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Business Associations for the bar exam

Business Associations is tested on the MEE and is one of the eight foundational subject areas in NextGen, but it is not one of the seven MBE subjects, so expect it in essay form rather than as multiple-choice questions. Essays usually start from an agency relationship or a small business and ask who is liable: the agent, the principal, the partners or the corporation. The analysis moves through agency and authority, partnerships and their liability rules, corporate formation and limited liability, directors and officers and their duties of care and loyalty, and shareholder rights, and most essays turn on tracing that liability chain from the person who acted back to whoever ultimately answers for it. The Business Associations outline covers the same law as one continuous reference with attack checklists, which is more efficient for late review. Practice writing the fiduciary-duty analysis out in full.

22deep scope modules
185rules and propositions
22worked applications
88retrieval drills

Complete long-form outline

Modules in the full outline

Prefer one continuous document? Read the Business Associations outline instead.

Business Associations coverage by unit
UnitRule bank entriesEncyclopedia modules
Agency formation10
Authority20
Principal and agent liability10
Partnerships21
Formation and capitalization10
Directors and officers20
Shareholder rights10
Fundamental changes01
01 · Agency

Creation and actual authority

Agency is a consensual fiduciary relationship in which an agent acts on a principal's behalf and subject to the principal's control; actual authority follows the agent's reasonable understanding of the principal's manifestations.

5 propositions · open complete guide →
02 · Agency

Apparent authority, estoppel, and ratification

A principal can be bound without actual authority through reasonable third-party reliance on the principal's manifestations or later affirmance of the act.

5 propositions · open complete guide →
03 · Agency

Contract liability and agent warranties

Principal and agent liability on an authorized contract depends on authority and whether the principal was disclosed, unidentified, or undisclosed.

5 propositions · open complete guide →
04 · Agency and tort

Employee status and vicarious liability

A principal is vicariously liable for an employee's tort within employment scope, while contractor torts ordinarily require an exception or direct principal fault.

5 propositions · open complete guide →
05 · Agency duties

Care, loyalty, obedience, information, and remedies

Agents owe fiduciary and performance duties to principals, and principals owe contractual, indemnity, and good-faith duties to agents.

5 propositions · open complete guide →
06 · Partnership

Formation, property, management, and authority

A general partnership forms when two or more persons carry on as co-owners a business for profit, whether or not they intend the legal label.

5 propositions · open complete guide →
07 · Partnership

Partner liability, duties, dissociation, and dissolution

Partners face entity and personal consequences for partnership obligations, fiduciary conduct, departure, winding up, and continuation.

5 propositions · open complete guide →
08 · Formation

Corporations, promoters, and preincorporation contracts

A corporation forms through compliant public filing; promoter acts before formation and defective incorporation raise distinct liability and adoption issues.

5 propositions · open complete guide →
09 · Corporate capital

Shares, subscriptions, issuance, and veil piercing

Corporate capital rules govern valid issuance and ownership, while veil piercing exceptionally imposes entity obligations on owners who abuse limited liability.

6 propositions · open complete guide →
10 · Governance

Board, officers, shareholder voting, and distributions

Corporate power is allocated among the board, officers, and shareholders through statutes, articles, bylaws, and valid agreements.

5 propositions · open complete guide →
11 · Fiduciary duties

Care, loyalty, business judgment, and oversight

Directors and officers owe care and loyalty, while the business-judgment rule protects informed, disinterested, good-faith decisions within authority.

5 propositions · open complete guide →
12 · Owner litigation

Direct, derivative, and closely held claims

Shareholder and member litigation depends on whose right was harmed, who receives recovery, standing, demand, and procedural control.

6 propositions · open complete guide →
13 · LLCs and change

LLC governance and fundamental transactions

LLCs combine entity liability protection with operating-agreement flexibility, while corporations and LLCs require approvals for specified structural changes.

6 propositions · open complete guide →
14 · Corporate governance

Director protections: exculpation, good-faith reliance, indemnification, advancement, and insurance (Delaware)

A corporation may indemnify directors and officers who acted in good faith, must indemnify a director or officer who wins, may advance defense costs on an undertaking to repay, and may buy insurance, with tighter limits when the suit is brought by or for the corporation.

15 propositions · open complete guide →
15 · Corporate governance

Stockholder meetings, voting, proxies, written consent, and removal or replacement of directors (Delaware)

Delaware sets default rules for quorum and voting at stockholder meetings, the life of a proxy, action by written consent, cumulative voting, and how directors are removed or vacancies filled, and the charter or bylaws can change many of them.

12 propositions · open complete guide →
16 · Fundamental changes

Mergers, sales of substantially all assets, dissolution, and appraisal rights (Delaware)

A Delaware corporation needs board approval and, for fundamental changes, a stockholder vote, and stockholders who dissent from a merger may have a right to a court appraisal of the fair value of their shares unless a market exception applies.

12 propositions · open complete guide →
17 · Partnerships

Purported partners, partner agency, and partner liability (Delaware Revised Uniform Partnership Act)

A person who holds herself out as a partner, or agrees to be held out as one, can be liable to someone who relied on it, even though no partnership exists between the parties, and actual partners are jointly and severally liable for partnership obligations.

