Deck 15: Corporations

Question 1

A new corporation's name can be deceptively similar to,but not the same,as the name of an existing corporation doing business within the state.

Answer 1

False

Question 2

Each incorporator must have an interest in the corporation.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Corporate profits can be subject to double taxation.

Question 5

Express powers of a corporation are found in its articles of incorporation.

Question 6

A corporation is referred to as a domestic corporation by its home state.

Question 7

The primary document needed to incorporate a business is the articles of incorporation.

Question 8

When the corporate privilege is abused for personal benefit,the courts will require the owners to assume personal liability.

Question 9

A corporation can retain its profits or pass them on to the shareholders as dividends.

Question 10

An S corporation is treated the same as a regular corporation for tax purposes

Question 11

To pierce the corporate veil means to ignore the corporate structure,exposing the shareholders to personal liability.

Question 12

Implied powers of a corporation are expressed in state statutes.

Question 13

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is illegal.

Question 14

A corporation is a legal entity created and recognized by federal law.

Question 15

The articles of incorporation serve as a primary source of authority for a corporation.

Question 16

Many qualifications are required for directors.

Question 17

Shareholders are the ultimate authority in every corporation.

Question 18

The first step in the incorporation process is to select a state in which to operate.

Question 19

A corporation formed in another country but doing business in the United States is referred to in the United States as an alien corporation.

Question 20

A corporation cannot be held liable for the criminal acts of its employees.

Question 21

Skyla and Terry want to form and do business as Unbound Games Corporation.Most statutes governing the formation and use of corporations are guided by

A)city or county corporate codes.
B)the Entrepreneur's Corporate Handbook.
C)the federal Administrative Procedure Act.
D)the Revised Model Business Corporation Act.

Question 22

The board of directors normally can remove a corporate officer at any time with or without cause.

Question 23

Directors are not obligated to refrain from self-dealing.

Question 24

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Question 25

In most states,one individual cannot be both an officer and a director.

Question 26

Every shareholder is entitled to examine specified corporate records.

Question 27

Shareholders are personally liable for the debts of a corporation.

Question 28

Before shareholders can bring a derivative suit,they must submit a written demand to the corporation,asking the board of directors to take action.

Question 29

A director or officer is not liable to the corporation for a bad business decision.

Question 30

Shareholders must approve fundamental changes affecting the corporation before the changes can be implemented.

Question 31

Officers hire the directors and other executive employees.

Question 32

When a third party harms a corporation,only the shareholders can bring a suit in the corporation's name against that party.

Question 33

Directors have a right to participate in all board of directors' meetings.

Question 34

Felicity and Gideon want to form and do business as Home Healthcare Corporation.A corporation is

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

Question 35

Shareholders' meetings need not occur at any certain interval.

Question 36

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

A)a domestic corporation.
B)a foreign corporation.
C)an alien corporation.
D)a de jure corporation.

Question 37

Mountaintop Clearview Corporation authorizes Niles,its employee,to oversee its timber operation.In the course of his employment,Niles disposes of the operation's waste illegally.Orson is a Mountaintop shareholder.Liability for this crime most likely rests with Orson to

A)no extent.
B)the proportionate extent of the number of shares Orson owns.
C)the amount of Orson's investment in the firm.
D)the full extent.

Question 38

Ivy and Justin want to form and do business as Kayak Adventures Corporation.A corporation can be owned by

A)natural persons only.
B)artificial persons only.
C)artificial or natural persons.
D)neither "artificial" nor "natural" persons.

Question 39

A director does not need to disclose any conflict of interest before voting on a proposed transaction.

Question 40

Directors are entitled to use confidential corporate information for their personal advantage.

Question 41

Like the bylaws of other corporations,the bylaws of Farmland Equipment,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 42

Wild & Scenic River Tours,Inc.,is a corporation.Wild & Scenic has the implied power to

A)issue stocks and bonds.
B)execute contracts and negotiable instruments.
C)buy and sell (or lease)property.
D)perform all acts reasonably appropriate and necessary to accom?plish its corporate purposes.

Question 43

Raul is chairman of the board of Swif-Vac Corporation.Pinky,a consumer,is injured while using a Swif-Vac product.Pinky sues Swif-Vac,and Raul individually.Swif-Vac may pay Raul's legal fees under

A)the director's right to certification.
B)the director's right to compensation.
C)the director's right to indemnification.
D)no circumstances.

Question 44

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Delite's

A)board of directors.
B)incorporators.
C)officers.
D)shareholders.

Question 45

VeriVisual Company makes HD 3D film and video equipment.VeriVisual is like most corporations in that its officers are hired by the firm's

A)board of directors.
B)incorporators.
C)other officers.
D)shareholders.

Question 46

Reba is a director of Quantum Mechanix Corporation.Reba's rights,as a director,do not include a right to

A)indemnification.
B)inspection.
C)participation.
D)self-dealing.

Question 47

Viola is a director of Water Pure Corporation.With respect to Water Pure,Viola's most important right is the right of

A)compensation.
B)indemnification.
C)participation.
D)certification.

Question 48

Bertram,Claudia,and Dynah form Eat Local,Inc.,a closely held corporation,and agree to restrict the transfer of its stock to anyone else.A reasonable purpose for a stock transfer restriction in a closely held corporation,like the agreement between Bertram,Claudia,and Dynah,is

A)a desire to limit the participation of outsiders in the firm.
B)a goal to restrain insiders from taking advantage of their position.
C)an attempt to restrain the free flow of commerce among investors.
D)a wish to restrict the transfer of the shareholders' physical assets.

