Question 1

Shares permitted to be issued by a corporation are called:

Accepted Answer

A) preference shares. 
B) issued shares. 
C) authorized shares. 
D) outstanding shares. 
A) preference shares. 
B) issued shares. 
C) authorized shares. 
D) outstanding shares.

Question 2

Two corporations in a state may have the same name.

Accepted Answer

A) True 
 B)False

Question 3

When close corporation shareholders want to ensure that there is a market for their shares upon their deaths,they should use a:

Accepted Answer

A) buy-and-sell agreement. 
B) right of first refusal. 
C) consent restraint. 
D) provision disqualifying purchasers. 
A) buy-and-sell agreement. 
B) right of first refusal. 
C) consent restraint. 
D) provision disqualifying purchasers.

Question 4

A promoter owes a fiduciary duty to the corporation and to its prospective investors.This implies that:

Accepted Answer

A) a promoter is an agent of the prospective corporation. 
B) prospective investors in the business can control actions of a promoter. 
C) a promoter may engage in intrinsically fair transactions with the corporation. 
D) a promoter is an agent of the prospective investors in the business. 
A) a promoter is an agent of the prospective corporation. 
B) prospective investors in the business can control actions of a promoter. 
C) a promoter may engage in intrinsically fair transactions with the corporation. 
D) a promoter is an agent of the prospective investors in the business.

Question 5

Which of the following is included in the bylaws?

Accepted Answer

A) The purpose of the corporation. 
B) The machinery for the transfer of shares. 
C) The par value of shares of the corporation. 
D) The duration of the corporation. 
A) The purpose of the corporation. 
B) The machinery for the transfer of shares. 
C) The par value of shares of the corporation. 
D) The duration of the corporation.

Question 6

When the promoters of a business substantially comply with each of the mandatory conditions precedent to the incorporation of the business,a(n)________ corporation is formed.

Accepted Answer

A) "S" 
B) de jure 
C) de facto 
D) estoppel 
A) "S" 
B) de jure 
C) de facto 
D) estoppel

Question 7

Which of the following is not considered a transfer restriction?

Accepted Answer

A) Right of first refusal 
B) Option agreement 
C) Provisions disqualifying purchasers 
D) Fiduciary agreement 
A) Right of first refusal 
B) Option agreement 
C) Provisions disqualifying purchasers 
D) Fiduciary agreement

Question 8

Equity securities consist of:

Accepted Answer

A) debentures and promissory notes. 
B) short-term notes payable. 
C) common and preferred shares. 
D) bonds and debentures. 
A) debentures and promissory notes. 
B) short-term notes payable. 
C) common and preferred shares. 
D) bonds and debentures.

Question 9

Generally,corporate acceptance of preincorporation subscriptions occurs by action of the:

Accepted Answer

A) board of directors after incorporation. 
B) promoters during their issuance. 
C) board of directors during their issuance. 
D) promoters before incorporation. 
A) board of directors after incorporation. 
B) promoters during their issuance. 
C) board of directors during their issuance. 
D) promoters before incorporation.

Question 10

Mandatory dividend provisions enacted in corporate laws have generally been held legal.

Accepted Answer

A) True 
 B)False

Question 11

Under the MBCA,an incorporator may become jointly and severally liable for preincorporation contracts just by being an incorporator.

Accepted Answer

A) True 
 B)False

Question 12

________ is the buying back of one's property after it has been sold.

Accepted Answer

A) Convertible 
B) Mandatory dividend 
C) Redemption 
D) Conversion right 
A) Convertible 
B) Mandatory dividend 
C) Redemption 
D) Conversion right

Question 13

John is the promoter of Wheelies Corp. ,an automotive wheel manufacturing business.To escape personal liability on preincorporation contracts,John planned to make only nonbinding preincorporation contracts.He made one such contract in March 2011 with his friend David for supplying Wheelies with auto parts.After getting payment for the contract,David refused to make the supply.Wheelies has not been incorporated yet.Is David liable?

Accepted Answer

A) No,David is not liable because John is not liable on the contract. 
B) No,David is not liable because Wheelies has not been formed yet. 
C) Yes,David is liable to Wheelies but not to John. 
D) Yes,David is liable to both John and Wheelies. 
A) No,David is not liable because John is not liable on the contract. 
B) No,David is not liable because Wheelies has not been formed yet. 
C) Yes,David is liable to Wheelies but not to John. 
D) Yes,David is liable to both John and Wheelies.

