Deck 36: Corporate Formation and Financing

Question 1

A corporation is a foreign corporation in states other than the one in which it is incorporated.

Answer 1

True

Question 2

Corporation codes regulate the formation,operation,and dissolution of corporations.

Answer 2

True

Question 3

According to the RMBCA,only corporations with 50 or fewer shareholders may elect statutory close corporation status.

Answer 3

True

Question 4

The RMBCA provides that corporate existence begins when the articles of incorporation are filed.

Question 5

Shareholders of a closely held corporation play a minor role in its management.

Question 6

Corporations are not allowed to enter into contracts in their own name.

Question 7

The registered office in the articles of incorporation must be the same as the corporation's place of business.

Question 8

Publicly held corporations are corporations run by the government.

Question 9

The shareholders of the corporation have the absolute right to amend bylaws.

Question 10

The earnings of a not-for-profit corporation are distributed among its members.

Question 11

Shareholders are liable for the debt and obligations of a corporation.

Question 12

An S corporation must pay federal income tax at the corporate level.

Question 13

Incorporators cannot become shareholders of the corporation they are associated with.

Question 14

The board of directors makes policy decisions concerning the operation of a corporation.

Question 15

A corporation can be incorporated into several states.

Question 16

Bylaws of a corporation must be filed with a government official.

Question 17

The articles of incorporation must contain the name and address of every incorporator.

Question 18

Amendments to the articles of incorporation must be filed with the secretary of state of the state of incorporation.

Question 19

A foreign corporation can conduct intrastate commerce if it obtains a certificate of authority from the state.

Question 20

Foreign corporations can elect to be taxed as an S corporation.

Question 21

A corporation reimbursing its employees for expenses would fall under its implied powers.

Question 22

Treasury shares cannot be issued by the corporation.

Question 23

A corporation is dissolved upon the effective date of the articles of dissolution.

Question 24

Secured bondholders can foreclose on the collateral in the event of nonpayment of interest.

Question 25

An S corporation cannot have more than 100 shareholders.

Question 26

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

A)spectators
B)shareholders
C)electors
D)associates

Question 27

Common stockholders receive dividends declared by the board of directors.

Question 28

In debt securities,the corporation is the debtor and the holder is the creditor.

Question 29

The debt security of notes doesn't have a maturity period.

Question 30

Corporations formed under general incorporation laws cannot engage in businesses like banking.

Question 31

Shares that are repurchased by a corporation are called unissued shares.

Question 32

An S corporation can have nonresident aliens as shareholders.

Question 33

A C corporation pays taxes at the corporate level and the shareholder's level.

Question 34

Only outstanding shares have the right to vote.

Question 35

In case the corporation's assets are liquidated,the preferred stockholders are paid before common stockholders.

Question 36

Authorized shares that have been sold by the corporation are called issued shares.

Question 37

Shareholders cannot move an injunction against an ultra vires act engaged by the corporation.

Question 38

Convertible preferred stock permits the preferred stockholders to convert their shares into common stock.

Question 39

Any corporation with more than 100 shareholders is automatically considered a C corporation for federal income tax purposes.

Question 40

Preferred stockholders are given the right to vote for the board of directors of the corporation.

Question 41

Which of the following is true for a corporation's liability on the promoters' contracts if the corporation is never formed?

A)The corporation assumes liability of the promoters' contract automatically upon its creation.
B)The promoter's liabilities are transferred to the board of directors of the corporation upon its formation.
C)The promoter,corporation,and the third-party enter into a novation whereby liability is solely transferred to the corporation.
D)The promoters have joint personal liability on the contract unless the third party specifically exempts them from such liability.

Question 42

Which of the following is a definition of a foreign corporation?

A)A corporation with incorporations in multiple states.
B)A corporation in the state in which it is incorporated.
C)A corporation in states other than the one in which it is incorporated.
D)A corporation in the United States which has been incorporated in another country.

