liable for obligations incurred before dissolution (§ 67) and for later obligations to persons who had previously extended credit to the firm and had no knowledge or notice of dissolution (§ 66). There is no 90-day RUPA window.
Alice and Bob form an LLC in New York. The operating agreement is silent on management. Under the New York LLC Law, which default rule applies?
Answer: The LLC is member-managed, and management decisions are made by a majority in interest of the members.
Under NY LLC Law §§ 401(a) and 402(a), unless the articles of organization provide for management by managers, management is vested in the members, and decisions are made by a majority in interest of the members (by share of profits). It is not manager-managed, and a court does not appoint a manager by default.
Under New York's Business Corporation Law, what is the minimum number of directors required to form a quorum for a board meeting in the absence of a contrary bylaw provision?
Answer: A simple majority of the entire authorized board.
BCL § 707 provides that a majority of the entire board constitutes a quorum unless the certificate of incorporation or bylaws fix a different proportion, but not less than one-third.
A New York limited partnership fails to file a certificate of limited partnership. What is the status of a person who invested capital believing they were a limited partner?
Answer: Unless, on discovering the mistake, they promptly cause a certificate to be filed or withdraw, they can be liable as a general partner to persons who dealt with the business believing them to be a general partner.
Under Partnership Law § 121-304, a person who contributes to a purported limited partnership and erroneously but in good faith believes he is a limited partner is not a general partner if, on ascertaining the mistake, he promptly causes a proper certificate to be filed or withdraws by filing a certificate; if he does neither, he faces general-partner liability to third parties who transacted business believing him to be a general partner (§ 121-304(b)). Filing the certificate is what creates the limited-partner shield.
A New York corporation's shareholder agreement restricts stock transfer without board approval. A shareholder transfers shares in violation of this restriction to a buyer who had actual notice of it. Is the restriction enforceable against the buyer?
Answer: Yes, because the buyer had actual knowledge of the restriction.
Under BCL § 627, a lawful restriction on transfer may be enforced against a holder or transferee who has actual knowledge of it, even if it was not noted on the certificate (a noted restriction binds regardless of knowledge). A buyer with actual notice cannot claim to be an innocent purchaser.
Under the New York LLC Law, when may a member bring a derivative action on behalf of the LLC?
Answer: After making a demand on the managers or members that was refused or after demonstrating demand futility.
NY LLC Law § 1002 requires a member to make a demand on managers or members prior to filing a derivative suit, or to plead with particularity why demand would be futile.
Two attorneys form a New York LLP. One partner commits malpractice. Under New York's LLP statutes, what is the other, non-negligent partner's personal liability?
Answer: Not personally liable for the malpractice claim but remains liable for ordinary contract debts of the partnership.
Under NY Partnership Law § 26, an LLP partner is shielded from personal liability for malpractice of co-partners but retains liability for the partnership's own contractual obligations.