Deck 44: Corporate Formation

Question 1

When a corporation acts in excess of or beyond the scope of its powers, the corporation's act is described as "ultra vires."

Answer 1

True

Question 2

A quasi-public corporation is one that is organized for charitable or benevolent purposes.

Answer 2

False

Question 3

Debts of a corporation are not the debts of the persons running the corporation or owning shares of stock in it.

Answer 3

True

Question 4

Bylaws are typically approved by the officers of the corporation.

Question 5

Stock that is reacquired by the corporation that issued it is commonly called "boomerang" stock.

Question 6

A California corporation is a foreign corporation with respect to the remaining forty-nine (49) states of the United States.

Question 7

A corporation may exercise its power to borrow money by issuing bonds.

Question 8

Shareholders ordinarily cannot be sued for corporate liabilities.

Question 9

The corporate form of business continues regardless of changes in stock ownership.

Question 10

Subchapter S corporations have the benefits of limited liability as in partnerships and are taxed as corporations.

Question 11

Subject to constitutional limitations, corporations may be regulated by state statutes.

Question 12

Most states have a general corporation code, and anyone who satisfies code requirements and files the necessary papers with the government may automatically become a corporation.

Question 13

For the purpose of determining the right to bring a lawsuit in federal court, a corporation is a citizen of any state in which it has been incorporated and of the state where it has its principal place of business.

Question 14

If a corporation assumes a contract made by a promoter with knowledge that the promoter had fraudulently induced the other party to enter into the contract, the corporation is liable to such other party for the fraud of the promoter.

Question 15

A corporate seal is required in order for the corporation to enter into a binding contract.

Question 16

A corporation is considered a person for purposes of the due process clause of the United States Constitution.

Question 17

Because nonprofit corporations have a more restricted range of powers than business corporations, actions not authorized by the charters of nonprofit corporations are more likely to be found ultra vires.

Question 18

A corporation is an artificial person that is created by governmental action.

Question 19

A corporation may properly exist without a name.

Question 20

The shares of a close corporation are always held by a single individual.

Question 21

A de facto corporation is accorded legal recognition despite some recognized defect in its incorporation.

Question 22

If two firms consolidate, the new corporation usually succeeds to the rights, powers and immunities of its component parts.

Question 23

For the purpose of lawsuits in federal courts, a Delaware corporation that is owned by residents of Minnesota and has its principal place of business in Ohio is deemed to be a citizen of:

A)Delaware and Minnesota.
B)Minnesota and Ohio.
C)Delaware and Ohio.
D)Delaware only.

Question 24

A corporation must have:

A)a name.
B)more than one incorporator.
C)a corporate seal.
D)none of the above.

Question 25

A corporation may be judicially dissolved when its management is deadlocked and the deadlock cannot be broken by the shareholders.

Question 26

Under recent statutes, the articles of incorporation must contain all of the following except the:

A)name of the corporation.
B)name and address of each incorporator.
C)purpose for which the corporation is organized.
D)number of shares the corporation is authorized to issue.

Question 27

A public corporation is:

A)a private corporation furnishing services on which the public is particularly dependent.
B)a corporation organized for charitable and benevolent purposes or for purposes of finance, industry, and commerce.
C)a corporation established for governmental purposes and for the administration of public affairs.
D)also known as a public utility.

Question 28

The Revised Model Business Corporation Act:

A)has eliminated the need for a certificate of incorporation.
B)has made the process of obtaining a certificate of incorporation more difficult.
C)states that corporate existence begins when the secretary of state issues a certificate of incorporation.
D)has eliminated the need for articles of incorporation.

Question 29

In a merger, the surviving corporation has all the rights and property of the corporation with which it merged, but none of the debts and liabilities.

Question 30

What is not a correct statement concerning promoters?

A)Promoters are generally active before the corporation is formed.
B)Two (2) or more promoters are required to form a corporation.
C)Promoters are fiduciaries with respect to the corporation and its shareholders.
D)Promoters are liable for any torts that they commit while promoting the corporation.

Question 31

"Conglomerate" describes the relationship of equal companies engaged in similar fields of business activity.

Question 32

A merger is subject to antitrust law, while a consolidation is not.

Question 33

Which of the following is a correct statement concerning the incorporation process?

A)Each application for incorporation is reviewed by the appropriate state legislature.
B)The incorporation process is essentially a matter of filing the correct papers and fees with the designated government official.
C)Most applications for incorporation are rejected.
D)The incorporator(s) must prove to be of good moral character.

