Defective formation and LLC organisation Bar Exam Flashcards - Medical Study Cards
Master Defective formation and LLC organisation with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.
Defective formation and LLC organisation Flashcard Deck - 10 Cards
Flashcard 1: What fiduciary duty does a promoter owe regarding property or business opportunities offered to the corporation?
Answer: A promoter owes the prospective corporation a fiduciary duty and must disclose material facts, including any profit or interest in a transaction. The promoter may not secretly profit from selling property to the corporation or diverting its opportunity.
Flashcard 2: What is the effect of bylaws compared with the articles of incorporation?
Answer: Bylaws provide the corporation’s internal governance rules, while the articles are the corporation’s foundational public document. If they conflict, the articles control over bylaws.
Flashcard 3: How can a promoter be released from liability after a corporation adopts a preincorporation contract?
Answer: The promoter is released through a novation—an agreement among the promoter, corporation, and other contracting party substituting the corporation for the promoter. Corporate adoption without novation generally leaves the promoter liable.
Flashcard 4: What documents are required to form a corporation under the majority rule?
Answer: The incorporator must file articles of incorporation with the state, and the corporation comes into existence when the filing becomes effective. Bylaws are generally adopted after formation and are not filed with the state.
Flashcard 5: What is the majority rule for corporate liability when a promoter misrepresents that a corporation already exists?
Answer: The promoter remains personally liable on the contract and may also be liable for fraud or misrepresentation. The nonexistent corporation cannot be bound until it is formed and adopts the contract.
Flashcard 6: What information must articles of incorporation generally contain?
Answer: Articles generally state the corporation’s name, purpose or permitted business, authorized shares, registered agent and office, and incorporator information. The articles may include additional lawful provisions, such as limits on director liability.
Flashcard 7: Who may serve as an incorporator, and what is the incorporator’s primary function?
Answer: Under the majority rule, one or more natural persons or entities may serve as incorporators. The incorporator signs and files the articles and, typically, acts only until the initial directors are selected.
Flashcard 8: When is a corporation liable on a contract made by a promoter before incorporation?
Answer: A corporation is not automatically liable because it did not exist when the promoter contracted. It becomes liable if, after incorporation, it adopts the contract expressly or impliedly, unless the contract’s terms provide otherwise.
Flashcard 9: When does a promoter remain personally liable on a preincorporation contract?
Answer: Under the majority rule, a promoter is personally liable on a preincorporation contract even if the corporation later adopts it, unless the contract expressly or impliedly provides that the promoter is not liable. Adoption alone does not release the promoter.
Flashcard 10: What are the elements of de facto corporation status under the traditional rule?
Answer: De facto corporation requires a valid incorporation statute, a good-faith attempt to incorporate, and actual use of corporate powers. The modern majority trend largely abolishes this doctrine and protects parties through statutory entity-status rules instead.
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