GBL 323 Exam 3 Practice Questions
and All Correct Answers 2026 Update.
6 Elements one must evaluate when choosing a business platform - Answer 1. Taxes
2. Degree of Control
3. Liability of Owner
4. Ease & Expense of Formation and Operation
5. Transfer-ability of Ownership Interests
6. Projected Life of Organization
Proxy - Answer An agent the shareholder chooses to vote for them. Need a document card.
Valid for 11 months.
Business Judgement Rule - Answer If acting outside duty of care, court may let decision stand
if it was made in good faith and without having been influenced by personal considerations.
Courts avoid second-guessing
Corporate Veil - Answer Legal separation of shareholders from managers/the corp.
Shareholders are not responsible for company's debts beyond their investment, and they are
not responsible for crimes committed by the corp.
Piercing the Corporate Veil - Answer A shareholder may be responsible for the crimes of the
corp. if they helped commit them. Used to reach assets of individual shareholders when the
corp has no more assets to satisfy the judgement made against them. If shareholders never
voted, had meetings, committed fraudulent activity, or otherwise behaved if the corp didn't
exist.
Financing Long Term - Answer
Financing Short Term - Answer
Common Stock - Answer Shares in a company; can vote on directors; dividend payments;
Preferred Stock - Answer In the event of liquidation, they trump claims for money over
common stock holders; get a fixed dividend paid before common stockholders are paid; usually
no voting rights
, Duties of Directors - Answer Must exercise duties in good faith, with the care of a reasonable
person, and in a manner they reasonably believe to be in the interest of the company.
Duty of Obedience
Duty of Care
Duty of Loyalty
Duty of Obedience (directors) - Answer act within their authority provided by the state laws,
articles of incorp., the bylaws, and the resolutions adopted by the board.
Duty of Care (directors) - Answer Act like a reasonable person, care, when performing duties.
Acception to this rule is application of business judgement rule
Duty of Loyalty (directors) - Answer Duty not to act adversely to the interests of the corp. If
there is a conflict between personal and corporate interests, the person must pick corporate
interests. Examples: Self-dealing, usurping a corporate opportunity, competing with the
corporation, secret profits.
Duties of Shareholders - Answer
Contract - Answer agreement enforceable by court. Has to be legal, voluntary, terms are
private law
The common law of contracts (sources of contract law) - Answer created by judges/state
courts
The Uniform Commercial Code (UCC) (Source of contract law) - Answer Applies to sale of
goods, laws covering commercial transactions
The restatement of the law of contracts (source of contract law) - Answer used for guidance
via judge/lawyers, on second edition (what does that mean...?)
Offoror - Answer makes the offer to enter the contract
Offeree - Answer accepts contract/ contract is offered to them
NOTE - Answer A contract can be more than one bilateral, express, etc (the different
classifications) but cannot be bilateral and unilateral at the same time
and All Correct Answers 2026 Update.
6 Elements one must evaluate when choosing a business platform - Answer 1. Taxes
2. Degree of Control
3. Liability of Owner
4. Ease & Expense of Formation and Operation
5. Transfer-ability of Ownership Interests
6. Projected Life of Organization
Proxy - Answer An agent the shareholder chooses to vote for them. Need a document card.
Valid for 11 months.
Business Judgement Rule - Answer If acting outside duty of care, court may let decision stand
if it was made in good faith and without having been influenced by personal considerations.
Courts avoid second-guessing
Corporate Veil - Answer Legal separation of shareholders from managers/the corp.
Shareholders are not responsible for company's debts beyond their investment, and they are
not responsible for crimes committed by the corp.
Piercing the Corporate Veil - Answer A shareholder may be responsible for the crimes of the
corp. if they helped commit them. Used to reach assets of individual shareholders when the
corp has no more assets to satisfy the judgement made against them. If shareholders never
voted, had meetings, committed fraudulent activity, or otherwise behaved if the corp didn't
exist.
Financing Long Term - Answer
Financing Short Term - Answer
Common Stock - Answer Shares in a company; can vote on directors; dividend payments;
Preferred Stock - Answer In the event of liquidation, they trump claims for money over
common stock holders; get a fixed dividend paid before common stockholders are paid; usually
no voting rights
, Duties of Directors - Answer Must exercise duties in good faith, with the care of a reasonable
person, and in a manner they reasonably believe to be in the interest of the company.
Duty of Obedience
Duty of Care
Duty of Loyalty
Duty of Obedience (directors) - Answer act within their authority provided by the state laws,
articles of incorp., the bylaws, and the resolutions adopted by the board.
Duty of Care (directors) - Answer Act like a reasonable person, care, when performing duties.
Acception to this rule is application of business judgement rule
Duty of Loyalty (directors) - Answer Duty not to act adversely to the interests of the corp. If
there is a conflict between personal and corporate interests, the person must pick corporate
interests. Examples: Self-dealing, usurping a corporate opportunity, competing with the
corporation, secret profits.
Duties of Shareholders - Answer
Contract - Answer agreement enforceable by court. Has to be legal, voluntary, terms are
private law
The common law of contracts (sources of contract law) - Answer created by judges/state
courts
The Uniform Commercial Code (UCC) (Source of contract law) - Answer Applies to sale of
goods, laws covering commercial transactions
The restatement of the law of contracts (source of contract law) - Answer used for guidance
via judge/lawyers, on second edition (what does that mean...?)
Offoror - Answer makes the offer to enter the contract
Offeree - Answer accepts contract/ contract is offered to them
NOTE - Answer A contract can be more than one bilateral, express, etc (the different
classifications) but cannot be bilateral and unilateral at the same time