Question 43

A(n)________ is the basic governing documents of a corporation which must be filed with the secretary of state of the state of incorporation.

A)debt security
B)debenture
C)certificate of authority
D)articles of incorporation

Question 44

Which of the following is true for the amendment of articles of incorporation that does not affect the rights attached to shares?

A)The shareholders need to propose a resolution of recommending such an amendment.
B)The shareholders need to provide vote of approval for the amendment.
C)The board of directors can approve the amendment without shareholder approval.
D)The amendment need not be filed with the secretary of state of the state of incorporation.

Question 45

A(n)________ is a person or persons who organize and start a corporation,negotiate and enter into contracts in advance of its formation,find the initial investors to finance the corporation,and so forth.

A)incorporator
B)promoter
C)articles drafter
D)negotiator

Question 46

Which of the following elects members of the board of directors for a corporation?

A)the CEO
B)corporate officers
C)shareholders
D)employees

Question 47

A corporation in the United States that has been incorporated in another country is referred to as a(n)________ corporation.

A)foreign
B)domestic
C)onshore
D)alien

Question 48

A corporation is a(n)________ corporation in the state in which it is incorporated.

A)offshore
B)domestic
C)alien
D)foreign

Question 49

A(n)________ is a clause that can be included in the articles of incorporation that permits the corporation to engage in any activity permitted by law.

A)general-purpose clause
B)limited-purpose clause
C)dissolution clause
D)ultra vires clause

Question 50

Which of the following is true for a corporation's incorporation in a state?

A)Domestic corporations can incorporate into only one state.
B)Domestic corporations can incorporate into all states that it conducts business in.
C)Alien corporations can only incorporate into one state.
D)Foreign corporations can incorporate into more than one state.

Question 51

Which of the following can dismiss the existence of a corporation?

A)voluntary termination by shareholder
B)death of a shareholder
C)bankruptcy of a shareholder
D)voluntary termination by the corporation's creditors

Question 52

A panel of persons who are elected by the shareholders that make policy decisions concerning the operation of a corporation is known as ________.

A)legal aides
B)cartel
C)consortium
D)board of directors

Question 53

Which of the following must be included in an article of incorporation?

A)The minutes of the first organizational meeting of the board of directors.
B)The number of shares the corporation is authorized to issue.
C)The dissolution terms of the incorporation.
D)The corporate seal must be used in the articles of incorporation.

Question 54

________ is a general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

A)Limited-purpose clause
B)Limited liability of shareholders
C)Preferred shareholder rule
D)Nonparticipating shareholder rule

Question 55

The person or persons,partnerships,or corporations that are responsible for incorporation of a corporation is known as a(n)________.

A)promoter
B)shareholder
C)incorporator
D)director

Question 56

A(n)________ is a fictitious legal entity that is created according to statutory requirements.

A)corporation
B)cartel
C)outfit
D)conference

Question 57

A corporation in the state in which it was formed is referred to as a(n)________.

A)foreign corporation
B)domestic corporation
C)alien corporation
D)overseas corporation

Question 58

Which of the following acts is seen as conclusive proof for the existence of a corporation?

A)creation of the promoter's contracts
B)filing of the articles of incorporation
C)acquiring the domain name for the corporation
D)selecting a state for incorporation

Question 59

________ are corporations that have many shareholders and whose securities are often traded on national stock exchanges.

A)Closely held corporations
B)Non-profit corporations
C)Publicly held corporations
D)Shore-up corporations

Question 60

A corporation that is incorporated in another country is known as a(n)________.

A)alien corporation
B)public corporation
C)domestic corporation
D)municipal corporation

Question 61

An act by a corporation that is beyond its express or implied powers is called a(n)________.

