Florida Bar Exam: How Business Entities Actually Shows Up

While sipping on a passionfruit White Claw and reading through feedback from people who took the February 2026 Florida Bar Exam—specifically the Business Entities multiple choice section—I had a realization.

This subject is usually taught in a way that makes everything blend together—partnerships, LLCs, corporations—until nothing sticks.

So let’s simplify it.

We’ll go through short, practical scenarios and the rules that actually get tested.

Yes, I’m currently writing a Business Entities guide (it’s already over 50 pages).

But what if what you actually need…is just this?

“Are we a partnership or not?”

Story: Two people start a business. No filing. They split profits.

A general partnership forms when:

• 2+ people
• carry on as co-owners
• for profit

Triggers:

• Profit sharing → presumption of partnership
• Sharing gross returns (money before expenses) ≠ partnership
• Intent does not matter
• Doesn’t need to be in writing (conduct ok)

If partnership → general partners are personally liable (joint and several liability)

Fact check: § 620.8202 (formation), § 620.8203 (property), § 620.8204 (property rules), § 620.8306 (liability) 

“We want to form a business the formal way — what do we choose?

Story: Two people want to start a business and limit personal liability.

If they do nothing → they likely formed a general partnership → unlimited personal liability.

If they want liability protection, they must file:

• LP → file a certificate of limited partnership (there must be at least 1 GP & 1 LP) 
• LLC → file Articles of Organization (operating agreement governs internal affairs but is not required to form the LLC)
• Corporation → file Articles of Incorporation

What you’re choosing between:

• General Partnership (GP) → manages the business and is personally liable
• Limited Partnership (LP) → does not manage and is not personally liable (just an investor)

The core benefit of an LP is that it allows passive investors to invest in the business without personal liability.

Memory line:
If they wanted protection, they had to file.
If they didn’t file, they’re exposed.

Exam traps:

• “We didn’t mean to form a partnership” → irrelevant
• “We planned to file later” → too late
• “We called ourselves an LLC but didn’t file” → still a GP

Fact check: § 620.1201 (LP formation), § 605.0201 (LLC formation), § 607.0202 (corporate formation)

Follow Up Story: They start doing business before filing a corporation. Who is liable?

Answer:

• Anyone acting on behalf of an unformed corporation may be personally liable
• If they knew the corporation was not formed, liability is joint and several
• The corporation is not liable unless it is later formed and adopts the contract

Fact check: § 607.0204 (pre-incorporation liability)

“Who is liable?”

Story: Someone signs a contract. Business can’t pay.

• GP → all partners personally liable (joint & several)
• LP → GP liable, LP not (doesn’t matter that they may participate in management and control of the LP)
• LLC → members/managers generally not personally liable solely because of status
• Corporation → corporation liable if properly bound (through authority); shareholders generally not personally liable solely because they are shareholders

But first ask: Was the entity bound?

Fact check: § 620.8306 (partner liability), § 605.0304 (LLC liability of members and managers), § 607.0622 (shareholder liability)

“Who had authority to bind?”

Story: Someone signs a deal on behalf of the business.

Rule:

• Actual authority → given by the entity
• Apparent authority → third party reasonably believes authority exists

GP (highlight testable): 

• A partner binds the partnership if acting in the ordinary course of business
• Unless: 
  • the partner lacked authority, and
  • the third party knew or was notified of the lack of authority
• If the act is outside the ordinary course → requires approval

Other entities:

• LP → only general partner binds
• Corporation → officers bind (not shareholders)

LLC (Key Distinction):

• Member-managed LLC → members bind the company in the ordinary course of business
• Manager-managed LLC → managers (not members) bind the company

In both:

• Ordinary course → binds
• Outside ordinary course → requires approval
• No binding if the third party knew the person lacked authority

Exam Tip: If it’s a manager-managed LLC, the correct answer will not be that members have authority to bind.

Fact check: § 620.8301 (partner authority), § 605.0301 (LLC authority), § 605.04074 (agency rights of members and managers), § 607.0801 (requirement for & duties of board of directors) 

“Who actually manages?”

Story: An investor (or owner) tries to make decisions for the business.

• GP → all partners manage
• LP → LP → only GPs manage and have authority to bind.
  • LPs are not personally liable solely because they participate in governance.
  • LPs may vote on or approve major structural decisions (e.g., admission of partners, merger, dissolution).
• LLC → member-managed OR manager-managed
• Corp → board of directors

What LLC means:

• Member-managed → all members participate in running the business (like a partnership)
• Manager-managed → designated managers run the business; members act more like passive investors

Memory line:

Member-managed = owners run it
Manager-managed = managers run it

Trap: Shareholders ≠ managers (they elect directors)

Fact check: § 620.8401 (partner rights/duties), § 605.0407 (LLC management), § 605.04074 (agency rights of members and managers), § 607.0801 (board authority)

“Can they transfer their interest?”

