Question 1

An  ultra vires   act  is beyond the legal authority of the corporation.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is correct regarding a foreign corporation?

Accepted Answer

A)  A foreign corporation is incorporated in a foreign country. 
B)  Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C)  A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D)  All of these are correct. 
A)  A foreign corporation is incorporated in a foreign country. 
B)  Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C)  A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D)  All of these are correct. C

Question 3

Identify each of the following corporations by type. 
a. Dr. Smith and Dr. Jones are both medical doctors who practice together. They incorporate their medical practice so that they can offer themselves and their employees better employment benefits. 
b. A group of concerned citizens obtains a corporate charter from the state to form a local Water Planning and Management Corporation that is authorized to do water planning on a local level and to grant permits for such purposes as the installation of ditches, and the encouragement of good water usage practices in their jurisdictional area. 
c. Agatha and Betty, who are sisters, form a corporation in which they are the sole shareholders. They plan to operate a large retail store that sells collectibles. Agatha is the president and Betty is the chairperson of the board of directors. 
d. Bill and Carl form a corporation to prevent spouse and child abuse. The corporation operates a shelter for battered women and homeless children. 
e. Zeron Corporation is incorporated in the state of West Virginia. It decides to expand its business to Kentucky. What type of corporation is it in West Virginia? What type of corporation is it in Kentucky?

Accepted Answer

a. Smith and Jones have a professional corporation. 
b. The Water Planning and Management Corporation is a public corporation. 
c. Agatha and Betty have formed a for-profit, closely held corporation. 
d. Bill and Carl have formed a nonprofit corporation. 
e. Zeron is a domestic corporation in West Virginia and a foreign corporation in Kentucky.

Question 4

In many states, the services of the incorporators are perfunctory and short-lived.

Accepted Answer

A) True 
 B)False

Question 5

General Supply owns all the stock of Playne Pencils. A Playne employee commits a tort for which the employer is liable. The suit results in a judgment for $1 million against Playne. Playne's assets total $650,000, but General Supply's assets are in the millions. In which of the following situations would the judgment have to be paid by General?

Accepted Answer

A)  General Supply's board of directors is exactly the same as Playne's. 
B)  The president of General Supply is also the vice president of Playne. 
C)  Playne's income and General Supply's income is held in one account. 
D)  General Supply would automatically be liable as the only stockholder. 
A)  General Supply's board of directors is exactly the same as Playne's. 
B)  The president of General Supply is also the vice president of Playne. 
C)  Playne's income and General Supply's income is held in one account. 
D)  General Supply would automatically be liable as the only stockholder.

Question 6

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

Accepted Answer

A) True 
 B)False

Question 7

Promoters have a fiduciary relationship with the corporation.

Accepted Answer

A) True 
 B)False

Question 8

Most states have special incorporation statutes governing nonprofit corporations.

Accepted Answer

A) True 
 B)False

Question 9

Estoppel may create a corporation.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is the basic governing document of a corporation?

Accepted Answer

A)  A subscription. 
B)  A charter, after filing. 
C)  The set of bylaws. 
D)  A certificate of authority. 
A)  A subscription. 
B)  A charter, after filing. 
C)  The set of bylaws. 
D)  A certificate of authority.

Question 11

A benefit corporation , also called a public benefit corporation or B-corporation, is a corporate entity whose legally defined goals are only having a positive impact on society and the environment, not making a profit.

Accepted Answer

A) True 
 B)False

Question 12

Corporations have achieved dominance in which of the following ways?

Accepted Answer

A)  This form of organization accounts for 85 percent of the gross revenues of all business entities. 
B)  Over 50 percent of all U.S. businesses are organized in the corporate form. 
C)  Over 75 percent of American adults own stock directly or indirectly. 
D)  All of these are true and are ways that corporations have achieved dominance. 
A)  This form of organization accounts for 85 percent of the gross revenues of all business entities. 
B)  Over 50 percent of all U.S. businesses are organized in the corporate form. 
C)  Over 75 percent of American adults own stock directly or indirectly. 
D)  All of these are true and are ways that corporations have achieved dominance.

Question 13

Delaware is a popular state for the headquarters of corporations because:

Accepted Answer

A)  it is a small state with little competition for the corporations. 
B)  there are no fees for filing to incorporate in Delaware. 
C)  Delaware offers more stability in their corporation laws than other states. 
D)  office space is low cost and abundant. 
A)  it is a small state with little competition for the corporations. 
B)  there are no fees for filing to incorporate in Delaware. 
C)  Delaware offers more stability in their corporation laws than other states. 
D)  office space is low cost and abundant.

Question 14

The doctrine of ultra vires is of more significance today than it has been in the past.

Accepted Answer

A) True 
 B)False

Question 15

A promoter who enters a preincorporation contract in the name of the corporation usually remains liable on the contract even if the corporation adopts it.

Accepted Answer

A) True 
 B)False

Question 16

Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the business from Jack, who believed that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a perm and the solution caused her customer severe burns. The customer sued the Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the Revised Model Act, what would be the result?

Accepted Answer

A)  Claire and Jack would not be personally liable. 
B)  Claire would not be personally liable, but Jack would. 
C)  Jack would not be personally liable, but Claire would. 
D)  Both would be personally liable since there was no corporation formed. 
A)  Claire and Jack would not be personally liable. 
B)  Claire would not be personally liable, but Jack would. 
C)  Jack would not be personally liable, but Claire would. 
D)  Both would be personally liable since there was no corporation formed.

Question 17

Bylaws are rules governing a corporation's internal management.

Accepted Answer

A) True 
 B)False

Question 18

Once a shareholder sells the stock of the corporation, since the ownership of the corporation changes, a new corporation is formed.

Accepted Answer

A) True 
 B)False

Question 19

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is correct regarding the characteristics of a corporation?

Accepted Answer

A)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause. 
B)  The Fifth Amendment provisions against self-incrimination protect a corporation. 
C)  A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
D)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause and  is also protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
A)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause. 
B)  The Fifth Amendment provisions against self-incrimination protect a corporation. 
C)  A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
D)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause and  is also protected by the Fourth Amendment's provision against unreasonable searches and seizures.

Exam 33: Nature and Formation of Corporations

An ultra vires act is beyond the legal authority of the corporation.

Which of the following is correct regarding a foreign corporation?

In many states, the services of the incorporators are perfunctory and short-lived.

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

Promoters have a fiduciary relationship with the corporation.

Most states have special incorporation statutes governing nonprofit corporations.

Estoppel may create a corporation.

Which of the following is the basic governing document of a corporation?

A benefit corporation , also called a public benefit corporation or B-corporation, is a corporate entity whose legally defined goals are only having a positive impact on society and the environment, not making a profit.

Corporations have achieved dominance in which of the following ways?

Delaware is a popular state for the headquarters of corporations because:

The doctrine of ultra vires is of more significance today than it has been in the past.

A promoter who enters a preincorporation contract in the name of the corporation usually remains liable on the contract even if the corporation adopts it.

Bylaws are rules governing a corporation's internal management.

Once a shareholder sells the stock of the corporation, since the ownership of the corporation changes, a new corporation is formed.

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

Which of the following is correct regarding the characteristics of a corporation?

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance Breach and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits Collections and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property Property Insurance Bailments and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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