Question 1

The process of doing business as a self-governing corporation is called associative corporativism.

Accepted Answer

A) True 
 B)False  True

Question 2

The Panon Corporation is incorporated in Tennessee, but its corporate headquarters is in Massachusetts. As a result, the Panon Corporation is:

Accepted Answer

A)  considered a citizen of only Massachusetts. 
B)  considered a citizen of only Tennessee. 
C)  not considered a citizen of either Massachusetts or Tennessee. 
D)  considered a citizen of both Massachusetts and Tennessee. 
A)  considered a citizen of only Massachusetts. 
B)  considered a citizen of only Tennessee. 
C)  not considered a citizen of either Massachusetts or Tennessee. 
D)  considered a citizen of both Massachusetts and Tennessee. D

Question 3

Patricia holds 150 shares of common stock in a large corporation. Patricia:

Accepted Answer

A)  is guaranteed the rights to some of the profits of the corporation. 
B)  is most likely entitled to two votes for each share of stock she holds. 
C)  will not be included in the distribution of capital upon dissolution of the corporation. 
D)  risks whatever money she invested in the 150 shares of common stock. 
A)  is guaranteed the rights to some of the profits of the corporation. 
B)  is most likely entitled to two votes for each share of stock she holds. 
C)  will not be included in the distribution of capital upon dissolution of the corporation. 
D)  risks whatever money she invested in the 150 shares of common stock. D

Question 4

An electric company would be an example of a quasi-public corporation.

Accepted Answer

A) True 
 B)False

Question 5

Janet is the promoter of a corporation called Time Inc., which is in the process of being formed. Janet rents office space in Time's name. Time is bound by Janet's contract.

Accepted Answer

A) True 
 B)False

Question 6

Par value is the value placed on the shares of stock at incorporation by the Secretary of Commerce.

Accepted Answer

A) True 
 B)False

Question 7

Janice requires information about the voting rights of members of Titan, LLC. Which document will contain this information?

Accepted Answer

A)  Articles of incorporation 
B)  Articles of organization 
C)  Bylaws 
D)  Operating agreement 
A)  Articles of incorporation 
B)  Articles of organization 
C)  Bylaws 
D)  Operating agreement

Question 8

In terms of the steps in the incorporation process, which of the following occurs after the charter is issued?

Accepted Answer

A)  A statutory agent is appointed. 
B)  The organizational meeting is held. 
C)  Filing fees are paid. 
D)  Promoters do preliminary work. 
A)  A statutory agent is appointed. 
B)  The organizational meeting is held. 
C)  Filing fees are paid. 
D)  Promoters do preliminary work.

Question 9

Alan sells merchandise on credit to ABC Co. ABC fails to pay for the merchandise. Alan later discovers that ABC is not a corporation, but a partnership consisting of Alice, Betty, and Charles. Which legal doctrine might shield Alice, Betty, and Charles from personal liability?

Accepted Answer

A)  De facto corporation 
B)  De jure corporation 
C)  Corporation by estoppel 
D)  Piercing the corporate veil 
A)  De facto corporation 
B)  De jure corporation 
C)  Corporation by estoppel 
D)  Piercing the corporate veil

Question 10

Vivian, owner of Titan Corp., uses Titan Corp. as a way to order merchandise for her personal benefit and fails to pay for the merchandise. Creditors who have shipped merchandise to Titan want to sue Vivian personally. Which of the following legal doctrines would allow a personal suit against Vivian?

Accepted Answer

A)  Corporation by estoppel 
B)  Piercing the corporate veil 
C)  De facto corporation 
D)  De jure corporation 
A)  Corporation by estoppel 
B)  Piercing the corporate veil 
C)  De facto corporation 
D)  De jure corporation

Question 11

Viola, a promoter, wants to be certain the name Xenographics, Inc. is available for her corporation. She can reserve the name in advance of incorporation.

Accepted Answer

A) True 
 B)False

Question 12

Outstanding shares of stock of the Bittman Corporation were held by seven shareholders, all from the same Bittman family. The Bittman Corporation may be designated as a close corporation.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the official authorization of a corporation to do business in a state?