Question 14

In order to capitalize a newly formed corporation,a company will usually seek cash in exchange for equity securities,debt securities,or both.

Accepted Answer

A) True 
 B)False

Question 15

A(n)________ occurs when a corporation accepts a preincorporation contract by action of its board of directors,by which the corporation becomes liable for the contract.

Accepted Answer

A) adoption 
B) novation 
C) ratification 
D) assumption of contract 
A) adoption 
B) novation 
C) ratification 
D) assumption of contract

Question 16

A(n)________ is created when people hold themselves out as representing a corporation and a court will prevent them from denying that a corporation exists.

Accepted Answer

A) de facto corporation 
B) de jure corporation 
C) corporation by estoppel 
D) equitable corporation 
A) de facto corporation 
B) de jure corporation 
C) corporation by estoppel 
D) equitable corporation

Question 17

Andrew decides to incorporate his sole proprietorship under the name Sampras Entertainment Corporation.He tells his lawyer to file articles of incorporation,and the lawyer says that the filing will be done on July 1.On June 25,Andrew makes a contract with Wimbledon Corporation.Andrew signs the contract in the name of Sampras Entertainment Corporation only.On July 1,the secretary of state files the articles.Under the MBCA,is Andrew personally liable on the contract with Wimbledon?

Accepted Answer

Yes,Andrew is personally liable on the c

Question 18

Promoters of a youth-oriented magazine publishing business substantially complied with each of the mandatory conditions precedent to the incorporation of the business,but they forgot to include the incorporators' addresses in the articles of incorporation.As a result,a(n)________ corporation was formed.

Accepted Answer

A) de jure 
B) de facto 
C) "S" 
D) estoppel 
A) de jure 
B) de facto 
C) "S" 
D) estoppel

Question 19

Under the Model Business Corporation Act,a corporation's existence begins:

Accepted Answer

A) only after the promoters substantially comply with each of the mandatory conditions precedent to incorporation and hold an organization meeting. 
B) only after the articles of incorporation are filed with the secretary of state. 
C) when the secretary of state returns to the corporation a copy of the articles stamped "Filed." 
D) when the shareholders approve of all the changes in the articles. 
A) only after the promoters substantially comply with each of the mandatory conditions precedent to incorporation and hold an organization meeting. 
B) only after the articles of incorporation are filed with the secretary of state. 
C) when the secretary of state returns to the corporation a copy of the articles stamped "Filed." 
D) when the shareholders approve of all the changes in the articles.

Question 20

When a nonprofit corporation gives its members transfer rights,restrictions on those rights are only valid if approved by:

Accepted Answer

A) a majority of the members. 
B) two-thirds of the members. 
C) affected members. 
D) all members. 
A) a majority of the members. 
B) two-thirds of the members. 
C) affected members. 
D) all members.

Exam 42: Organization and Financial Structure of Corporations

Shares permitted to be issued by a corporation are called:

Two corporations in a state may have the same name.

When close corporation shareholders want to ensure that there is a market for their shares upon their deaths,they should use a:

A promoter owes a fiduciary duty to the corporation and to its prospective investors.This implies that:

Which of the following is included in the bylaws?

When the promoters of a business substantially comply with each of the mandatory conditions precedent to the incorporation of the business,a(n)________ corporation is formed.

Which of the following is not considered a transfer restriction?

Equity securities consist of:

Generally,corporate acceptance of preincorporation subscriptions occurs by action of the:

Mandatory dividend provisions enacted in corporate laws have generally been held legal.

Under the MBCA,an incorporator may become jointly and severally liable for preincorporation contracts just by being an incorporator.

________ is the buying back of one's property after it has been sold.

In order to capitalize a newly formed corporation,a company will usually seek cash in exchange for equity securities,debt securities,or both.

A(n)________ occurs when a corporation accepts a preincorporation contract by action of its board of directors,by which the corporation becomes liable for the contract.

A(n)________ is created when people hold themselves out as representing a corporation and a court will prevent them from denying that a corporation exists.

Under the Model Business Corporation Act,a corporation's existence begins:

When a nonprofit corporation gives its members transfer rights,restrictions on those rights are only valid if approved by:

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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