Deck 27: Corporate Formation and Financing

Question 1

The members of the board of directors are appointed by upper-level corporate management.

Answer 1

False

Question 2

Corporations generate over eighty-five percent of the country's gross business receipts.

Answer 2

True

Question 3

A corporation can hold title to and transfer property.

Answer 3

True

Question 4

Shareholders elect the corporate board of directors and vote on fundamental changes in the corporation.

Question 5

Corporations are treated,in effect,as artificial persons created by the state.

Question 6

A corporation may be involuntarily terminated by the corporations' creditors if an involuntary petition for bankruptcy against the corporation is granted.

Question 7

Owners of corporations are called stakeholders.

Question 8

The shareholders do not have the power to terminate a corporation.

Question 9

Corporations are the most dominant form of business organization in the United States.

Question 10

The shareholders of a corporation are not personally liable for the debts of that corporation.

Question 11

The board of directors makes policy decisions concerning the operation of a corporation.

Question 12

A corporation can sue or be sued in its own name.

Question 13

A corporation cannot be found civilly or criminally liable for violations of law.

Question 14

A corporation is terminated if a shareholder dies,becomes insane or goes bankrupt.

Question 15

Shareholders may agree among themselves as to restrictions on the transfer of shares.

Question 16

A corporation cannot enter into or enforce contracts.

Question 17

One major characteristic of corporations is that they have perpetual existence unless a specific duration is stated in the articles of incorporation.

Question 18

A corporation is a legal person for most purposes.

Question 19

Corporate shares are freely transferable by a shareholder by sale,assignment,pledge,or gift unless they are issued pursuant to certain exemptions from securities regulation.

Question 20

Corporations can be created only pursuant to the laws of the state of incorporation.

Question 21

A closely-held corporation is one whose shares are owned by a small number of shareholders,who are often family members,relatives,or friends.

Question 22

Shareholders of professional corporations are often called limited partners.

Question 23

Where a foreign corporation is required to qualify to conduct intrastate commerce in a state,it must obtain a certificate of incorporation from the state.

Question 24

Professional corporations have normal corporate attributes,and are formed like other corporations.

Question 25

Members of a professional corporation are usually held liable for the torts committed by the corporation's agents or employees.

Question 26

A "closely held," or "close",corporation is a corporation that operates only within its state of incorporation.

Question 27

Not-for-profit corporations are formed for charitable,educational,religious,or scientific purposes.

Question 28

A corporation is a domestic corporation in the state in which it is incorporated,and it is an alien corporation in all other states and jurisdictions.

Question 29

Public corporations are formed pursuant to state law.

Question 30

Private corporations are formed by government entities to meet a specific governmental or political purpose.

Question 31

Government-owned corporations are also known as "quasi-private" corporations.

Question 32

All states have enacted the Model Nonprofit Corporation Act,which governs the formation,operation,and termination of not-for-profit corporations.

Question 33

Local government corporations are often called municipal corporations.

Question 34

Together,the directors and the officers form the corporate management.

Question 35

The concept of "centralized management" means that the management of a corporation is separate and independent from its shareholders; therefore,a corporation is not subject to any oversight by its shareholders.

Question 36

An alien corporation is a corporation that is incorporated in another country.

Question 37

The board of directors appoints corporate officers to run the corporation's "day-to-day" operations.

Question 38

Professional corporations are prohibited in most states.

Question 39

Most cities and towns are formed as "quasi-private" corporations.

Question 40

Private corporations can be classified as either for profit or not-for-profit corporations.

Question 41

The document filed in order to obtain a corporate charter is called an affirmation of incorporation.

Question 42

A corporation has the same basic rights to perform acts and enter into contracts as an actual person.

Question 43

"Common" stock is an equity security that represents the residual value of the corporation.

Question 44

The shareholders of a corporation elect the corporate officers.

Question 45

Every corporation must have a registered office and registered agent,and both must be identified in the articles of incorporation.

Question 46

An organizational meeting of the initial directors of the corporation must be held after the articles of incorporation are filed.

Question 47

A corporation can be incorporated in only one state.

