LES 305 EXAM #4 QUESTIONS AND
ANSWERS
Professional corporation - Answer-Entity with limited liability except for
malpractice/negligence by its owners
S corporation - Answer-IRS category of corporation with flow-through characteristics
Model Business Corporation Act (MBCA) - Answer-Uniform law adopted in
approximately one-third of the states
Articles of incorporation - Answer-Document filed to organize a corporation
Common stock - Answer-Generally most voluminous type of corporate shares and
usually allows shareholders to vote
Preferred stock - Answer-Ownership interest with priority over common stock
Corporate veil - Answer-Liability shield for corporate owners
Watered shares - Answer-Failure to pay per value for shares
Business judgement rule - Answer-Standard of liability for directors
Corporate opportunity doctrine - Answer-Fiduciary responsibility of directors with
respect to investments
Board of directors - Answer-Policy-setting body of corporations
Proxy - Answer-Right to vote for another
Pooling agreement - Answer-Shareholder contract to vote a certain way
Voting trust - Answer-Separation of legal and equitable title in shares to ensure voting of
shares in one way
Dissenting shareholder - Answer-Shareholder who objects to merger
Appraisal rights - Answer-Value of shares immediately before merger that is paid to
dissenting shareholder
How is a LLC formed? - Answer-a) Articles of organization
b) Flow-through of income
ANSWERS
Professional corporation - Answer-Entity with limited liability except for
malpractice/negligence by its owners
S corporation - Answer-IRS category of corporation with flow-through characteristics
Model Business Corporation Act (MBCA) - Answer-Uniform law adopted in
approximately one-third of the states
Articles of incorporation - Answer-Document filed to organize a corporation
Common stock - Answer-Generally most voluminous type of corporate shares and
usually allows shareholders to vote
Preferred stock - Answer-Ownership interest with priority over common stock
Corporate veil - Answer-Liability shield for corporate owners
Watered shares - Answer-Failure to pay per value for shares
Business judgement rule - Answer-Standard of liability for directors
Corporate opportunity doctrine - Answer-Fiduciary responsibility of directors with
respect to investments
Board of directors - Answer-Policy-setting body of corporations
Proxy - Answer-Right to vote for another
Pooling agreement - Answer-Shareholder contract to vote a certain way
Voting trust - Answer-Separation of legal and equitable title in shares to ensure voting of
shares in one way
Dissenting shareholder - Answer-Shareholder who objects to merger
Appraisal rights - Answer-Value of shares immediately before merger that is paid to
dissenting shareholder
How is a LLC formed? - Answer-a) Articles of organization
b) Flow-through of income
