Deck 30: Formation and Termination of a Corporation

Question 1

An alien corporation is a corporation formed in another country.

Answer 1

True

Question 2

The U.S.Postal Service is a public corporation.

Answer 2

True

Question 3

To pierce the corporate veil means to shield the shareholders from personal liability.

Answer 3

False

Question 4

Selecting the state in which to incorporate is an important step in the incorporation procedure.

Question 5

There are no important consequences if the procedures for incorporation are not followed precisely.

Question 6

If a corporation has S corporation status,it can avoid the imposition of income taxes at the corporate level.

Question 7

A court will pierce the corporate veil of a corporation that is formed to accomplish an illegitimate objective. 

Question 8

The articles of incorporation serve as a primary source of authority for the corporation's future organization and business operations.

Question 9

A corporation does NOT possess the same right of access to the courts as natural persons.

Question 10

The purpose of a corporation may be specified in its articles of incorporation.

Question 11

A corporation whose shares are all held by a single person is called a close corporation.

Question 12

A corporation cannot be formed without a profit-making purpose.

Question 13

The board of directors hires officers to run the daily business of a corporation.

Question 14

Express powers of a corporation can be found in the U.S.Constitution.

Question 15

A corporation is an artificial being.

Question 16

The corporation is a creature of the common law.

Question 17

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

Question 18

One of the key advantages of the corporate form is the unlimited liability of its owners.

Question 19

A court will not pierce the corporate veil of a corporation that is merely set up never to make a profit.

Question 20

A corporation has an implied power to extend credit to those with whom it has a legal or contractual relationship.

Question 21

A merger must be approved by either each corporation's board of directors or a majority of the shareholders,but not both. 

Question 22

Erin is a shareholder in Far East Adventures.As a shareholder,Erin 

A) ​owns shares of stock in Far East Adventures. 
B) ​is the founder of Far East Adventures. 
C) ​has no say in the election of Far East Adventures's board of directors. 
D) ​is liable for all the debts of Far East Adventures.

Question 23

Generally,a corporation that purchases the assets of another corporation is not responsible for the liabilities of the selling corporation. 

Question 24

Venture capital is capital provided to new business ventures by professional,outside investors. 

Question 25

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation.Lily and Moe are Kleen's officers.As in other corporations,the responsibility for the overall management of Kleen rests with 

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

Question 26

A receiver is always appointed by a court if the dissolution of a corporation is involuntary.

Question 27

A state court can dissolve a corporation for abandoning operations before startup.

Question 28

 A merger involves the legal combination of one or more corporations. 

Question 29

Stocks represent the borrowing of funds by firms.

Question 30

A short-form merger is the legal combination of two or more corporations online. 

Question 31

Because of the ultra vires doctrine,shareholders are told the internal rules of corporate management.

Question 32

Whether a combination is merger or a consolidation,the rights and liabilities of the shareholders are the same. 

Question 33

Dante and Eden want to form and do business as Farm-to-Fork Restaurant Corporation.Its existence depends generally on 

A) ​city or county corporate codes. 
B) ​the Entrepreneur's Corporate Handbook. 
C) ​the federal Administrative Procedure Act. 
D) ​state law.

Question 34

Appraisal rights extend to mergers,consolidations,share exchanges,and sales of substantially all of the corporate assets. 

Question 35

Firms are obligated to return a principal amount per share to each holder of common stock. 

Question 36

Actions taken on extraordinary matters must be authorized by the board of directors and the shareholders. 

Question 37

When a corporation is dissolved voluntarily,the corporation does not need to file articles of dissolution with the state.

Question 38

George is the founder of Excellent Exotics Corporation.Wilson is a shareholder and director and Bill is an officer.The day-to-day operations of Excellent Exotics are overseen by 

A) ​Bill. 
B) ​Wilson. 
C) ​George. 
D) ​George and Wilson.

Question 39

On dissolution,liquidation of the corporate assets cannot be accomplished without court supervision. 

Question 40

Pola and Quincy want to form and do business as River Tours Corporation.A corporation is owned by 

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

Question 41

A firm named Scientific Discovery Corporation (SDC)makes an attempt to incorporate for a purpose other than making a profit.SDC is 

A) ​a foreign corporation. 
B) ​an alien corporation. 
C) ​a nonprofit corporation. 
D) ​not a corporation.