Question 34

Where a corporation is properly formed, it is called a corporation:

A)di giorno.
B)de facto.
C)de jure.
D)by estoppel.

Question 35

The rules and regulations enacted by a corporation to govern the affairs of the corporation and its shareholders, directors and officers are called:

A)articles of incorporation.
B)corporate management agreements.
C)bylaws.
D)articles of organization.

Question 36

A corporation that does business in the state in which it was created is called a(n):

A)domestic corporation.
B)foreign corporation.
C)alien corporation.
D)home corporation.

Question 37

A holder of a single share of stock who objects to a merger has the power to stop the merger.

Question 38

A corporation may be an incorporator of another corporation.

Question 39

Under the Revised Model Business Corporation Act (RMBCA), corporate existence begins when the articles of incorporation are filed with the secretary of state.

Question 40

A business corporation may legally merge with a charitable corporation.

Question 41

An enterprise that conducts business following a merger or consolidation succeeds to:

A)all of the rights of the predecessor.
B)all of the property of the predecessor.
C)all of the debts and liabilities of the predecessor.
D)all of the above.

Question 42

After a corporate charter has been forfeited, the owners and officers of the dissolved corporation are __________ shielded from personal liability by using the corporate name when making contracts.

A)nevertheless
B)conditionally
C)not
D)retroactively

Question 43

If there is a consolidation of corporations A, B, and C:

A)corporations B and C are absorbed into corporation A, and corporation A continues to exist.
B)all of the corporations continue to exist.
C)all corporations continue to exist, but corporation A owns all of the stock of corporations B and C.
D)corporations A, B, and C cease to exist, and a new corporation with the property and assets of the old corporations comes into being.

Question 44

Osvaldo was attempting to promote a corporation to be named Xavier, Inc. In that capacity, Osvaldo signed a lease in the name of Xavier and ordered furniture in the company's name. The corporation was in fact formed and the board of directors, knowing of the actions of Osvaldo, moved into the space Osvaldo had leased. Upon delivery and inspection of the furniture Osvaldo ordered, numerous defects were discovered, and the furniture was accordingly rejected and returned to the seller. The corporation was not successful, and as a result, the rent was not paid. Osvaldo was sued for the unpaid rent and for breach of contract concerning the furniture. The corporation was sued on the same grounds. Decide the cases against Osvaldo and Xavier, Inc.

Question 45

In a merger situation, what is the right of a dissenting shareholder?

A)to block the merger until satisfied regarding its terms
B)to have its shares appraised and purchased by the corporation
C)to enforce a consolidation instead of a merger
D)none of the above, since dissenting shareholders have no rights with respect to a merger

Question 46

____ of a corporation may occur when management is deadlocked and the deadlock cannot be broken by the shareholders.

A)Bankruptcy
B)Consolidation
C)Reinstatement
D)Judicial dissolution

Question 47

The Miller family, who operates a musical instrument manufacturing concern, has decided to incorporate. The three (3) members of the Miller family, Mary, Mark and Sue, would like to become a corporation and obtain limited liability; however, taxation at the corporate level would be very costly for them. If possible, Mary Miller would rather be taxed as a partnership. Mark Miller is worried about the additional paperwork and meetings that incorporation would surely bring. Sue Miller does not want a large board of directors to be formed. Sue fears that the board would somehow detract from the family goals and orientation the business has always enjoyed. In light of these concerns, is there a corporate form that would better suit the Miller family?

Question 48

A successor enterprise is not subject to the contract obligations of the former business if:

A)one corporation is absorbed by another through merger.
B)a corporation merely purchases the assets of another business.
C)two or more corporations consolidate.
D)none of the above.

Question 49

In states that have adopted the Revised Model Business Corporation Act, the secretary of state may commence proceedings to administratively dissolve a corporation under all but which of the following circumstances?

A)the corporation adopts more than one business purpose.
B)the corporation does not pay franchise taxes within sixty (60) days after they are due
C)the corporation does not file its annual report within sixty (60) days after it is due.
D)the corporation is without a registered agent or registered office for sixty (60) days or more.

Question 50

When two corporations merge:

A)their separate existences cease, and a new corporation is formed.
B)one of the corporations absorbs the other.
C)the liabilities of the two merging corporations are eliminated.
D)a new charter is needed.