Deck 19: Corporations

Question 1

A corporation cannot be formed for purposes other than making a profit.​

Answer 1

False

Question 2

A de jure corporation is one that is formed for a single purpose.​

Answer 2

False

Question 3

Express powers of a corporation can be found in state corporation statutes.​

Answer 3

True

Question 4

A vacancy on the board of directors can be filled by the board itself.​

Question 5

In corporate law, acts of a corporation that are beyond its express or implied powers are de facto acts.​

Question 6

The board of directors makes corporate policy decisions.​

Question 7

Corporate officers are selected and removed by shareholders.​

Question 8

If a corporation has S corporation status, it must pay income taxes at the corporate level.​

Question 9

A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.​

Question 10

The true ownership of a corporation is represented by common stock.​

Question 11

A court will not pierce the corporate veil of a corporation simply because it is too thinly capitalized.​

Question 12

Stocks represent the borrowing of funds by firms.​

Question 13

Not all directors have a right to access a corporation's books and records, facilities, and premises.​

Question 14

A corporation is not liable for the misconduct of its agents, officers, or employees.​

Question 15

The executive officers represent the ultimate authority in every corporation.​

Question 16

In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.​

Question 17

Each director present at a board meeting has one vote.​

Question 18

A corporation does not have perpetual existence in most states unless the articles of incorporation state otherwise.​

Question 19

In many states, close corporations have more flexibility in determining their rules of operation.​

Question 20

The articles of incorporation serve as a primary source of authority for a corporation's business operations.​

Question 21

For shareholders to act during a shareholders' meeting, a quorum must be present.​

Question 22

Every shareholder is entitled to examine specified corporate records, but only in person, not through an agent.​

Question 23

When deciding which form of business organization to choose, businesspersons normally take into account tax considerations.​

Question 24

Shareholders must approve fundamental changes affecting a corporation.​

Question 25

In some situations, a majority shareholder owes a fiduciary duty to minority shareholders.​

Question 26

In most states, an individual can be an officer or a director of a corporation, but not both at the same time.​

Question 27

Ida and Jay are the directors of Keystone Property Management Inc. Lily and Mike are Keystone officers. Nina is a Keystone shareholder. The responsibility for the overall management of this firm rests with​

A) Ida and Jay.​
B) ​Lily and Mike.
C) ​Nina.
D) ​none of the parties.

Question 28

Corporate directors and officers are insurers of business success.​

Question 29

Bay City Merchants Corporation has six shareholders, four of whom are members of the same family. All of Bay City's shareholders agree in writing to operate without shareholders' meetings. This most likely warrants​

A) ​no penalties or sanctions.
B) ​the imposition of a fine on Bay City.
C) ​the imprisonment of Bay City's shareholders.
D) ​the piercing of Bay City's corporate veil.

Question 30

The articles of incorporation can exclude or limit shareholders' voting rights.​

Question 31

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.​

Question 32

All forms of business organizations are treated as legal entities separate from their owners.​

Question 33

Rita and Susan want to form and do business as Trips & Travel, Inc. They will serve as the firm's directors and officers, and will initially hold all of the stock in the company. A corporation is owned by​

A) ​the board of directors.
B) ​the officers.
C) ​the employees.
D) ​the shareholders.

Question 34

Sean is the incorporator of Twisty Pretzels Corporation. Ross is a shareholder, Phyllis is a director, and Velma is an officer. The day-to-day operations of Twisty are overseen by​

A) ​Velma.
B) ​Ross.
C) ​Sean.
D) ​Phyllis.

Question 35

A director must abstain from voting on a proposed transaction in which he or she has a personal interest.​

Question 36

Corporate officers can normally be removed by the board of directors without cause.​

Question 37

As a general rule, shareholders are responsible for the daily management of a corporation.​

Question 38

​Dennis and Eve want to form and do business as a corporation-Farm-2-Fork Inc. A corporation is

A) ​a natural being.
B) ​a tangible thing.
C) ​an artificial legal person.
D) ​a non-entity.

