- Which statement best describes Dynamo's status and powers after filing?
Answer: Dynamo continues to exist solely to wind up; it may defend suits, dispose of assets, and complete existing contracts, but may not enter new business unrelated to winding up.
When you see a question about corporate dissolution under the MBCA, remember that filing articles of dissolution does not instantly kill the corporation. Instead, the corporation enters a statutory "winding up" phase—a sort of corporate afterlife limited to finishing its affairs.
The best statement is the one describing Dynamo as continuing to exist solely to wind up. That is exactly what the MBCA provides: after dissolution, Dynamo may defend lawsuits, sell the warehouse, collect assets, and complete existing contracts like the outstanding customer order. What it may not do is start new business unrelated to winding up. This preserves the bargain made with creditors and shareholders: the corporation can settle its obligations but cannot reinvent itself as an ongoing enterprise.
Each wrong answer misses that limited-continuity rule. The statement that Dynamo's corporate existence ended when articles were filed, with all contracts and litigation abating automatically, is wrong because dissolution does not abate pending suits or void existing contracts. The claim that directors lose authority and only a court-appointed receiver may act is wrong because the directors ordinarily remain in charge during winding up; a receiver is not required. Finally, the idea that Dynamo may carry on any business generating funds to pay creditors, including new lines of business, is wrong because the MBCA limits post-dissolution activity to winding up, not profit-making ventures beyond existing affairs.
Study tip: on dissolution questions, look for the "winding up" boundary—powers exist to finish, not to expand.
- Can PaperCo enforce payment against the partnership?
Answer: Yes, because PaperCo had extended credit to the partnership before dissolution and had not received notice of dissolution; B's apparent authority continued as to PaperCo.
Whenever a partner binds a dissolved partnership, focus on the third party's prior dealings and whether notice was given. Under RUPA, dissolution does not immediately strip partners of power to bind the firm. For someone like PaperCo that extended credit to the partnership before dissolution and never received notice, B's apparent authority continues. Therefore PaperCo can enforce payment against the partnership—B's order was in the ordinary course, and PaperCo reasonably relied on the established relationship.
The answer "after dissolution B's authority terminated as to all third parties" is wrong because RUPA expressly protects prior creditors without notice; internal liquidation limits don't erase apparent authority. The "only if necessary to complete an existing contract" answer is wrong because RUPA imposes no such requirement—ordinary purchases during winding up can bind the partnership if the creditor falls in the protected class. The "unless A and C separately ratified" answer is wrong because apparent authority alone suffices; a single partner can bind the partnership without ratification when a prior-creditor relationship exists.
For exam day, remember the "old creditor" rule: a pre-dissolution creditor with no notice may hold the partnership liable for ordinary-course transactions made during winding up. Spot the two key facts—prior credit and lack of notice—and the answer follows.
- Under the Uniform Limited Liability Company Act (2013), which statement best describes the members' obligations after dissolution?
Answer: Tara has no further obligation to Peak; Uma remains obligated to contribute the remaining $20,000, and Peak may enforce that obligation during winding up.
When you see a question about LLC members' obligations after dissolution, recall that under the Uniform Limited Liability Company Act (2013), winding up does not erase enforceable capital promises. The LLC itself may collect unpaid contributions during winding up, and those funds are used to pay creditors.
Here, Tara paid her entire $50,000 contribution, so she owes nothing more to Peak. Uma paid only $30,000, leaving an enforceable $20,000 obligation. After dissolution, Peak may pursue that remaining contribution as part of its winding-up process — the obligation survives dissolution and becomes an asset of the LLC. Thus, Tara has no further duty, while Uma's $20,000 obligation remains enforceable by Peak.
Now consider the distractors. The statement that Tara and Uma are personally liable to Peak's creditors confuses members' obligations to the LLC with direct liability to third parties. LLC members generally are not personally liable for company debts merely because the LLC has dissolved. Similarly, the claim that Uma's obligation was extinguished at dissolution misstates the law; capital contribution obligations are specifically preserved for winding up. Finally, the suggestion that Tara owes creditors $40,000 is wrong both because Tara already fulfilled her full contribution and because members do not owe creditors directly.