10 propositions · open complete guide →
18 · Formation of corporations and limited liability companies

Limited liability companies: formation, operating agreements, management, member liability, and fiduciary duties (Delaware)

A Delaware limited liability company is formed by filing a certificate of formation, is governed mainly by an operating agreement that may be written, oral, or implied, is managed by its members in proportion to profits unless the agreement provides for managers, shields members and managers from personal liability for its debts, and allows the agreement to expand, restrict, or eliminate fiduciary duties but not the implied covenant of good faith and fair dealing.

10 propositions · open complete guide →
19 · Formation and governance of corporations

Corporate charters, bylaws, board procedure, staggered boards, cumulative voting, and stockholder voting agreements (Delaware)

A Delaware corporation exists from the filing of its certificate of incorporation, the certificate and the bylaws govern internal affairs with the certificate controlling over inconsistent bylaws, directors act at meetings with a quorum or by unanimous consent, a board may be divided into up to three classes, and stockholders may enter voting agreements and cumulative voting only if the law and the certificate allow it.

10 propositions · open complete guide →
20 · Formation of corporations

Promoters, preincorporation contracts, de facto corporations, and corporation by estoppel

A promoter is personally liable on a contract made for a corporation not yet formed unless the other party knowingly agrees to look only to the corporation, courts in some states protect people who dealt with a defectively formed corporation through the de facto and estoppel doctrines while statutes based on the Model Act make the filing of the articles the cut-off, and shareholders are not personally liable for corporate debts merely as shareholders.

10 propositions · open complete guide →
21 · Corporate governance

Director and officer duties, conflict-of-interest transactions, and unlawful distributions under the North Carolina Business Corporation Act

The North Carolina Business Corporation Act, which follows the Model Business Corporation Act, requires a director or officer with discretionary authority to act in good faith, with the care of an ordinarily prudent person in a like position, and in a manner reasonably believed to be in the corporation's best interests, allows reasonable reliance on others, saves a conflict-of-interest transaction from being voidable if it was approved after disclosure or was fair, bars distributions that would leave the corporation unable to pay its debts or with assets below liabilities, and makes directors who assent to an unlawful distribution liable with rights of contribution.

14 propositions · open complete guide →
22 · Formation and governance of corporations and limited liability companies

North Carolina limited liability company management, standards of conduct, distributions, derivative actions, and dissolution

Under the North Carolina Limited Liability Company Act, members are managers by default unless the operating agreement designates managers, decisions approved by a majority of the managers control, each manager owes duties of good faith, ordinary prudent care, and reasonable belief in the company's best interests, a person is not liable for the company's obligations solely by reason of being an owner or manager, distributions are barred when the company could not pay debts or its liabilities would exceed its assets, and a member may sue derivatively after demand and 90 days.

14 propositions · open complete guide →
Core rule bankElementsTrapsWorked examples
01

UNIT

Agency formation

CONTROLLING FRAMEWORK

Agency relationship

Agency arises when a principal manifests assent that an agent act on the principal’s behalf and subject to control, and the agent consents; consideration and a writing are usually unnecessary.

Elements and checkpoints
  1. Mutual assent
  2. On principal’s behalf
  3. Principal control
  4. Legal capacity as required
Exam trap

Calling someone an independent contractor does not prevent agency if the actual relationship satisfies the test.

Application example

A company can create agency by directing a representative to negotiate for it even without pay.

02

UNIT

Authority

CONTROLLING FRAMEWORK

Actual authority

Actual authority exists when the agent reasonably believes, based on the principal’s manifestations, that the principal wishes the agent to act; it may be express or implied.

Elements and checkpoints
  1. Principal manifestation to agent
  2. Agent’s reasonable belief
  3. Action within scope
  4. No effective termination
Exam trap

The agent’s own belief without a principal manifestation is insufficient.

Application example

Authority to manage a store ordinarily implies authority for usual supply purchases.

CONTROLLING FRAMEWORK

Apparent authority

Apparent authority exists when a third party reasonably believes the agent is authorized because of the principal’s manifestations.

Elements and checkpoints
  1. Principal manifestation to third party
  2. Reasonable third-party belief
  3. Reliance in transaction
  4. Authority not terminated as to third party
Exam trap

An agent cannot create apparent authority solely through the agent’s own claims.

Application example

A company’s public title and prior course of dealing can create apparent purchasing authority.

03

UNIT

Principal and agent liability

CONTROLLING FRAMEWORK

Vicarious liability

An employer is liable for an employee’s tort within the scope of employment; intentional torts may qualify when motivated to serve the employer or characteristic of assigned work.

Elements and checkpoints
  1. Employee rather than independent contractor
  2. Tort
  3. Scope of employment
  4. No abandonment
Exam trap

Commuting is ordinarily outside scope, subject to exceptions.

Application example

A delivery employee’s negligent collision while making assigned deliveries is within scope.

04

UNIT

Partnerships

CONTROLLING FRAMEWORK

General partnership formation

A partnership forms when two or more persons carry on as co-owners a business for profit, whether or not they intend the label; profit sharing creates a presumption subject to exceptions.