Question 39

With preemptive rights, shareholders can preempt the decisions of directors and officers with respect to corporate policy.​

Question 40

Directors can delegate work to corporate officers and employees.​

Question 41

Jen and Kay would like to form Lunch Garden, Inc., to enter the food vending business. Most likely, the articles of incorporation for the firm will not include​

A) ​the corporate name.
B) ​the name and address of a registered agent.
C) ​the number of shares that the corporation is authorized to issue.
D) ​the minutes of the first organizational meeting.

Question 42

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to​

A) ​reimbursement.
B) ​inspection.
C) ​participation.
D) ​self-dealing.

Question 43

EZ Hauling holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, EZ Hauling is most likely​

A) ​a corporation by estoppel.
B) ​a de facto corporation.
C) ​a de jure corporation.
D) ​a benefit corporation.

Question 44

Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to​

A) ​none of the choices.
B) ​depart significantly from traditional corporate formalities.
C) ​bind the corporation to an action that will greatly affect its purpose.
D) ​borrow funds and lend funds.

Question 45

Vince buys 500 shares of common stock in Water Services, Inc. As a shareholder of record, Vince owns a proportionate interest with regard to Water's​

A) ​net assets.
B) ​control.
C) ​earnings.
D) ​all of the choices.

Question 46

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is​

A) ​the head of the board of directors.
B) ​an employee of the firm.
C) ​the employer of the firm.
D) ​in charge of approving the shareholders.

Question 47

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve​

A) ​a merger.
B) ​a decision to pursue new business opportunities.
C) ​none of the choices.
D) ​a contract between management and labor.

Question 48

Security Insurance, Inc. has a board of five directors. Security's bylaws do not state any quorum requirements. In most states, a quorum for Security's board meetings would be​

A) ​one director.
B) ​three directors.
C) ​four directors.
D) ​all of the directors.

Question 49

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and​

A) ​reasonable.
B) ​unquestionable.
C) ​indefensible.
D) ​perfect.

Question 50

Gina is a director on the board of Home Furnishings Inc. As a director, she may not​

A) ​authorize major corporate policy decisions.
B) ​decide to issue stock and bonds, and declare dividends.
C) ​select and remove corporate officers.
D) ​subordinate the firm's welfare to her personal interests.

Question 51

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they​

A) ​are guaranteed to receive more than the amount of their investment.
B) ​are the last to receive returns for their investment.
C) ​have priority to the firm's assets if it becomes insolvent.
D) ​reside in the state of the firm's incorporation.

Question 52

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, Wings2Go is most likely​

A) ​a corporation by estoppel.
B) ​a de facto corporation.
C) ​a de jure corporation.
D) ​ultra vires.

Question 53

Charlie, Dora, and Ethel are the first directors on the board of Face Time Corporation, a social media host. Subsequent directors are elected by a majority vote of Face Time's​

A) ​users.
B) ​employees.
C) ​officers.
D) ​shareholders.

Question 54

Harry and Ilene want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. To avoid income taxes at the corporate level, they should form​

A) ​an alien corporation.
B) ​a close corporation.
C) ​an S corporation.
D) ​a private corporation.

Question 55

The board of Management Consultants, Inc., can delegate some of its responsibilities to​

A) ​the firm's incorporators.
B) ​the firm's officers.
C) ​the firm's shareholders.
D) ​no one.

Question 56

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of​

A) the duty of care.​
B) ​none of the choices.
C) ​the duty of loyalty.
D) ​the business judgment rule.

Question 57

Roy, a director of Service & Sales Corporation, does not attend a board meeting for three years. During that time, Terry, the firm's president, makes improper loans that cost the company $10 million. Roy is most likely liable for breach of​

A) ​the business judgment rule.
B) ​the duty of care.
C) ​the duty of loyalty.
D) ​none of the choices.