For study, remember this pattern: dissolution terminates the LLC's ordinary business but not its ability to call in unpaid contributions. On exam day, any answer saying a member's unfilled capital promise disappears at dissolution is a trap — the LLC can still enforce it during winding up.
- Under the Uniform Limited Liability Company Act (2013}, what is the effect on the LLC?
Answer: The LLC continues because Elena, as Dara's legal representative, agreed in a record to continue the LLC within90 days of Dara's death.
Whenever a question involves the death of the sole member of an LLC, the key is the Uniform Limited Liability Company Act's special survival rule: the last member's legal representative gets 90 days to act. Dara died, the operating agreement was silent, and Elena as executor gave written notice within 30 days. Under ULLCA 2013, that timely agreement in a record is exactly what prevents the LLC from dissolving. So the LLC continues because Elena, as Dara's legal representative, agreed to continue it within 90 days.
The choice saying the LLC dissolved immediately because a single-member LLC cannot exist without a member ignores that statutory window—the LLC is not automatically terminated on death. The choice saying Elena's notice retroactively reinstates the LLC is also wrong: there is no reinstatement because the timely agreement means dissolution never takes effect in the first place. And the choice requiring Dara's estate to remain liable for all LLC debts invents a condition the statute does not impose; continuation does not require the estate to assume the company's obligations.
On exam day, when you see a sole-member LLC and member death, immediately look for whether a legal representative agreed in writing within 90 days. Don't assume death alone dissolves the LLC—timely action can keep it alive.
- Which statement best describes Sidney's entitlement to judicial dissolution?
Answer: Sidney may obtain dissolution if the deadlock is irreparable and threatens irreparable injury to Omega, or makes its business affairs unable to be conducted to advantage of shareholders.
When you see a question about judicial dissolution under the MBCA, think of it as a last-resort remedy for shareholder deadlock or oppression—not a penalty for director misconduct. The statute (MBCA § 14.30) allows dissolution when directors are deadlocked such that they cannot act, the deadlock is irreparable, and either the business is threatened with irreparable injury or its affairs can no longer be conducted to the shareholders' advantage. That's exactly what the facts show: a lease essential to the only profitable product, a deadlocked board, and shareholders unable to break the tie. Sidney doesn't need to prove illegality, fraud, or oppression—deadlock alone is a sufficient statutory ground, provided the irreparable/injury or disadvantage condition is met.
Now the wrong answers: The choice saying "only if she proves the directors acted illegally, oppressively, or fraudulently" misstates the standard—those grounds are separate alternatives, not prerequisites for deadlock dissolution. The one requiring "all other shareholders join the petition" is wrong because the MBCA allows any shareholder to petition under § 14.30(2), not just majority or unanimous shareholders. The derivative-suit requirement is also a trap—there's no prerequisite that you first sue directors for breach of duty; dissolution is an independent statutory remedy, not a derivative action.
Your study tip: Memorize the two prongs of deadlock dissolution—irreparable deadlock plus either irreparable injury or inability to conduct affairs to advantage. If a question describes a hopeless board split with real economic harm, that's the answer.
- Does Banco's sale to Carol transfer title to the warehouse free of Able's estate's claim?
Answer: Yes, because Banco's power was coupled with an interest; such a power survives the principal's death and can be exercised to convey title.
Whenever you see a question about an agent's power after the principal dies, first ask whether the agency is "coupled with an interest." Ordinary agencies terminate immediately at death, but a power coupled with an interest—where the agent holds a present property interest or security interest in the subject matter—survives the principal's death.
Here, Banco holds a mortgage on Able's warehouse, and the written instrument expressly gives Banco a power of sale to enforce the debt and remit the surplus. That makes Banco's power coupled with an interest, not a bare agency. Because such a power is irrevocable until the debt is paid, Able's death does not extinguish it. Banco may convey title to Carol, and Able's estate cannot defeat the sale.