Story: An owner sells their interest in the business.

• Partnerships/LLC → only economic rights transfer
  • Transferee gets:
    • right to profits and losses
    • right to distributions
  • Transferee does not get:
    • management rights
    • access to information
  • Transfer does not:
    • make the transferee a partner or member
    • cause dissociation or dissolution
• Corp → shares freely transferable
  • Buyer steps into ownership and gets rights associated with the shares (including voting), unless restricted

Exam Tip: A transfer of a partnership or LLC interest transfers only economic rights and does not grant management authority unless the transferee is admitted as a partner or member

Fact check: § 620.8502 (transferable interest), § 605.0502 (LLC transfer), § 607.0627 (share transfer)

“Who owns the property?”

Story: One owner says, “That building is mine.”

• GP → partnership property belongs to the partnership, not the partners. Property purchased with partnership assets is presumed to be partnership property.
  • A partner is not a co-owner of partnership property and has no transferable interest in specific partnership property.
• LP → limited partnership property belongs to the LP, not the partners.
• LLC → LLC property belongs to the LLC, not the members. A member has no interest in specific LLC property.
• Corporation → Corporate property belongs to the corporation, not the shareholders.
  • A shareholder has no interest in specific corporate property, only an ownership interest in shares.

Trap: Title alone is not determinative—use of entity funds controls.

Fact check: § 620.8204 (when property is partnership property), § 620.8203 (partnership property), § 605.0110 (LLC property), § 607.0302 (corp general powers) 

“They promised to contribute but didn’t”

Story: An owner promised money or property, but never delivered it.

• GP → governed by the partnership agreement. 
  • A partner who fails to contribute as agreed may be liable to the partnership or other partners.
• LP → a partner may be liable for failing to make a promised contribution.
• LLC → a member may be liable for failing to make an agreed contribution.
  • A contribution obligation is enforceable if in a signed writing, and the LLC may seek damages or specific performance.
• Corporation → shareholders may be liable on unpaid stock subscriptions or agreed consideration which may be enforced by the corporation or its creditors.

Fact check: § 620.8401 (partner obligations), § 605.0403 (LLC contributions), § 607.0621 (share consideration), § 607.0622 (liability for shares issued before payment) 

“Can an owner sue?”

Story: An owner says, “I was harmed.”

• GP / LP → If the harm was to the partnership, the claim is derivative. If the harm was personal to the partner, it is direct.
• LLC → If the claim seeks to enforce a right of the LLC, it is derivative. If the harm was to the member individually, it is direct.
• Corporation → if the harm was to the corporation, the claim is derivative. If the harm was to the shareholder individually, the claim is direct.

Derivative actions are brought to enforce a right of the entity, require compliance with statutory procedures (e.g., standing and demand), and any recovery generally belongs to the entity.

Fact check: § 607.0750 (direct action by shareholder – corp), § 607.0741 (who can sue – corp),§ 607.0742 (what you must plead/do – corp), § 605.0802 (LLC derivative), § 620.8405 (actions by partnership and partners) 

“Who owes fiduciary duties?”

Story: Someone in control makes a self-interested decision.

• GP → Partners owe fiduciary duties of loyalty and care to the partnership and the other partners.
• LP → General partners owe fiduciary duties; limited partners generally do not owe management-based fiduciary duties absent participation in control.
• LLC →
  • In a member-managed LLC, members owe fiduciary duties to the LLC and other members.
  • In a manager-managed LLC, managers (and any managing members) owe fiduciary duties.
  • Duties may be modified by the operating agreement (subject to statutory limits).
• Corporation → Directors (and officers) owe fiduciary duties of care and loyalty to the corporation.

Trap: Shareholders do not owe board-type fiduciary duties just because they own shares.

What those duties mean:

• Duty of loyalty → requires:
  • accounting to the entity for any benefit derived from the business or use of entity property
  • refraining from self-dealing or acting adversely to the entity
  • refraining from competing with the business
  • not usurping business opportunities
• Duty of care → requires:
  • acting in good faith
  • making informed decisions
  • avoiding grossly negligent or reckless conduct, intentional misconduct, or knowing violations of law

Important (Corporations):  

Under the business judgment rule, directors are presumed to act:

• in good faith
• on an informed basis
• in the best interests of the corporation

This presumption is rebutted by:

• bad faith
• conflicts of interest / lack of independence
• gross negligence

Fact check: § 620.8404 (partner duties), § 605.04091 (LLC duties), § 607.0830 (director duties)

“They merged — what now?”

