Deck 7: Corporations

Question 1

Failure to hold regular shareholders' and directors' meetings may be a factor taken into consideration in support of piercing the corporate veil.

Answer 1

True

Question 2

Statutory close corporations typically

A) have more than 50 shareholders.
B) are managed by a board of directors with at least five directors.
C) are managed by the shareholders of the corporation.
D) may not have restrictions on the transfer of shares of their stock.

Answer 2

C

Question 3

All corporations must have their tax year end on December 31.

Answer 3

False

Question 4

In smaller statutory close corporations, the corporation is usually managed by the board of directors, with little input or interference from the shareholders.

Question 5

To become an S Corporation, the corporation's shareholders must

A) file an election with the secretary of state or other appropriate state official.
B) designate the corporation as an S Corpora- tion in the articles of incorporation.
C) publish notice of S Corporation status.
D) file an election to be treated as an S Corpo- ration, approved by all shareholders, with the IRS.

Question 6

A corporation is a corporation that owns stock in another corporation sufficient to control that corporation.

A) sister
B) parent
C) subsidiary
D) control

Question 7

To be eligible for S Corporation status, a cor- poration must have

A) at least 75 shareholders.
B) at least one corporation as a shareholder.
C) no more than 100 shareholders.
D) at least two classes of stock issued.

Question 8

Corporations do not generally offer sharehold- ers the ability to

A) limit their personal liability for the corpora- tion's debts and obligations.
B) avoid double taxation.
C) transfer their shares of ownership.
D) elect directors to oversee the management of the corporation.

Question 9

When a court disregards the corporate entity to prevent an injustice, it is referred to as

A) piercing the corporate veil.
B) corporate liability.
C) unlimited shareholder liability.
D) shareholder responsibility.

Question 10

To be considered tax-exempt for federal income tax purposes, a corporation must

A) file articles of incorporation of a nonprofit corporation.
B) include a tax-exempt provision in its by- laws.
C) publish an affidavit signed by all share- holders.
D) file an application for tax-exempt status with the Internal Revenue Service pursuant to IRC § 501(c).

Question 11

It is generally considered illegal to place restrictions on the transfer of shares of stock of a statutory close corporation.

Question 12

Shareholders usually elect the corporation's

A) directors.
B) managers.
C) officers.
D) members.

Question 13

A business corporation is not an

A) entity created by law.
B) organization that can exist perpetually.
C) organization with certain rights and powers granted by statute.
D) entity that is disregarded for income tax purposes.

Question 14

The corporation's state of domicile is the state where its articles of incorporation are filed, regardless of where it transacts its business.

Question 15

Corporations have the right to own property, including real estate, in the corporate name.

Question 16

Much of modern corporate law has been derived from the decisions of the courts of Delaware.

Question 17

The term sister corporation is sometimes used to refer to two corporations owned or con- trolled by the same owners.

Question 18

Professionals from several different fields, such as doctors, lawyers, and accountants, can consolidate their businesses to form one professional corporation.

Question 19

The primary source of business corporation law is

A) the statutes of the corporation's state of domicile.
B) the Internal Revenue Code.
C) common law.
D) federal statutes.

Question 20

Because the corporation is a separate entity, the corporation itself is liable for any debts and obligations it incurs.