1. Abdul, Bo and Carlos have formed a general partnership pursuant to an oral agreement.

The
agreement provided only that the partnership will conduct an oil drilling and leasing business. Abdul,
Bo and Carlos contribute start-up capital in the respective amounts of $2,000,000, $1,000,000 and
$500,000. Before the planned business is commenced, Carlos learns that a uranium mining business
is available for sale, and, stating to the seller that he is acting on behalf of himself, Abdul and Bo, uses
$2,000,000 of the partnership’s funds to purchase the business (including an operating mine). The
agreement to purchase the business is in writing. Abdul and Bo are not aware of what Carlos has
done. The day after the purchase, several workers are killed in a mining accident. Assuming that the
survivors of these workers would be able to prove damages of $12,000,000, who will have to pay it?
Why?
What difference (if any) would it make if the partnership had made a filing as a limited liability
partnership?

2. Dora and Edward are both independent psychologists specializing in family therapy. They meet at a
conference and decide that they would like to office-share, splitting the rent and utilities (other than
telephone service). Both names will appear on the door, although they will have separate telephone
listings. Each will continue to control and advertise his or her own practice and keep his or her own
profits. Before long, Dora decides to purchase a very expensive computer system and other office
equipment, none of which will be shared with Edward. She borrows the necessary funds from Fiona,
a relative. Fiona, feeling that she is doing Dora a favor, agrees to take a variable rate of interest equal
to five percent of Dora's quarterly profits. Fiona insists on having a veto power over any changes in
Dora’s basic business plan.
Has Dora formed a partnership with Edward?
With Fiona?
Why or why not?
Is there any reason for Fiona to worry about whether she might be treated as Edward’s partner?

3. Grace Gable is the sole shareholder, the only director, and the president of Test Corp. Test Corp. is
the only general partner in the Truss, Gable, and Buttress Limited Partnership. The limited partners
are Grace and ten other individuals, none of whom are named Truss or Buttress. Will Grace be liable
for the debts of Truss, Gable, and Buttress Limited Partnership? Why or why not? What difference
would it make if, in addition to filing a limited partnership certificate, Grace caused a limited liability
partnership certificate to be filed?
4. Hua and Ignacio decide to incorporate Exam Co. They decide not to use an attorney, and instead rely
on a form-book that they purchase in a bookstore. They mail their articles of incorporation to the
appropriate filing location (the relevant Secretary of State) on September 1. The same afternoon, Hua
signs a contract to purchase a piece of real property as "Hua, President of Exam Co." Assuming that
the Secretary of State rejects the articles because of an error that they contain, will Hua be liable on
the contract? Why or why not? Will Ignacio be liable on the contract? Why or why not?
Do you think that the jurisdiction makes any difference? Why or why not

5. The typical motivation for forming a corporation is to permit the shareholders to avoid personal
liability for the debts of the corporation. Notwithstanding a valid formation of a corporation, courts
sometimes "pierce the corporate veil" to impose personal liability on one or more shareholders, and
sometimes use other justifications to impose such liability. If you were forming a corporation, of
which you were going to be the sole shareholder, what would you want to keep in mind to protect
yourself from personal liability?
Would your answer be any different if you were forming a limited liability company? How about a
limited liability partnership?

6. Jinx is the president of Grocery Corp., a publicly held company that owns and operates a chain of 2000
retail grocery stores. She is contacted by Kyle, who offers to purchase two of the stores for what Jinx
believes are fabulous prices. Kyle says that Grocery Corp. must decide within 24 hours. Jinx tries to
arrange a telephone conference call with the six other individuals who, together with Jinx, compose
the board of directors of Grocery Corp. She fails, but manages to contact three of the other board
members by sequential phone calls. Each of these three agrees with Jinx that the deal is too good to
pass up. Figuring that she has the approval of a majority of the board, Jinx goes ahead and signs a
contract with Kyle. Is the contract likely to be binding on Grocery Corp.? Why or why not?

7. What are the most important similarities and differences between a limited liability company, a
limited liability partnership, a limited liability limited partnership, and a corporation?

8. Cash Crunch, Inc., a company that does not report under the Securities Exchange Act of 1934, needs
to raise $10,000,000 within the next eighteen months. Of this amount, it must receive $1,000,000
within the first three months and another $5,000,000 within the first year. It believes that it could
raise up to $1,000,000 by selling common stock to its rank-and-file work-force, which is dispersed
throughout the three states in which Cash Crunch does business. It also believes that it could raise
substantial amounts by selling either common or preferred stock to members of its management, and
by selling preferred stock to institutional investors. Assuming (1) that the only fiscal consideration
that is important is that the indicated amounts be received on schedule (that is, don't worry about
such matters as dividend rates on preferred) and (2) that Cash Crunch very much wants to avoid the
expense and hassle of registration under the Securities Act of 1933, how should it structure its
offering(s)? Why?
9. Please explain, in your own words, what the word "security" means for purposes of the Securities Act
of 1933. What factors in a transaction would alert you to the fact that a securities lawyer should be
consulted to determine whether the issuance of a security is involved?

10. New Company’s shares of common stock are closely held. It proposes to conduct an initial public
offering, as the result of which it will (for the first time) have in excess of $10,000,000 of assets and
more than 500 holders of its common shares. It expects that these shares will not be traded on a
registered stock exchange but will be thinly traded over the counter. It also has a class of preferred
shares outstanding in the hands of 50 holders. No shares of preferred will be issued in the proposed
offering. Assume that the offering will be conducted in full compliance with Regulation A of the
Securities Act of 1933. Will New Company have to register the common stock under the Securities
Exchange Act of 1934? How about the preferred stock? Assuming that one or both classes of stock
will be registered under the ‘34 Act, what are the most important things for New Company to know
about the requirements of that Act?