Non-corporate entities
What is the simplest form of business ownership where the owner is indistinguishable from the business?
Sole proprietorship
What is another term for publicly traded corporations?
Publicly held corporations
Who is the person acting on behalf of another in an agency relationship?
Agent
What act serves as a statutory model for many states’ corporate laws?
Model Business Corporation Act (MBCA)
What is one advantage of forming a corporation?
Limited liability for shareholders
What document serves as the "operating manual" for partnerships?
Partnership agreement
What type of corporation is created by the government to perform a public function?
Public corporations (e.g., Federal Deposit Insurance Corporation)
What term describes the person for whom the agent acts?
Principal
Name one characteristic of a corporation.
Limited liability, perpetual existence, or centralized management
What is a disadvantage of the corporate form?
Double taxation
What type of partnership requires no formal governmental filings to be created?
General partnership
What is a characteristic of a closely held corporation?
Few shareholders, often family or friends, and no public stock exchange
What is the nature of an agency relationship?
Fiduciary relationship
What is the term for actions outside the corporation’s stated purpose?
Ultra vires acts
What is the statutory source of limited liability for shareholders?
Model Business Corporation Act Section 6.2(b)
Name one fiduciary duty owed by partners in a partnership.
Duty of care, duty of loyalty, or duty of good faith
Which corporation is exempt from stringent public reporting requirements?
Closely held corporations
How is express authority created in an agency relationship?
Through direct agreement or contract
What is the main purpose of corporate bylaws?
To govern the internal management of the corporation
What is the doctrine allowing creditors to reach shareholders’ assets in certain cases?
Piercing the corporate veil
What term describes partnerships where the income is taxed directly to the partners?
Pass-through entity
Name one example of a municipal corporation.
Cities, towns, or public school districts
What is the key duty owed by an agent to the principal?
Duty to act in the principal's best interest
What is the role of shareholders in a corporation?
They vote for directors and approve fundamental changes.
What factor often determines the jurisdiction for incorporating?
Favorable corporate laws, such as in Delaware
What statute often governs partnerships in the U.S.?
Uniform Partnership Act or Revised Uniform Partnership Act
What is a benefit of nonprofit corporations?
Tax exemptions
What type of authority arises from a principal's actions leading others to believe an agent is authorized?
Apparent authority
What is required for the legal formation of a corporation?
Filing Articles of Incorporation with the state
What is the primary purpose of stock transfer restrictions in closely held corporations?
To maintain control among select shareholders
What happens to a sole proprietorship when the owner dies?
The business ceases to exist
What is the primary difference between closely held and publicly traded corporations?
Stock in publicly traded corporations is freely bought and sold on public exchanges.
What is the doctrine that makes a principal liable for the agent’s contracts if certain criteria are met?
Ratification
What is a key feature of perpetual existence in corporations?
The corporation continues despite the death of shareholders.
What is the term for obligations voluntarily assumed by a shareholder, leading to personal liability?
Personal acts liability
What is the liability structure for general partners in a general partnership?
Unlimited personal liability
What type of corporation typically requires shareholders to sign a buy-sell agreement?
Closely held corporations
How is an agency relationship terminated?
Mutual agreement, death, incapacity, or fulfillment of purpose
How does the MBCA simplify corporate purpose?
By allowing broad-based purpose language to avoid ultra vires issues
What is a key consideration for businesses forming LLCs instead of corporations?
Avoidance of double taxation
What is the term for the legal authority of a partner to bind the partnership?
Apparent authority
What are the governance requirements for closely held corporations?
They must have bylaws, hold meetings, and maintain written minutes.
What is the principal’s liability for unauthorized acts of the agent?
The principal is not liable unless the acts are ratified
What is the significance of quorum in corporate meetings?
It is the minimum attendance required to conduct business
What is one non-tax advantage of corporate centralization?
Efficient management by a board of directors and officers
What distinguishes a limited partnership from a general partnership?
Limited partners have liability limited to their investment, and they do not manage the business.
What federal law extensively regulates publicly traded corporations?
Sarbanes-Oxley Act
What is the term for a principal being held liable for an agent’s torts within the scope of employment?
Respondeat superior
What corporate form is designed for social and environmental benefits?
Benefit corporations
What legal principle ensures the continuity of corporations despite changes in ownership?
Perpetual succession