FREE CLA/CP Business Organization Types Questions and Answers Flashcards

What is the primary legal document used to establish the rights and obligations among members of an LLC?

Answer: Operating agreement

The operating agreement defines member rights, profit distribution, and management responsibilities in an LLC.

Which type of business organization allows professionals such as attorneys and accountants to limit personal liability while practicing together?

Answer: Professional limited liability company (PLLC)

A PLLC allows licensed professionals to organize as an LLC while maintaining required professional licensing standards.

In a general partnership, how are profits distributed among partners when there is no written partnership agreement?

Answer: Equally among all partners

Under the Uniform Partnership Act, profits are shared equally among partners absent a contrary agreement.

What legal concept allows a corporation to exist independently from its shareholders, with its own rights and liabilities?

Answer: Separate legal entity doctrine

The separate legal entity doctrine treats a corporation as a distinct legal person apart from its owners.

Which filing is required to form a limited partnership in most states?

Answer: Certificate of limited partnership

A certificate of limited partnership must be filed with the state to formally create a limited partnership.

What is the legal consequence when a court decides to 'pierce the corporate veil'?

Answer: Shareholders become personally liable for corporate debts

Piercing the corporate veil removes the liability shield, making shareholders personally responsible for the corporation's obligations.