BLAW 3310 TEST 3 SCHWEMER QUESTIONS AND
ANSWERS 2026
CHAPTER 12
LLC and Personal Liability - Answers -No member or manager is personally liable for
all debts.
Piercing the corporate veil - Answers -A situation in which courts put aside limited
liability and hold shareholders or directors personally liable for a corporation's actions or
debts.
Forming a partnership - Answers -Either an oral or written agreement must be made
between partners. Written is the most formal and may include terms such as finances,
management, and terms for dissolution.
General Partnership - Answers -No state filing needed; is created when two or more
partners agree to form. Low startup cost.
Limited Partnership - Answers -Only general partners have management capabilities;
other partners have limited liability.
Limited Liability Partnership - Answers -LP created by professional businesses such as
dentists or attorneys.
Things that shareholders vote on - Answers -Matters that change the corporation's
structure or existence (such as a merger with another firm or an amendment to the
corporation's articles of incorporation). Shareholders also vote for the board of directors.
Negative of Sole Proprietorships and Partnerships - Answers -Unlimited Liability
Things partners have to agree on - Answers -Mergers, dissolution, adding new
partners, major business decisions
Business judgement rule - Answers -Makes directors and managers of corporations
immune from liability when problems result from honest mistakes in judgement, so long
as there is a reasonable basis for the decisions.
Proxy - Answers -A written authorization by shareholders to cast their votes, so that
they do not have to show up in person.
CHAPTER 13 - Answers -
, The party that is paid is the _______ - Answers -Payee
How many parties are on promissory notes? - Answers -Two: The maker and the
payee
Bill of Exchange - Answers -International Draft
Sight Draft - Answers -Draft that requires immediate payment
Suretyship - Answers -A guarantee that debts will be paid, often given by a third party.
The third party (surety) agrees to pay if the debtor will not.
A guarantor is a third party that may only be obligated to pay under certain
circumstances.
Floating Lien - Answers -A security interest in a group of property that remains in place
even after the exact items in that group of property change
Mortagor - Answers -Debtor
Mortgagee - Answers -Creditor
Who is able to file for Chapter 13 bankruptcy? - Answers -Individuals
Debts you can't get out of when you declare bankruptcy - Answers -o Alimony and child
support payments
o Back taxes
o Most student loans
o Some debts incurred immediately before filing bankruptcy
o Debts incurred by fraud against the creditors
o Fines owed to the government
Chapter 11 Bankruptcy - Answers -Applies to businesses; debts are reorganized and
no liquidation occurs
During a bankruptcy, who in the company is left in charge? - Answers -Managers
CHAPTER 14
Agency by Operation of Law - Answers -Sometimes, an agent is unable to reach the
principal and has to make a rational decision quickly. This would be legally acceptable.
An example would be an agent who is forced to buy $500 worth of plywood to cover a
principal's home during a hurricane, because they are unable to get in contact with
them.
ANSWERS 2026
CHAPTER 12
LLC and Personal Liability - Answers -No member or manager is personally liable for
all debts.
Piercing the corporate veil - Answers -A situation in which courts put aside limited
liability and hold shareholders or directors personally liable for a corporation's actions or
debts.
Forming a partnership - Answers -Either an oral or written agreement must be made
between partners. Written is the most formal and may include terms such as finances,
management, and terms for dissolution.
General Partnership - Answers -No state filing needed; is created when two or more
partners agree to form. Low startup cost.
Limited Partnership - Answers -Only general partners have management capabilities;
other partners have limited liability.
Limited Liability Partnership - Answers -LP created by professional businesses such as
dentists or attorneys.
Things that shareholders vote on - Answers -Matters that change the corporation's
structure or existence (such as a merger with another firm or an amendment to the
corporation's articles of incorporation). Shareholders also vote for the board of directors.
Negative of Sole Proprietorships and Partnerships - Answers -Unlimited Liability
Things partners have to agree on - Answers -Mergers, dissolution, adding new
partners, major business decisions
Business judgement rule - Answers -Makes directors and managers of corporations
immune from liability when problems result from honest mistakes in judgement, so long
as there is a reasonable basis for the decisions.
Proxy - Answers -A written authorization by shareholders to cast their votes, so that
they do not have to show up in person.
CHAPTER 13 - Answers -
, The party that is paid is the _______ - Answers -Payee
How many parties are on promissory notes? - Answers -Two: The maker and the
payee
Bill of Exchange - Answers -International Draft
Sight Draft - Answers -Draft that requires immediate payment
Suretyship - Answers -A guarantee that debts will be paid, often given by a third party.
The third party (surety) agrees to pay if the debtor will not.
A guarantor is a third party that may only be obligated to pay under certain
circumstances.
Floating Lien - Answers -A security interest in a group of property that remains in place
even after the exact items in that group of property change
Mortagor - Answers -Debtor
Mortgagee - Answers -Creditor
Who is able to file for Chapter 13 bankruptcy? - Answers -Individuals
Debts you can't get out of when you declare bankruptcy - Answers -o Alimony and child
support payments
o Back taxes
o Most student loans
o Some debts incurred immediately before filing bankruptcy
o Debts incurred by fraud against the creditors
o Fines owed to the government
Chapter 11 Bankruptcy - Answers -Applies to businesses; debts are reorganized and
no liquidation occurs
During a bankruptcy, who in the company is left in charge? - Answers -Managers
CHAPTER 14
Agency by Operation of Law - Answers -Sometimes, an agent is unable to reach the
principal and has to make a rational decision quickly. This would be legally acceptable.
An example would be an agent who is forced to buy $500 worth of plywood to cover a
principal's home during a hurricane, because they are unable to get in contact with
them.