Question 49

The abbreviation "P.A." in the name "Painless Dental,P.A." means that this organization is

A)a private association.
B)a professional association.
C)a public association.
D)a publicly administered corporation.

Question 50

The shares of Capital Corporation are publicly traded in securities markets.Capital Corporation is

A)a private corporation.
B)a privately held corporation.
C)a public corporation.
D)a publicly held corporation.

Question 51

Niki owns O.K.Oil Corporation.Niki uses O.K.'s funds to pay her personal expenses,creates Pure Fuel Corporation to engage in the same business as O.K.,transfers O.K.'s assets to Pure Fuel,and petitions O.K.into bankruptcy.This most likely warrants

A)a bonus to Niki for financial maneuvers.
B)a discharge for O.K.in bankruptcy.
C)a pierce of O.K.'s corporate veil.
D)a review of Pure Fuel's articles of incorporation.

Question 52

Boutique Corporation would like to change its corporate status to avoid income taxes at the corporate level.To qualify,the shareholders must not be

A)corporations.
B)estates.
C)individuals.
D)partnerships.

Question 53

Convenience Mart,Inc.,is a closely held corporation.Convenience Mart is

A)eligible to make public offerings of securities.
B)exempt from filing a certificate of incorporation.
C)generally allowed to restrict the transfer of its stock.
D)taxed in the same manner as a partnership.

Question 54

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

A)board of directors.
B)incorporators.
C)officers.
D)shareholders.

Question 55

Frida and Gregor want to market a new line of fishing gear.To avoid income taxes at the corporate level,they should form

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

Question 56

Caffeine Café,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 57

Hailey and Ike hold the first organizational meeting of Java Drive-In Corporation.Probably the most important function of this meeting is

A)adopting Java's bylaws.
B)agreeing on Java's purpose.
C)drafting Java's articles.
D)obtaining a charter for Java.

Question 58

Rapid Pest Control itself out to others as being a corporation but makes no attempt to incorporate.Ponce signs a contract with Rapid Pest Control that is not performed.Ponce files a suit against the firm.The court will likely hold that Rapid Pest Control is

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

Question 59

Sullivan and Taylor want to form a corporation to provide catering services.The first step in the incorporation procedure is to

A)file the articles of incorporation.
B)hold the first organizational meeting.
C)secure a corporate name.
D)select a state in which to incorporate.

Question 60

Start-Up Corporation substantially complies with all conditions precedent to incorporation.Start-Up has

A)corporate existence by estoppel.
B)de facto existence.
C)de jure existence.
D)ultra vires existence.

Question 61

Starr Cardio,Inc.,is a small business.Ted,Uma,and eleven other members of the Starr family own all of its stock.Currently,Starr's income is taxed at the corporate level and,after being distributed to the family members,at the shareholder level.Can Starr retain its corporate status but otherwise avoid this double taxation If so,how

Question 62

Orin is a shareholder of Pinkwater Corporation.In some states,Orin might incur personal liability for Pinkwater obligations if he

A)accepts a dividend knowing that it was paid from retained earn?ings.
B)buys stock for less than its fair-market value.
C)fails to fulfill his fiduciary duty to the majority shareholders.
D)sells his shares.

Question 63

Naomi and Ogden are shareholders of MediCare Residences,Inc.As shareholders,they must approve

A)conducting a merger.
B)deciding to pursue new business opportunities.
C)terminating a managerial employee.
D)negotiating a contract between management and labor.

Question 64

Rocco is a director of Spa Lids & Tubs,Inc.Under the standard of due care owed by directors of a corporation,Rocco's decisions must be

A)unwavering and unquestionable.
B)arguable and defensible.
C)informed and reasonable.
D)perfect and unassailable.

Question 65

Genna is a director of Fab Stuff Corporation.Without informing Fab,Genna starts up Evertrendy,Inc.,to compete with Fab.Genna is liable for breach of

A)no duty or rule
B)the business judgment rule.
C)the duty of loyalty.
D)the right of participation.

Question 66

Ricardo is a shareholder of Speedy Bikes Company (SBC).When the directors fail to undertake an action to redress a wrong suffered by SBC,Ricardo files a suit on the firm's behalf.Any damages recovered by Ricardo's suit will normally go to

A)Ricardo.
B)SBC.
C)SBC's directors.
D)the state in which SBC is incorporated.

Question 67

Officers and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine.Can Apples and Oranges be held liable for these crimes If so,how can they be punished

Question 68

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

A)forfeited immediately.
B)forfeited within ten days of a third party's claim to ownership.
C)forfeited within thirty days if she cannot find the certificate.
D)not affected.

Question 69

Zero Sum Games Corporation has forty-three shareholders.The minimum number that must be present at a meeting for a shareholders' vote is

A)all of the shareholders.
B)a quorum.
C)a proxy.
D)three of the shareholders.

Question 70

Heidi and Ian are directors and shareholders of Globe Software,Inc.Heidi's written authorization to Ian to vote Heidi's shares at a Globe shareholders' meeting is

A)a violation of the duty of loyalty.
B)a preemptive right.
C)a proxy.
D)a quorum.

Question 71

Odell is a director of Price Rite,Inc.As a director,with respect to the corporation,Odell is

A)a fiduciary.
B)a forum.
C)a proxy.
D)a quorum.

Question 72

Gladys is a shareholder of Frozen Yogurt,Inc.As a shareholder,Gladys must approve

A)amending the bylaws.
B)declaring a corporate dividend.
C)hiring a chief executive officer.
D)issuing additional shares.