Question 42

Memphis Music Makers Incorporated has a stated purpose to sell musical instruments.If chief executive officer Tabitha contracts with Frenzied Firearms in Memphis Music Makers's name to sell a shotgun,she has likely committed 

A) ​an ultra vires act. 
B) ​a de facto act. 
C) ​a de jure act. 
D) ​a legal act.

Question 43

Qiara is a holder of preferred stock in Rio Grande Irrigation & Development,Inc.Qiara has priority over holders of Rio common stock as to 

A) ​nothing. 
B) ​payments of dividends. 
C) ​the date on which Rio must repurchase the shares. 
D) ​upward changes in the market price of the shares.

Question 44

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 45

Finn and Glenda want to form and do business as Hobby Crafts Corporation.A corporation is 

A) ​a natural person. 
B) ​a tangible thing. 
C) ​an artificial being. 
D) ​a visible radiance.

Question 46

Tech Personnel,Inc.,is a corporation.Tech Personnel'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 47

Dollars & Sense,Inc.,is incorporated in the state of New Jersey and is doing business in the state of New York.In New York,Dollars & Sense is properly referred to as 

A) ​a domestic corporation. 
B) ​a foreign corporation. 
C) ​an alien corporation. 
D) ​a public corporation.

Question 48

Wiley incorporates his business as Wiley Wire Corporation in Texas.He and his group of shareholders intend to make a profit from their sales of fencing wire.Wiley Wire Corporation is 

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

Question 49

Miracle Mobile Devices,Inc.,is a private,for-profit corporation that is owned by five shareholders who are members of the same family.Miracle is 

A) ​an S corporation. 
B) ​a close corporation. 
C) ​a nonprofit corporation. 
D) ​none of the choices.

Question 50

Smalltown,Alabama is incorporated by the government.Smalltown is 

A) ​a foreign corporation. 
B) ​a public corporation. 
C) a private corporation.​ 
D) ​an alien corporation.

Question 51

Ruby Red Corporation is incorporated in South Carolina.In that state,Ruby Red is 

A) ​a domestic corporation. 
B) ​a foreign corporation. 
C) ​an alien corporation. 
D) ​a non-entity.

Question 52

Rhys owns Solar Fuel Corporation.Rhys uses Solar Fuel's funds to pay his personal expenses,creates Thermal Power Corporation to engage in the same business as Solar Fuel,transfers Solar Fuel's assets to Thermal Power,and petitions Solar Fuel into bankruptcy.This most likely warrants 

A) ​a bonus to Rhys for financial maneuvers. 
B) ​a discharge for Solar Fuel in bankruptcy. 
C) ​a pierce of the corporate veil. 
D) ​a review of Thermal Power's articles of incorporation.

Question 53

Stan incorporates his scientific products business as Tech Supply,Inc.Under most state corporation statutes,Tech Supply can have 

A) ​only a finite, yet-to-be-determined existence. 
B) ​only a one-year, nonrenewable existence. 
C) ​only a one-year, renewable existence. 
D) ​perpetual existence.

Question 54

Deepwater Dredging Company holds itself out to others as being a corporation but makes no attempt to incorporate.Estuary Marina signs a contract with Deepwater that is not performed.Estuary Marina files a suit against the firm.The court will likely hold that Deepwater is 

A) ​a corporation by estoppel. 
B) ​an alien corporation. 
C) ​an S corporation. 
D) ​ultra vires.

Question 55

Bread & Brews,Inc.,files its articles of incorporation with the appropriate government agency.Least likely to appear in the articles is the name of 

A) ​each of the corporation's incorporators. 
B) ​each of the corporation's shareholders. 
C) ​the corporation. 
D) ​the corporation's initial registered agent.

Question 56

When a conflict arises among the documents that involve Simpatico Social Media Corporation,the first priority for resolving the conflict is given to 

A) ​resolutions of Simpatico's board of directors. 
B) ​Simpatico's bylaws. 
C) ​state statues. 
D) ​the U.S. Constitution.

Question 57

Natural Laminate Corporation and Oak Wood Flooring Company combine so that all that remains after the papers have been signed is Natural Laminate.This is 

A) ​a consolidation. 
B) ​a merger. 
C) ​a purchase of assets. 
D) ​a share exchange.

Question 58

Like other corporations,Western Steel Corporation can extend its operations through 

A) ​a merger. 
B) ​a dissolution. 
C) ​a termination. 
D) ​a liquidation.