The first wrong choice says Able's death terminated the agency immediately even if neither party knew. That is the general rule for ordinary agency, but it ignores the coupled-with-an-interest exception. The second wrong choice claims Banco's adverse interest disqualifies him from acting as Able's agent. A secured creditor with a sale power is not "adverse" in a disabling sense; the power is designed to protect Banco's security interest while benefiting the estate by applying proceeds to the debt and returning any surplus. The fourth wrong choice says Banco had actual authority at contract time because death does not affect third parties lacking notice. Death does terminate ordinary actual authority, but the coupled power survives on its own; lack of notice is not the reason and is not required.
Study tip: when you see "coupled with an interest" and "irrevocable," remember the power is tied to a property/security interest and outlives the principal.
- Is Principal bound to honor the contract with Supplier?
Answer: Yes, because Agent had apparent authority; and Agent's termination was not effective as to Supplier until Supplier received actual or constructive notice.
Whenever you see an agency question about a fired agent, separate actual authority from apparent authority. Firing an agent ends actual authority immediately, but it does not necessarily end the power to bind the principal with third parties who previously dealt with the agent.
Here, Supplier had dealt with Agent for two years and had no reason to know of the termination. Because Principal's failure to notify Supplier allowed Agent to appear still authorized, Agent had apparent authority to enter the standard supply contract at market prices. Therefore Principal is bound. The key rule: termination of an agent's authority is effective against third parties only when they receive actual or constructive notice.
The first wrong answer, "No, because Agent's actual authority terminated," confuses actual authority with apparent authority—termination ends the former but not the latter. The second wrong answer, "No, because Supplier had notice of Agent's authority from prior dealings," gets it backwards: prior dealings are what create apparent authority, and they do not impose a duty to inquire unless something puts Supplier on notice. The final wrong answer, "Yes, because Agent retained actual authority," is incorrect because Principal's immediate firing did terminate actual authority; the contract is binding due to apparent authority, not continuing actual authority.
Study tip: on agency questions, always ask two questions—Did the agent have actual authority? If not, did the principal's conduct or silence create apparent authority? Notice to third parties is the trigger for cutting off apparent authority.
- Was the dissolution proposal approved by the shareholders?
Answer: No, because approval requires affirmative vote of a majority of all shares entitled to vote, not merely of votes cast or shares present; 400 is less than 500.
When you see a shareholder approval question, the key is to identify the exact voting requirement the statute imposes—especially whether it turns on votes cast, shares present, or all shares outstanding. Under the Model Business Corporation Act, dissolution generally requires approval by a majority of all votes entitled to be cast on the plan. With 1,000 voting shares outstanding, that means more than half of all outstanding votes—over 500—must affirmatively approve. Here only 400 shares voted in favor, so the proposal was not approved even though it carried among votes cast.
The correct answer is the one saying approval requires a majority of all shares entitled to vote,not merely votes cast or shares present. Since 400 is far short of the needed majority of the 1,000 outstanding shares, the dissolution failed. The 350 no votes and the 250 absent shares all effectively count against the proposal under this rule, because the statute does not reduce the denominator to those present or voting.
The first wrong answer—that a majority of the votes present and voting approved—mistakenly applies the ordinary default rule for most shareholder action, but dissolution has a special outstanding-shares requirement. The second wrong answer—that 400 out of 750 present is a majority of the quorum—confuses quorum with the voting threshold;quorum only validates the meeting,it does not lower the approval standard. The third wrong answer—that two-thirds of all shares is required—overstates the MBCA requirement; dissolution does not need two-thirds unless the articles impose a supermajority requirement, which they do not here.
Your study takeaway: when the statute says "majority of all votes entitled to be cast," treat absent shares and abstentions as votes against. Always compare the favorable votes to all outstanding voting shares, not to votes cast or shares present.
- Is the partnership bound to pay for the lumber under RUPA?
Answer: Yes, because completing an existing construction contract is appropriate for winding up, and A's act binds the partnership.
Whenever you see a post-dissolution partnership question under RUPA, ask yourself: is the partner's act appropriate for winding up? Dissolution does not instantly end the partnership; it triggers the winding-up phase. Here, A is the designated winding-up partner, and the house was already partially built for an existing customer. Buying lumber needed to finish that house is squarely within winding up, because completing existing contracts is a normal and necessary winding-up activity. Therefore, A's act binds the partnership.