Question 48

An "ultra vires" act will generally cause dissolution of the corporation.

Question 49

All amendments to a corporation's bylaws must be approved by the shareholders.

Question 50

An act by a corporation that is beyond its express or implied powers is called a sua sponte act.

Question 51

A small corporation will typically choose the state in which the corporation will be doing most of its business as the state for incorporation.

Question 52

The articles of incorporation must be approved by the state before the corporation can officially come into existence.

Question 53

A large corporation will typically choose to incorporate in the state with the laws that are most favorable to the corporation's internal operations.

Question 54

The bylaws can be adopted by either the incorporators or the initial board of directors.

Question 55

Corporations formed under general incorporation laws cannot engage in banking or insurance.

Question 56

A corporation's express powers represent only those powers granted to it in its articles of incorporation.

Question 57

"Par value" is usually an accurate measure of a stock's market value when the stock is originally issued.

Question 58

A corporation is automatically bound to its promoters' contracts as soon as the corporation is formed.

Question 59

"Preferred" stock can be issued in different classes,with one class of preferred stock given preference over another class of preferred stock.

Question 60

A promoter is automatically released from liability on a promoter's contract if the newly-formed corporation agrees to be bound by the contract.

Question 61

Owners of corporations are called ________.

A) employees
B) associates
C) shareholders
D) directors
E) members

Question 62

A note is a long-term debt security with a maturity of thirty (30)years or less.

Question 63

The Secretary of State has no power to obtain an administrative dissolution of a corporation.

Question 64

"Convertible preferred" stock is stock that can be easily converted into the stock of another corporation.

Question 65

"Cumulative preferred" stock permits stockholders to convert their shares into common stock.

Question 66

A "dividend preference" is the right to receive a fixed dividend at set periods during the year.

Question 67

Debt securities are also called variable income securities.

Question 68

Corporations were first formed in ________.

A) Europe
B) the United States
C) Russia
D) Asia
E) Canada

Question 69

Corporations generate over ________ percent of the United States' gross business receipts.

A) twenty-five
B) forty-five
C) sixty-five
D) eighty-five
E) ninety-five

Question 70

The right to be paid before preferred stockholders if the corporation is dissolved and liquidated is called a "liquidation preference."

Question 71

The uniform law,issued in 1984 by the Committee on Corporate Laws of the American Bar Association,that regulates the formation,operation and termination of corporations is the:

A) Model Business Corporation Act.
B) Uniform Commercial Code.
C) Revised Model Business Corporation Act.
D) Standard Incorporation Act.
E) Revised Standard Incorporation Act.

Question 72

Which of the following is true regarding the history of corporations?

A) Corporations were first formed in the United States shortly after the United States gained independence from Great Britain.
B) Corporations were first formed in medieval Europe.
C) Corporations were first formed in Germany in the 1800s.
D) Corporations were first formed in Spain in the1800s.
E) Corporations were first formed in England between 1900 and 1910.

Question 73

A debenture is a long-term debt security that is secured by some form of collateral.

Question 74

The "liquidation preference" of preferred stock means that preferred shareholders have the right to be paid before common shareholders in the event of a corporation's dissolution and liquidation.

Question 75

Which of the following is true about corporations?

A) Corporate law is federal law.
B) Corporate law is statutory; thus, there is no common law applicable to corporations.
C) Changes to state corporate law can require the amendment of a corporation's articles of incorporation, even though the corporation is already in existence.
D) One requirement of corporate status is that a corporation's stock must be owned by a large number of shareholders.
E) There are no closely-held corporations.

Question 76

A dissolved corporation continues its corporate existence,but may not carry on any business after its dissolution.

Question 77

A private corporation is one that:

A) has a small number of owners who are often members of the same family.
B) does not prepare financial statements.
C) is owned by private entities.
D) does not make public disclosure of information.
E) has only one shareholder.

Question 78

A corporation can be involuntarily dissolved by a judicial proceeding.

Question 79

If a corporation has not commenced business or issued any shares,it may be dissolved by a vote of the majority of the incorporators or initial directors.

Question 80

A bond is a long-term,unsecured debt.