1. Sydney and Niki are law partners in a general partnership
Niki decides to take a position at another law firm. Niki
notifies Sydney that she’s leaving the partnership
. This set of
facts constitutes a dissolution by
A. operation of law. C. judicial decree.
B. acts of partners. D. consent.
2. Taylor served on the board of directors
for Cabby Company.
Taylor also owned a great deal of vacant land, which he had
tried unsuccessfully to sell for an extended period of time.
Taylor convinced the board of directors to purchase 1,000
acres of the land he had been attempting to sell for a price
well in excess of what the land was worth. This action likely
violated Taylor’s duty of
A. loyalty. C. disclose.
B. care. D. fair dealing.
3. Herbie owns a pizza parlor in New York. Herbie makes all business
retains all profit after overhead is paid. Herbie owns a
. C. sole proprietorship.
B. partnership. D. limited liability company.
4. Sally is a shareholder
in XYZ Corporation. XYZ Corporation made defective products,
and many individuals have filed lawsuits due to the defects. Sally may
A. be held personally liable for the defects as a shareholder.
B. be held personally liable only to the extent that she was aware of the defect.
C. be held personally liable only if she took actions to cause the defect, and those
actions are proven.
D. not be held personally liable for the defects in her capacity as a shareholder.
5. Sharon purchased $1,000 of Big Company stock. Sharon was, in effect,
A. purchasing an ownership interest in the company.
B. purchasing a seat on the board for the company.
C. loaning money to the company.
D. borrowing money from the company.
6. Melanie and Crawford were partners in a law firm. The firm was a general partnership.
Melanie failed to respond to a lawsuit against a client in time, and the client was found
liable on a $1 million dollar verdict. The client filed suit against Melanie and Crawford.
Which of the following is true about this set of facts?
A. Only Melanie can be held liable because she committed the wrong.
B. Only the partnership can be held liable, and neither Melanie nor Crawford face
C. Either Melanie or Crawford may be held jointly and severally liable.
D. Only Melanie can be held liable because Crawford knew nothing about the case on
which the mistake was made.
7. Ken was the president of a large energy company. Company executives approached
Ken about purchasing some smaller companies to expand the business. Ken read the
reports explaining the potential risk and return of the investment
, and decided the
purchase appeared to be a good investment. Unfortunately, Ken was wrong, and the
company lost millions of dollars as a result of the purchase. Based on these facts, Ken
A. violated his duty of care to the corporation.
B. should benefit from the business judgment rule.
C. violated his duty of loyalty to the corporation.
D. can’t possibly benefit from the business judgment rule.
8. Tricia purchased securities from a company in which she’s ensured ownership, and
priority as to payment of dividends and distribution of assets on dissolution. What type
of securities did Tricia purchase?
A. Common stock C. Preferred stock
B. Debenture bonds D. Convertible bonds
9. Brenda is on the board of directors for Money Company. Brenda rarely attends board
meetings, and doesn’t pay attention when she does attend. Brenda usually votes like
her friend Sadie, who is also on the board. Brenda is likely violating her duty of
A. care. C. effort.
B. substantial compliance. D. loyalty.
10. Steve decides to incorporate his business. Steve decides it’s too expensive to hire an
attorney to advise him of the requirements, and merely changes the name on the sign
outside from Steve’s to Steve, Inc. One of Steve’s customers brings suit against Steve,
Inc. based upon an allegedly defective product sold through his business. Steve defends
on the basis that Steve, Inc. doesn’t exist. Which of the following is true about this set
A. A de jure corporation exists.
B. A de facto corporation exists.
C. No corporation exists.
D. A corporation by estoppel exists.