Elements and checkpoints
  1. Two or more persons
  2. Co-ownership
  3. Business
  4. For profit
Exam trap

Sharing gross returns alone does not establish partnership, and profit payments for debt, wages, rent, or similar exceptions may not either.

Application example

Two people jointly controlling a consulting business and dividing net profits may form a partnership without filing.

CONTROLLING FRAMEWORK

Partner authority and liability

Each partner is an agent for partnership business and can bind the partnership in the ordinary course unless lacking authority and the third party knows; general partners are personally liable for partnership obligations.

Elements and checkpoints
  1. Partner status
  2. Ordinary-course act
  3. Third-party knowledge
  4. Entity and partner liability
Exam trap

An internal restriction may not protect the partnership from a third party without notice.

Application example

A partner’s ordinary inventory purchase can bind despite a private spending limit unknown to the seller.

05

UNIT

Formation and capitalization

CONTROLLING FRAMEWORK

Corporate limited liability and veil piercing

Shareholders ordinarily are not personally liable for corporate obligations, but a court may pierce when domination plus misuse causes injustice, considering undercapitalization, commingling, formalities, and fraud.

Elements and checkpoints
  1. Corporate obligation
  2. Shareholder domination
  3. Misuse or unity of interest
  4. Causal injustice
Exam trap

Ownership by one shareholder or failure of a minor formality alone ordinarily is insufficient.

Application example

Using the corporation as a personal bank account while leaving it unable to meet foreseeable liabilities supports piercing.

06

UNIT

Directors and officers

CONTROLLING FRAMEWORK

Duty of care and business judgment

Directors must act in good faith, with ordinary prudent care, and in the corporation’s best interests; the business-judgment rule protects informed, disinterested, good-faith decisions.

Elements and checkpoints
  1. Decision or oversight
  2. Information and deliberation
  3. Good faith
  4. No disabling conflict
  5. Best interests
Exam trap

The presumption protects process and judgment, not conflicted self-dealing or conscious disregard.

Application example

A losing strategy can remain protected if the board was informed, disinterested, and acted in good faith.

CONTROLLING FRAMEWORK

Duty of loyalty

Fiduciaries must put the corporation’s interests ahead of personal interests; conflicted transactions may be cleansed by informed disinterested approval or fairness under the governing statute.

Elements and checkpoints
  1. Conflict or benefit
  2. Disclosure
  3. Disinterested approval or fairness
  4. No usurpation or improper competition
Exam trap

Approval is ineffective if material conflict facts were withheld.

Application example

A director selling personal property to the corporation must disclose the interest and satisfy cleansing or fairness rules.

07

UNIT

Shareholder rights

CONTROLLING FRAMEWORK

Derivative suit

A derivative plaintiff enforces a corporate claim, must satisfy standing and adequacy rules, and ordinarily must make demand or establish recognized excuse; recovery goes to the corporation.

Elements and checkpoints
  1. Corporate injury
  2. Contemporaneous ownership
  3. Adequate representation
  4. Demand or excuse
  5. Court approval for settlement
Exam trap

A fall in share value from harm to the corporation is usually derivative, not a separate direct claim.

Application example

A shareholder challenging directors’ diversion of corporate assets generally sues derivatively.

08

UNIT

Fundamental changes

Resource-provided unit

This unit is trained through supplied law and skills tasks on the applicable exam version rather than closed-book foundational recall.

How mastery works

How to study Business Associations

The course separately measures retrieval, discrimination, fact application, writing, integrated judgment, and timed completion so memorization is never mistaken for readiness.

QUICK ANSWERS

Questions about Business Associations on the bar exam

Is Business Associations tested on the MEE?+

Yes. NCBE lists Business Associations, covering agency and partnership and corporations and limited liability companies, among the areas that may be covered on the MEE.

Is Business Associations part of the NextGen UBE?+

Yes. NCBE lists business associations and relationships among the foundational concepts from July 2026 through February 2028, and again from July 2028.

Is Business Associations on the MBE?+

No. NCBE says the seven MBE subject areas are Civil Procedure, Constitutional Law, Contracts, Criminal Law and Procedure, Evidence, Real Property and Torts.

What does the MEE outline cover under agency?+

Agency relationships, the power of an agent to bind the principal, vicarious liability of the principal, and fiduciary duties between principal and agent.

What partnership topics does NCBE list?+

Creation of general partnerships, limited partnerships and limited liability partnerships, plus the power, liability and rights of partners among themselves.

How long is an MEE question?+

30 minutes. NCBE says the MEE consists of six 30-minute questions, so a Business Associations essay must be organized quickly.

What does the MEE test besides knowing the law?+

Identifying issues, separating relevant from irrelevant material, presenting a reasoned analysis clearly, and demonstrating understanding of fundamental principles, per NCBE.

Do Business Associations questions cover more than one area?+

They can. NCBE says some MEE questions may include issues in more than one area of law and the areas covered vary from exam to exam.

Governing text

Corporate-law questions are usually answered under the Delaware General Corporation Law, whose current text is published by the State of Delaware. Delaware General Corporation Law (Delaware Code) ↗