Story: The entity combines with another business.

• Partnerships (GP / LP) → Mergers are permitted if authorized by statute and the partnership agreement. Approval and procedures are governed by the applicable partnership statutes.
• LLC → Mergers, conversions, and interest exchanges are permitted. A plan of merger must be approved as required by statute and the operating agreement.
• Corporation → Mergers and share exchanges are permitted, but generally require approval by the board of directors and the shareholders pursuant to statute.

Core Rule: The surviving entity continues, and all property, rights, and liabilities of the merging entities vest in the surviving entity.

Trap: The disappearing entity does not continue to exist—only the surviving entity remains, but it inherits all liabilities.

Fact check: § 607.1101 (corp mergers), § 605.1021 (LLC mergers), § 620.2106 (LP mergers)

“Minority owner doesn’t want the deal”

Story: One owner objects to a merger or similar transaction.

• LP → Limited partners may have appraisal rights in certain transactions (e.g., mergers, conversions), governed by statute.
• LLC → Members may have appraisal rights in major transactions, including mergers, conversions, interest exchanges, and certain asset sales, if they are entitled to vote on the transaction.
• Corporation → Shareholders have statutory appraisal rights in major corporate actions, especially mergers, share exchanges, asset sales, and certain amendments.

Core Rule: A dissenting owner may demand fair value for their interest instead of accepting the transaction.

Memory point: if you see a dissenting owner in a major structural change, think appraisal rights (buyout at fair value).

Trap: Appraisal rights:

• apply only if statutory requirements are met
• often require the owner to not vote in favor and to follow strict procedures
• may be limited or eliminated in certain circumstances (e.g., publicly traded shares)

Fact check: § 607.1302 (corp appraisal rights), § 605.1006 (LLC appraisal rights), 620.2113 (Appraisal – partnership) 

“An owner wants out”

Story: One owner leaves the business.

• GP → A partner may dissociate, either rightfully or wrongfully.
  • Wrongful dissociation may result in liability for damages.
  • Dissociation does not automatically cause dissolution.
• LP → Dissociation rules differ for general partners and limited partners; general partners are treated more like GP partners, while limited partners typically have more limited roles.
• LLC → A member may dissociate as provided by statute and the operating agreement. The consequences of dissociation are governed by the statute and the operating agreement.
• Corporation → A shareholder does not dissociate; instead, they typically exit by transferring shares.

Core Rule: Dissociation terminates management rights, but the owner may retain an economic (transferable) interest unless bought out.

Trap: Dissociation ≠ dissolution. The business usually continues, and the departing owner shifts from management rights to economic rights only.

Fact check: § 620.8601 (partner dissociation), § 605.0602 (LLC dissociation)

“What are the naming requirements?”

• Corporation → must include “Corporation,” “Incorporated,” “Company,” or an accepted abbreviation such as “Inc.” or “Corp.”
• LLC → must include “Limited Liability Company” or “LLC.”
• LP → must include “Limited Partnership” or “LP.”
• GP → general partnerships do not have the same filing-name function as formal filed entities, which is part of why students confuse this area.

Trap: Missing or incorrect designation can create filing issues and potential liability problems

Fact check: § 607.0401 (corporate name), § 605.0112 (LLC name), § 620.1108 (LP name)

“They’re doing business in Florida but formed elsewhere”

Story: The entity was formed in another state but is now operating in Florida.

• LP → A foreign limited partnership may not transact business in Florida without a certificate of authority.
• LLC → A foreign LLC may not transact business in Florida without a certificate of authority.
• Corporation → A foreign corporation may not transact business in Florida without a certificate of authority.
• GP → Analyze differently, as general partnerships are not built around the same formal filing structure.

Remember: 

• A foreign entity that fails to obtain authority may not maintain an action in Florida courts, but may still incur liability and be sued.
• Activities like lawsuits, banking, or interstate commerce usually don’t count as “transacting business.”

Trap: Failure to obtain authority does not invalidate contracts, but limits the entity’s ability to bring suit until it complies.

Fact check: § 607.1501 (foreign corp), § 605.0902 (foreign LLC), § 620.1902 (app for certificate of authority)

What to Remember Before the Exam

If you take nothing else from this, remember this:

• No filing = general partnership = unlimited liability
• Filing = liability protection (LLC, LP, Corporation)
• Always ask: was the entity bound?
  • Authority comes before liability
• General partners = joint and several liability
• LLC and corporation = entity liable, not the owners
• Transfer of interest ≠ transfer of control (except corporations)
• Entity owns the property, not the individuals
• If the entity is harmed → derivative action
  Recovery goes to the entity
• Dissociation ≠ dissolution
• Merger or major transaction + unhappy owner → think appraisal rights