Business Organizations Flashcards

Under agency law, a principal is vicariously liable for torts committed by an employee acting within the scope of employment under the doctrine of:

Answer: Respondeat superior

Respondeat superior imposes vicarious liability on an employer for torts committed by an employee within the scope of employment.

An agent has apparent authority to bind the principal when:

Answer: A third party reasonably believes the agent has authority based on the principal's conduct or representations

Apparent authority is created by the principal's conduct or representations that reasonably lead a third party to believe the agent is authorized to act.

Which business entity provides BOTH pass-through taxation AND limited liability protection for ALL of its owners?

Answer: Limited liability company (LLC)

An LLC combines pass-through taxation (avoiding double taxation) with limited liability protection for all members, making it popular for small and medium-sized businesses.

A principal is generally bound by an agent's previously unauthorized act when:

Answer: The principal later ratifies the act by accepting its benefits or expressly affirming it with full knowledge

Ratification occurs when a principal affirms a previously unauthorized act with full knowledge of the material facts, binding the principal retroactively as if the act had been authorized from the start.

An S-corporation differs from a C-corporation primarily because an S-corporation:

Answer: Avoids entity-level federal income tax by passing income and losses through to shareholders

S-corporations elect pass-through taxation so income and losses flow to shareholders' personal returns, avoiding the double taxation faced by C-corporations at both the entity and shareholder levels.

Under Oklahoma law, shareholder approval for a corporate merger is generally required when:

Answer: The surviving corporation's articles change significantly or shareholders face substantial dilution of their interests

Shareholder approval is required for mergers involving fundamental changes to the surviving corporation or significant dilution of existing shareholders' interests, protecting shareholders from board overreach.

Under Oklahoma law, which of the following corporate actions typically requires a supermajority vote of shareholders rather than a simple majority?

Answer: Amending the corporation's articles of incorporation

Amendments to the articles of incorporation are fundamental corporate changes that under Oklahoma law require approval by a supermajority of shareholders, not merely a simple majority.