Corporate and Commercial Law

Corporate and Commercial Law on the CP Exam

Corporate and Commercial Law accounts for 10% of the CP exam. This area covers business entity formation, governance, and commercial transactions under the UCC. Paralegals in corporate practice handle entity formation documents, maintain corporate records, and assist with commercial transactions regularly.

Business Entity Types

• Sole proprietorship: Simplest form. Owner has unlimited personal liability. No formal filing required. Income taxed on the owner's personal return.
• General partnership: Two or more persons carrying on a business for profit. Partners share management, profits, and unlimited liability. Governed by the Revised Uniform Partnership Act (RUPA).
• Limited partnership (LP): At least one general partner (unlimited liability) and one limited partner (liability limited to investment). Limited partners cannot participate in management.
• Limited liability partnership (LLP): Partners are shielded from liability for other partners' negligence and misconduct. Common for law and accounting firms.
• Limited liability company (LLC): Combines pass-through taxation with limited liability. Formed by filing articles of organization. Governed by an operating agreement.
• Corporation: Separate legal entity. Shareholders have limited liability. Formed by filing articles of incorporation. C-corps face double taxation; S-corps have pass-through taxation (limited to 100 shareholders).

Corporate Governance

• Board of directors: Manages business affairs. Owes fiduciary duties of care (informed decisions) and loyalty (no self-dealing) to the corporation and shareholders.
• Business judgment rule: Protects directors from liability for good-faith business decisions made with reasonable care and without conflicts of interest.
• Shareholder rights: Voting (ordinary and cumulative), dividends, inspection of records, derivative suits.
• Piercing the corporate veil: Courts may disregard the corporate entity when it is used as an alter ego, is undercapitalized, or is used to perpetrate fraud.

Commercial Transactions (UCC)

• UCC Article 2: Governs the sale of goods (movable, tangible property). Does not apply to services or real estate.
• Warranties: Express warranties (seller's statements), implied warranty of merchantability (fitness for ordinary purpose), implied warranty of fitness for a particular purpose.
• Secured transactions (Article 9): Security interests in personal property, attachment, perfection (filing a financing statement), and priority rules.

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