Latest Commercial Law Interview Questions and Answers

Read Top Commercial Law Interview Questions and Answers Experienced, Freshers for Job Interview Quiz with Solutions.

What is business law?

Business law encompasses the many rules, statutes, codes, and regulations that are established which govern commercial relationships and provide a legal framework within which businesses may be conducted and managed. Business law is highly diverse and includes areas such as:

• business formation and organization

• transactional business law (contracts)

• business planning

• business negotiations

• mergers and acquisition

• divestitures

What is the advantage of forming an S-Corporation?

The structure of an S-Corporation is identical to the C Corporation in many ways, but offers avoidance of double taxation. If a corporation qualifies for S status with the IRS, it is taxed like a partnership: the corporation is not taxed, but the income flows through to shareholders that report the income on their individual returns.

What factors should be considered in choosing the type of business form for my business?

Although there are many important things to think about when choosing a business form, some of the main considerations include your preference of tax treatment, how you intend to capitalize the business, whether you plan to issue stock and trade it publicly, how you intend to structure the management of your business and issues surrounding the liability of the business owners, among other things. It is very important to plan your business and to work closely with someone who can help you choose the business form that will meet your needs.

Are partners considered employees of a partnership or are they self-employed?

Partners are considered to be self-employed. If you are a member of a partnership that carries on a trade or business, your distributive share of its income or loss from that trade or business is net earnings from self-employment. Limited partners are subject to self-employment tax only on guaranteed payments, such as salary and professional fees for services rendered.

What is the difference between a subchapter C and S corporation?

The Internal Revenue Code allows for two different levels of corporate tax treatment. Subchapters C and S of the code define the rules for applying corporate taxes.

Subchapter C corporations include most large, publicly-held businesses. These corporations face double taxation on their profits if they pay dividends: C corporations file their own tax returns and pay taxes on profits before paying dividends to shareholders, which are subsequently taxed on the shareholders’ individual returns.

Subchapter S corporations meet certain requirements that allow the business to insulate shareholders from corporate debts but avoid the double taxation imposed by subchapter C. In order to qualify for subchapter S treatment, corporations must meet the following criteria

• Must be domestic

• Must not be affiliated with a larger corporate group

• Must have no more than one hundred shareholders

• Must have only one class of stock

• Must not have any corporate or partnership shareholders

• Must not have any nonresident alien shareholders.

Additionally, after a business is incorporated, all shareholders must agree to subchapter S treatment prior to electing that option with the Internal Revenue Service.

What is business law?

Business law, also referred to as commercial law, covers everything from contracts, bankruptcy, incorporation, transactions, and taxation, to banking, finance, and intellectual property. Business law encompasses a wide range of rules, statutes, and codes, as well as numerous regulations that govern commercial and business dealings. Other areas business law pertains to include business formation, organization, negotiations, planning, transactions, acquisitions, mergers, and divestitures.

What does it mean to “pierce the corporate veil?”

Sometimes, courts will allow plaintiffs and creditors to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate assets. This procedure bypasses the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:

• Courts may not allow owners to benefit from a corporation’s limited liability if the underlying business is indistinguishable from its owners.

• If a corporation is formed for fraudulent purposes.

• Courts may impose liability on the individuals controlling the business if a business fails to follow certain corporate formalities in areas such as record-keeping.

What are some benefits of incorporating?

Corporations can issue stock, and having corporate stock allows for easier transfer of interest in the business. If a business needs to raise money, it can sell shares of stock. Also, central management such as that of a corporation has advantages such as articles of incorporation and bylaws that may protect officers and directors from liability for losses caused by them in their corporate capacity.

What is the difference between a joint venture and a partnership?

Joint ventures and partnerships share certain characteristics. A joint venture is a sort of partnership where two or more entities join together for a particular “short term” purpose. In both partnerships and joint ventures, each partner has equal ability to legally bind the entire entity. A partner can represent the entire organization in the normal course of business and his or her legal actions on behalf of the joint venture or partnership create legal obligations.


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