Accepted Answer

A)  Articles of incorporation 
B)  Certificate of incorporation 
C)  Articles of organization 
D)  Certificate of authority 
A)  Articles of incorporation 
B)  Certificate of incorporation 
C)  Articles of organization 
D)  Certificate of authority

Question 14

Big Co. creates a wholly owned subsidiary, Small Co. Small Co. sells poor quality merchandise on credit to consumers at unlawful rates of interest and violates the warranty agreements made with consumers. Discuss if Big Co. may be held liable for the actions of Small Co.

Accepted Answer

Yes, under the instrumentality

Question 15

A promoter can escape liability by having the corporation and the third party create a(n):

Accepted Answer

A)  novation. 
B)  estoppel. 
C)  operating agreement. 
D)  certificate of organization. 
A)  novation. 
B)  estoppel. 
C)  operating agreement. 
D)  certificate of organization.

Question 16

____________ refer(s) to the written application to the state for permission to form a limited liability company.

Accepted Answer

A)  Novation 
B)  Estoppel 
C)  Operating agreement 
D)  Articles of organization 
A)  Novation 
B)  Estoppel 
C)  Operating agreement 
D)  Articles of organization

Question 17

The doctrine of de facto corporations can be altered by the courts and by statutory law.

Accepted Answer

A) True 
 B)False

Question 18

An LLC operating agreement is required by law in all states.

Accepted Answer

A) True 
 B)False

Question 19

Henry, a promoter, signs a five-year lease agreement for office space for Ajax Corp., which has not yet been formed. After formation, Ajax moves into the office space, pays rent and occupies it for six months, but then finds a cheaper location and moves out. Which party is liable on the lease?

Accepted Answer

A)  Henry 
B)  Ajax 
C)  No one, since it was a tenancy at will 
D)  Both Henry and Ajax 
A)  Henry 
B)  Ajax 
C)  No one, since it was a tenancy at will 
D)  Both Henry and Ajax

Question 20

A business concern incorporated in Canada and doing business in Ohio would be called an alien corporation.

Accepted Answer

A) True 
 B)False

Exam 26: The Corporate Entity

The process of doing business as a self-governing corporation is called associative corporativism.

The Panon Corporation is incorporated in Tennessee, but its corporate headquarters is in Massachusetts. As a result, the Panon Corporation is:

Patricia holds 150 shares of common stock in a large corporation. Patricia:

An electric company would be an example of a quasi-public corporation.

Janet is the promoter of a corporation called Time Inc., which is in the process of being formed. Janet rents office space in Time's name. Time is bound by Janet's contract.

Par value is the value placed on the shares of stock at incorporation by the Secretary of Commerce.

Janice requires information about the voting rights of members of Titan, LLC. Which document will contain this information?

In terms of the steps in the incorporation process, which of the following occurs after the charter is issued?

Alan sells merchandise on credit to ABC Co. ABC fails to pay for the merchandise. Alan later discovers that ABC is not a corporation, but a partnership consisting of Alice, Betty, and Charles. Which legal doctrine might shield Alice, Betty, and Charles from personal liability?

Viola, a promoter, wants to be certain the name Xenographics, Inc. is available for her corporation. She can reserve the name in advance of incorporation.

Outstanding shares of stock of the Bittman Corporation were held by seven shareholders, all from the same Bittman family. The Bittman Corporation may be designated as a close corporation.

Which of the following is the official authorization of a corporation to do business in a state?

Big Co. creates a wholly owned subsidiary, Small Co. Small Co. sells poor quality merchandise on credit to consumers at unlawful rates of interest and violates the warranty agreements made with consumers. Discuss if Big Co. may be held liable for the actions of Small Co.

A promoter can escape liability by having the corporation and the third party create a(n):

____________ refer(s) to the written application to the state for permission to form a limited liability company.

The doctrine of de facto corporations can be altered by the courts and by statutory law.

An LLC operating agreement is required by law in all states.

Henry, a promoter, signs a five-year lease agreement for office space for Ajax Corp., which has not yet been formed. After formation, Ajax moves into the office space, pays rent and occupies it for six months, but then finds a cheaper location and moves out. Which party is liable on the lease?

A business concern incorporated in Canada and doing business in Ohio would be called an alien corporation.

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