A)Subchapter Revision S Act
B)novation
C)cooperate code act
D)ultra vires act

Question 62

The WaterGlove Corporation issues ________ preferred stock that requires the payment of a quarterly dividend of $5.00 per share.The WaterGlove Corporation falls behind with four quarterly payments,i.e.,$20.00 per share of preferred stock.The next quarter,the corporation makes a profit of $25.00 per share.The corporation must pay the $20.00 per share of arrearages to the preferred shareholders plus this quarter's payment of $5.00 per share.

A)convertible
B)redeemable
C)cumulative
D)participating

Question 63

Stock that permits a corporation to buy back the preferred stock at some future date is known as ________.

A)cumulative preferred stock
B)participating preferred stock
C)convertible preferred stock
D)redeemable preferred stock

Question 64

A(n)________ is a clause that can be included in the articles of incorporation that stipulates the activities that the corporation can engage in.The corporation can engage in no other purposes or activities.

A)ultra vires clause
B)dissolution clause
C)general-purpose clause
D)limited-purpose clause

Question 65

________ is a type of equity security that represents the residual value of a corporation.

A)Common stock
B)Preferred stock
C)Cumulative preferred stock
D)Participating preferred stock

Question 66

Which of the following would be considered an express power of a corporation?

A)opening a bank account
B)issuing notes and bonds
C)purchasing advertisement
D)purchasing insurance

Question 67

Which of the following is true of corporate bylaws?

A)They only contain rules on how the corporation can deal with the government.
B)They are only adopted by the shareholders of the corporation.
C)They are not binding on the directors,or shareholders of the corporation.
D)They do not have to be filed with any government official.

Question 68

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation are referred to as ________.

A)ultra vires rules
B)articles of incorporation
C)bylaws
D)corporation codes

Question 69

Which of the following shares have the right to vote?

A)unissued shares
B)treasury shares
C)outstanding shares
D)liquidated shares

Question 70

Which of the following criteria must be met for a company to be treated as an S corporation?

A)Shareholders must be other corporations or partnerships.
B)Nonresident aliens cannot be shareholders.
C)The corporation must have more than 100 shareholders.
D)The corporation must have more than one class of stock.

Question 71

________ is a preferred stockholder right to be paid a stated dollar amount if a corporation is dissolved and its assets redistributed.

A)Noncumulative preference
B)Cumulative dividend preference
C)Dividend preference
D)Liquidation preference

Question 72

Stock for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends are known as ________.

A)cumulative preferred stocks
B)noncumulative preferred stocks
C)common stocks
D)participating preferred stock

Question 73

Authorized shares that have not been sold by the corporation are known as ________.

A)issued shares
B)unissued shares
C)outstanding shares
D)liquidated shares

Question 74

Which of the following must necessarily be met for a corporation to elect as a statutory close corporation?

A)The corporation must have 100 or more shareholders.
B)The corporation must have 50 or fewer shareholders.
C)The corporation must contain a board of directors.
D)The corporation must have a set of bylaws.

Question 75

Which of the following is true of an S corporation?

A)The corporation can have no more than 100 shareholders.
B)Only foreign corporations can be an S corporation.
C)They are taxed at the corporate level.
D)The corporation must be a member of an affiliated group of corporations.

Question 76

________ are powers beyond express powers that allow a corporation to accomplish its corporate purpose.

A)Cumulative powers
B)Corporation codes
C)Ultra vires acts
D)Implied powers

Question 77

Which of the following is true of treasury shares?

A)They cannot be issued by the corporation.
B)They cannot be voted by the corporation.
C)They are owned by shareholders.
D)They are paid dividends for.

Question 78

Which of the following is true of a C Corporation?

A)It doesn't pay tax at the corporate level.
B)Shareholders of such a corporation don't pay tax on their dividends.
C)It must have more than 100 shareholders.
D)Nonresident aliens cannot be shareholders.

Question 79

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n)________.

A)promoter
B)shareholder
C)registered agent
D)incorporator

Question 80

Issued shares that have been repurchased by the corporation are referred to as ________.

A)outstanding shares
B)liquidated shares
C)unissued shares
D)treasury shares