The wrong answer claiming that only a court-appointed liquidator can bind the partnership misunderstands RUPA: partners themselves may wind up, and no court appointment is required. The answer saying winding up allows only collecting debts and paying existing obligations is too narrow; winding up also includes completing existing projects, selling assets, and paying liabilities. Finally, the answer that A retained authority to operate the business in the ordinary course until winding up is complete overstates the authority — after dissolution, ordinary-course authority generally ends, and A's authority is limited to acts appropriate for winding up.
Study tip: remember RUPA's key distinction — dissolution ends ordinary business authority, not the partnership itself. On the exam, look for acts that finish existing obligations, not acts that continue the business as usual.
- Under the Uniform Limited Liability Company Act (2013), is the dissolution effective?
Answer: Not effective, because absent an operating-agreement provision authorizing manager dissolution, voluntary dissolution requires consent of all members; Noah did not consent.
Whenever you see a question about LLC dissolution, distinguish between ordinary business management and fundamental organic changes. Under ULLCA (2013), voluntary dissolution is a default member-level decision, not a managerial one, unless the operating agreement explicitly says otherwise. Here, the operating agreement gives Mia plenary authority to manage the business and affairs, but it is silent on dissolution. The statute's default rule requires the affirmative vote or consent of all members for voluntary dissolution. Because Noah did not consent, the dissolution is ineffective, regardless of Mia's managerial title. The trap is confusing "plenary" with "unlimited." Plenary authority covers day-to-day management and ordinary contracts, but dissolving the LLC terminates its existence—a fundamental change that the default rules reserve for members. The choice suggesting that a manager may bind the company unless a member objects within 30 days misstates the law: that rule applies to unauthorized acts binding the LLC to third parties in the ordinary course, not to internal dissolution, which requires member consent. The choice claiming a manager-managed LLC cannot be voluntarily dissolved is wrong; they can be dissolved by member consent or judicial decree, and paying creditors is part of winding up, not a prerequisite to dissolution. Study tip: Memorize that voluntary dissolution defaults to unanimous member consent under ULLCA. Managerial authority, even "plenary," does not include the power to dissolve unless the operating agreement specifically delegates it.
- Under the Revised Uniform Partnership Act, what is the effect of R's withdrawal?
Answer: The partnership is dissolved by R's express will to withdraw; P and Q cannot prevent dissolution by refusing to consent, and the partnership must be wound up.
Whenever you see a question about partner withdrawal under the Revised Uniform Partnership Act (RUPA), focus on the distinction between an at-will partnership and a term partnership. In an at-will partnership, any partner has the absolute power to withdraw and dissolve the partnership by expressing their will—regardless of the other partners' objections. Here, R's email is an unequivocal expression of intent to withdraw. Under RUPA, this immediately dissolves the at-will partnership. P and Q's rejection of the withdrawal is irrelevant because consent is not required for a partner to withdraw from an at-will partnership; the partnership must then be wound up.
Now, examine the incorrect choices. The choice stating that "the partnership continues because P and Q rejected the withdrawal, and R may not withdraw without all partners' consent" fails because it assumes unanimous consent is required—it is not. The choice claiming "the partnership is dissolved, but R remains a partner with full management rights until winding up is completed" is wrong because a withdrawing partner ceases to be a partner immediately upon withdrawal; they do not retain management rights during winding up—the remaining partners or a court-appointed liquidator handle that process. Finally, the choice that says "the partnership is not dissolved because R's withdrawal was wrongful, having been made in bad faith" is a classic trap. Even if R's withdrawal were wrongful (e.g., violating a partnership agreement), a wrongful withdrawal still dissolves the partnership, though the wrongdoer may be liable for damages. Here, since it's an at-will partnership, the withdrawal is not wrongful at all.
Study tip: In an at-will partnership, the power to dissolve is absolute—consent is never required. When analyzing withdrawal questions, separate the issue of whether the dissolution is effective (always yes upon express will) from whether it was wrongful (which only affects liability, not dissolution).