Question 58

Like the bylaws of other corporations, the bylaws of Rocks, Paper & Scissors, Inc.,​

A) ​establish the operating name of the corporation.
B) ​establish the value and classes of corporate stock.
C) ​were adopted at its first organizational meeting.
D) ​were submitted for approval to the public official in charge.

Question 59

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of​

A) ​none of the choices.
B) ​the business judgment rule.
C) ​the duty of care.
D) ​the duty of loyalty.

Question 60

Flo and Glen form Health Food Inc. to coordinate the purchase, sale, and delivery of food products from organic farms to hospitals and other institutions. The stated purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is​

A) ​a nonprofit corporation.
B) ​not a corporation.
C) ​a benefit corporation.
D) ​a private corporation.

Question 61

Agents and employees of Deco Arts Corporation and Echo Imitations Inc. are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes? If so, how can they be punished?​

Question 62

Corporate business matters are presented at a shareholders' meeting of Fitness Gyms Inc., and other corporations, in the form of​

A) ​resolutions.
B) ​proxies.
C) ​articles of incorporation.
D) ​bylaws.

Question 63

PrimarySource.com Corporation is a new online, textbook, and school supply business. How can PrimarySource.com obtain capital to finance its operations?​

Question 64

Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can​

A) ​assert the business judgment rule.
B) ​bring a suit for damages.
C) ​exercise de facto control.
D) ​force a cumulative vote.

Question 65

Mike is a shareholder of NatGas, Inc. NatGas uses cumulative voting to elect directors. This means that the number of Mike's votes is determined by the number of​

A) ​years that he has been a shareholder.
B) ​members of the board to be elected multiplied by the total number of voting shares that he holds.
C) ​shareholders present at the shareholders' meeting.
D) ​shareholders' meetings that he has attended.

Question 66

Bea transfers shares of stock that she owns in Coin Laundry Corporation to Dick. A shareholders' meeting takes place before his ownership is entered in the firm's stock book. A vote at the meeting can be cast by​

A) ​Bea and Dick.
B) ​Bea.
C) ​Dick.
D) ​none of the choices.

Question 67

Avery wants to go into business as Boom! to make and market fireworks. When deciding which form of business organization would be most appropriate, Avery would normally take into account all of the following except​

A) ​the liability of the owners.
B) ​the forms of competitors' business organizations.
C) ​tax considerations.
D) ​the need for capital.

Question 68

Brad is a shareholder of Cloud Servers Inc. He will be deemed to have a fiduciary duty to Cloud and its minority shareholders if he has a sufficient number of shares to​

A) ​assert the business judgment rule.
B) ​bring a shareholder's derivative suit.
C) ​exercise de facto control.
D) ​participate in a cumulative vote.

Question 69

Doris wants to form a new firm-eBeats-to market a new app. Fees are required to form all of the following business organizations except​

A) ​a sole proprietorship.
B) ​a corporation.
C) ​a limited partnership.
D) ​a limited liability company.

Question 70

Daryl, Elsa, and Ferris are the directors of Go Apps, Inc. Go also has four officers and fourteen shareholders. Dividends can be ordered by the firm's​

A) ​board.
B) ​minority shareholders.
C) ​officers.
D) ​majority shareholders.

Question 71

Gavin is a shareholder of Houseboats Inc. with preemptive rights. With these rights, he can​

A) ​buy a prorated share of a new issue of stock before other buyers.
B) ​choose to have the firm act exclusively in a certain area.
C) ​preempt managerial decisions that affect shareholders.
D) ​sell a prorated share of a new issue of stock before other sellers.

Question 72

Sheila is a shareholder of Travels & Trips Inc. She has the right to inspect corporate books and records​

A) ​only if she is also a director.
B) ​without restrictions.
C) ​for a proper purpose.
D) ​under no circumstances.