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

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What happens to the capital stock of a deceased shareholder in a PT corporation?

  1. It is inherited by the shareholder's next of kin

  2. It must be returned to the corporation or sold to remaining shareholders

  3. It is donated to a PT charity

  4. It ceases to exist

The correct answer is: It must be returned to the corporation or sold to remaining shareholders

When a shareholder in a PT corporation passes away, their shares become part of their estate. The capital stock is then either returned to the corporation or sold to the remaining shareholders, depending on the terms outlined in the shareholder's will or the corporation's bylaws. Option A is incorrect because the shares do not automatically transfer to the shareholder's next of kin. Option C is incorrect because there is no requirement for the capital stock to be donated to a PT charity. Option D is incorrect because the shares still exist but have changed ownership.

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