Question 59

Like the bylaws of other corporations,the bylaws of Retail Sales,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 60

Hudson and Ilka 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 61

Natural Food Corporation proposes to combine with Organic Produce,Inc.,and asks Natural Food shareholders to vote on the proposal.Phoebe,a Natural Food shareholder,votes against it,but is outvoted by the other shareholders.Is there an action that Phoebe can take to avoid being forced to go along with the transaction? If so,what can she do? After the combination,Organic Produce ceases to exist.Natural Food is the surviving firm.What type of combination is this?

Question 62

Fact Pattern 30-1Shale Oil Processing Corporation combines its assets and debts with those of Tierra Frakking Company to form United Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 30-1.United Resources acquires 

A) ​all of Shale's and Tierra's assets. 
B) ​half of Shale's and Tierra's assets. 
C) ​none of Shale's and Tierra's assets unless there is a formal transfer. 
D) ​only assets that Shale and Tierra acquired after a combination was proposed.

Question 63

Algorhythm Stock Trades,Inc.,and Big Data Market Analyses,Inc.,plan to merge.Most likely,the articles of merger will be filed with 

A) ​the county recording office. 
B) ​the local chamber of commerce. 
C) ​the state's secretary of state. 
D) ​the Securities and Exchange Commission.

Question 64

Brite Cosmetics Corporation purchases all of the assets of Color-All Lipsticks Corporation.With respect to Brite Cosmetics' liabilities,Color-All Lipsticks is 

A) ​automatically responsible. 
B) ​not responsible under any circumstances. 
C) ​responsible if Color-All Lipsticks is a competitor of Bright Cosmetics. 
D) ​responsible if the sale is actually a merger or consolidation.

Question 65

Fact Pattern 30-1Shale Oil Processing Corporation combines its assets and debts with those of Tierra Frakking Company to form United Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 30-1.United Resources assumes 

A) ​all of Shale's and Tierra's debts. 
B) ​half of Shale's and Tierra's debts. 
C) ​none of Shale's and Tierra's debts unless there is a formal transfer of liability. 
D) ​only debts that Shale and Tierra incurred after a combination was proposed.

Question 66

Speculative Business Corporation can be compelled to dissolve by 

A) ​any of the choices. 
B) ​its competitors. 
C) ​dissatisfied clients and customers. 
D) ​a court order.

Question 67

Lorelei files a suit against Memphis Music Makers Inc.While the suit is pending,Memphis Music consolidates with Nashville Recording Company to form Omni Productions,Inc.Now,liability in the suit,if any,rests with 

A) ​Omni. 
B) ​Memphis Music and Nashville Recording. 
C) ​Lorelei. 
D) no one.​

Question 68

Broncobuster BarBQ Company and Cowpuncher Cuisine,Inc.decide to combine.Deanna,a Cowpuncher shareholder,is dissatisfied with the price that she will receive for her stock.In the absence of fraud or other illegal conduct,Deanna's exclusive remedy is to 

A) ​exercise an appraisal right. 
B) ​file a suit to delay the process. 
C) ​refuse to agree to the deal, which cannot then proceed. 
D) ​acquire stock from the other shareholders and thereby obtain corporate control.

Question 69

Fact Pattern 30-1Shale Oil Processing Corporation combines its assets and debts with those of Tierra Frakking Company to form United Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 30-1.The formation of United Resources is 

A) ​a consolidation 
B) ​a merger. 
C) ​a purchase of assets. 
D) ​a share exchange.

Question 70

Corporate Investments,Inc.,attempts to acquire a substantial number of the shares of Downtown Properties Corporation through a public offer to Downtown's shareholders.This is 

A) ​a consolidation. 
B) ​a tender offer. 
C) ​a short-form merger. 
D) ​a dissolution.

Question 71

Brock is a shareholder of Competent Home builders Corporation (CHC).For the last few years,business has not been profitable for CHC.The firm has lost money on its operations.There has been some profit through sales of company assets,but the board of directors has refused to declare a dividend.This last year,the firm's accountants failed to file federal income tax returns and the board refused to pay the tax.Brock takes a close look at the firm and protests to the board,in particular over the failure to declare a dividend,but the board ignores the complaint.Which of these events,if any,would form a ground for a court to order the dissolution of CHC,on Brock's petition? If the court denies the petition,could Brock and the other shareholders dissolve CHC?

Question 72

Mediterranean Herbs Inc.wants to purchase all of the assets of Nature's Spice Company.Approval of the deal must be obtained from the shareholders of 

A) ​Mediterranean Herbs only. 
B) ​Nature's Spice only. 
C) ​both corporations. 
D) ​neither corporation.