Deck 30: Corporations: Formation and Organization

Question 1

Matt and Mindy wish to incorporate their business but want to limit who can buy ownership interests in their business. Which type of corporation would you suggest?

A) Non-profit corporation
B) Public corporation
C) Privately held corporation
D) Limited corporation

Answer 1

Privately held corporation

Question 2

Chaplan Corporation is a privately held corporation that wishes to offer ownership interests to the general public and commercial investors in order to generate more capital. This process is called

A) Initial public offerings
B) Public stock sales
C) Open stock offerings
D) Unlimited stock offerings

Answer 2

Initial public offerings

Question 3

Space X filed its articles of incorporation in Delaware, but its principal place of business is in Texas. In which state is Space X a domestic corporation?

A) Delaware
B) Texas
C) Both Texas and Delaware
D) Whichever state the promoters choose as the domestic state.

Answer 3

Delaware

Question 4

Which statement is accurate about Delaware as it relates to taxation treatment of out of state corporations that incorporate in Delaware?

A) They face no taxes.
B) They face very favorable tax treatment.
C) Delaware does not allow double taxation of corporations.
D) Unless they sell products and services in Delaware, they may not benefit at all from Delaware tax treatment.

Question 5

Jeff files the articles of incorporation to start BluSky Inc. What will be the next step?

A) Sell shares of stocks on the New York Stock Exchange
B) The principals will hold an organizational meeting to resolve any pending issues.
C) The court will declare the corporate existence.
D) The shareholders will create the bylaws.

Question 6

Corporate formalities include all of the following except

A) Filing annual reports.
B) Disclosing information to shareholders.
C) Keep the corporate bylaws up to date.
D) Find investors.

Question 7

Pfeffer Pharmaceuticals Inc. wishes to raise a substantial amount of capital to grow the business. The board decides to seek the services of a professional group of investors who will temporarily exercise a substantial amount of control over the board to use their expertise to grow the corporation. However, since this control is meant to be temporary, they must have an "exit strategy." What type of services is Pfeffer Pharmaceutical seeking?

A) Venture Capital Firms
B) Entrepreneurial Investment Firm
C) Diversification Growth Experts
D) Commercial Litigators

Question 8

Natural Corporation often fails to file the annual reports required by law. They also have failed to conduct annual shareholders meeting and their bylaws have been out of date and not followed for about four years. What could be the result of this malfeasance?

A) Nothing. Those actions are voluntary.
B) The shareholders could lose their investments.
C) The courts could file criminal charges.
D) The corporate veil could be pierced.

Question 9

A person who performs pre-incorporation duties on behalf of the forming corporation is called a __________.

A) Promoter
B) Incorporator
C) Venture capitalist
D) Principal

Question 10

In a minority of the states, the articles of incorporation are called the

A) Bylaws
B) Certificate
C) Corporate charter
D) Organization act

Question 11

Which body of a corporation has the duty to appoint and to remove the corporation's officers?

A) The shareholders
B) The executive officers
C) The principals
D) The board of directors

Question 12

A corporate bond issued in the amount of $500,000 is called a

A) Baby bond
B) Micro bond
C) Small bond
D) Miniature bond

Question 13

A venture capital firm is a group of professional investors using private equity to

A) Develop a business.
B) Dissolve a business.
C) Merge with a business.
D) Tear apart and sell off a business.

Question 14

Owners of nonvoting stock who receive a share of the corporate profits have received what is called a

A) Profit-share
B) Income distribution
C) Dividend
D) Gratuity

Question 15

The expiration date of a corporate bond is also called its __________.

A) Date of return
B) Maturity date
C) Amortization date
D) Fulfillment date

Question 16

What is an advantage of a Subchapter S corporation that a standard corporation does not have?

A) It does not face double taxation.
B) It does not having any filing requirement.
C) The board does not have any fiduciary duties.
D) It is inexpensive and easy to start up and run.

Question 17

Do corporations have protection under the First Amendment for political speech?

A) No because a corporation is not a person.
B) No because the government has a substantial governmental interest in regulating corporate speech.
C) Yes.
D) Yes unless someone is offended by the speech.

Question 18

A fictitious legal entity that exists as an independent individual separate from its owners is called a

A) Partnership
B) LLP
C) LLC
D) Corporation

Question 19

Which entity wrote the Revised Model Business Corporation Act (RMBCA)?

A) The federal legislature
B) The federal Commerce Commission
C) The American Law Institute
D) The state legislatures

Question 20

The United States Postal System is an example of what type of corporation?

A) Nonprofit
B) Public
C) Professional
D) Publicly traded

Question 21

Which statement below is correct about a promoter's liability?

A) It ceases to exist at the moment the corporation is formed.
B) It continues for the duration of the existence of the corporation.
C) It can only be terminated by judicial decree.
D) It never can be terminated.

Question 22

All of the following are methods a corporation can capitalize except

A) Borrow money.
B) Sell equity in their operations.
C) Require the shareholder to invest more money to keep their shares.
D) Sell bonds

Question 23

The liability protection shareholders, directors, and officers of a corporation have from personal liability in case the corporation runs up large debts or suffers some liability is called

A) Cone of silence
B) Corporate veil
C) Liability shield
D) Bubble of protection

Question 24

In the case of De Lage Landen Financial Services v. Picasso Aesthetic and Cosmetic Dental Spa, Rubin, the sole principal of a professional corporation, lost the veil of corporate protection because.

A) He engaged in fraudulent actions.
B) He engaged in criminal actions.
C) He gave a personal guarantee.
D) He had substantial personal assets.