PTBC (Physical Therapy Board of California) California Law Practice Exam

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What happens to the profit share of a disqualified shareholder in a PT corporation?

  1. It is doubled

  2. It is reinvested into the corporation

  3. It does not receive profit

  4. It is split among the qualified shareholders

The correct answer is: It does not receive profit

Disqualified shareholders are individuals who are not eligible to receive profit sharing in a PT corporation. This can include foreign shareholders or those who have violated certain regulations. Therefore, they will not receive any portion of the profits and their share will be allocated to the remaining qualified shareholders. Options A, B, and D are all incorrect as they suggest that the disqualified shareholder will still receive some form of profit sharing, which is not the case. Option B, in particular, is incorrect as it suggests that the profit share will be reinvested into the corporation when it is actually distributed among the qualified shareholders.

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