Deck 27: Corporate Formation and Financing

Question 1

________ is a general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

A) Limited-purpose clause
B) Limited liability of shareholders
C) Preferred shareholder rule
D) Nonparticipating shareholder rule

Answer 1

B

Question 2

A panel of persons who are elected by the shareholders that make policy decisions concerning the operation of a corporation is known as ________.

A) legal aides
B) cartel
C) consortium
D) board of directors

Answer 2

D

Question 3

An act by a corporation that is beyond its express or implied powers is called a(n)________.

A) Subchapter Revision S Act
B) novation
C) cooperate code act
D) ultra vires act

Answer 3

D

Question 4

A corporation in the United States that has been incorporated in another country is referred to as a(n)________ corporation.

A) foreign
B) domestic
C) onshore
D) alien

Question 5

________ are powers beyond express powers that allow a corporation to accomplish its corporate purpose.

A) Cumulative powers
B) Corporation codes
C) Ultra vires acts
D) Implied powers

Question 6

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

A) Public
B) Nonprofit
C) Privately held
D) Publicly held

Question 7

________ corporations are private corporations that are formed for charitable,educational,religious,or scientific purposes.

A) Privately held
B) Publicly held
C) Service
D) Nonprofit

Question 8

Which of the following statements best describes a foreign corporation?

A) It is a corporation with incorporations in multiple states.
B) It is a corporation in the state in which it is incorporated.
C) It is a corporation in states other than the one in which it is incorporated.
D) It is a corporation in the United States which has been incorporated in another country.

Question 9

A(n)________ is a fictitious legal entity that is created according to statutory requirements.

A) corporation
B) cartel
C) outfit
D) conference

Question 10

________ corporations are for-profit corporations whose shares are usually owned by a few shareholders,who are often family members,relatives,or friends.

A) Privately held
B) Service
C) Publicly held
D) Public

Question 11

A corporation is a(n)________ corporation in the state in which it is incorporated.

A) offshore
B) domestic
C) alien
D) foreign

Question 12

A corporation that is incorporated in another country is known as a(n)________ corporation.

A) alien
B) domestic
C) public
D) municipal

Question 13

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

A) authority
B) domesticity
C) authenticity
D) autonomy

Question 14

Which of the following elect members of the board of directors for a corporation?

A) the CEO
B) corporate officers
C) shareholders
D) employees

Question 15

Which of the following would be considered an express power of a corporation?

A) opening a bank account
B) issuing notes and bonds
C) purchasing advertisement
D) purchasing insurance

Question 16

A corporation in the state in which it was formed is referred to as a(n)________ corporation.

A) foreign
B) domestic
C) alien
D) overseas

Question 17

Which of the following statements about corporations is true?

A) The corporate officers appoint directors to run the corporation's day-to-day operations.
B) The death, insanity, or bankruptcy of a director or an officer of a corporation dissolves the corporation.
C) Corporations can be put in prison for violations of the law.
D) Corporations usually have a centralized management composed of the board of directors and officers of the corporation.

Question 18

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

A) spectators
B) shareholders
C) electors
D) associates

Question 19

________ corporations are for-profit corporations that have hundreds or thousands of shareholders,and their shares are traded on organized securities markets.

A) Privately held
B) Professional
C) Publicly held
D) Service

Question 20

Which of the following can dismiss the existence of a corporation?

A) voluntary termination by shareholder
B) death of a shareholder
C) bankruptcy of a shareholder
D) voluntary termination by the corporation's creditors

Question 21

Which of the following must be included in an article of incorporation?

A) The minutes of the first organizational meeting of the board of directors.
B) The number of shares the corporation is authorized to issue.
C) The dissolution terms of the incorporation.
D) The corporate seal must be used in the articles of incorporation.

Question 22

Local government corporations are often called ________ corporations.

A) service
B) professional
C) municipal
D) profit

Question 23

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n)________.

A) promoter
B) shareholder
C) registered agent
D) incorporator

Question 24

Which of the following must necessarily be met for a corporation to elect as a statutory close corporation?

A) The corporation must have 100 or more shareholders.
B) The corporation must have 50 or fewer shareholders.
C) The corporation must contain a board of directors.
D) The corporation must have a set of bylaws.

Question 25

________ corporations are also known as public corporations.

A) Professional
B) Profit
C) Government-owned
D) Nonprofit

Question 26

Which of the following is true of corporate bylaws?

A) They only contain rules on how the corporation can deal with the government.
B) They are only adopted by the shareholders of the corporation.
C) They are not binding on the directors, or shareholders of the corporation.
D) They do not have to be filed with any government official.

Question 27

Which of the following is true for the amendment of articles of incorporation that does not affect the rights attached to shares?

A) The shareholders need to propose a resolution recommending such an amendment before the board of directors draft the amendment.
B) The shareholders need to provide vote of approval for the amendment after it has been submitted to the secretary of state.
C) The board of directors can approve the amendment without shareholder approval if it does not affect rights attached to shares.
D) The amendment need not be filed with the secretary of state of the state of incorporation if it only affects rights attached to shares.

Question 28

Judicial dissolution of a corporation can be instituted by the attorney general of the state of incorporation if the corporation ________.

A) procured its articles of incorporation through fraud
B) did not pay its franchise fee
C) failed to file an annual report
D) failed for 60 days to maintain a registered agent in the state

Question 29

Which of the following is true of a C Corporation?

A) It doesn't pay tax at the corporate level.
B) Shareholders of such a corporation don't pay tax on their dividends.
C) It must have more than 100 shareholders.
D) Nonresident aliens cannot be shareholders.

Question 30

According to priority,which of the following claimants is the last to be paid after assets have been liquidated of a corporation?

A) creditors
B) common stockholders
C) preferred shareholders
D) bond holders

Question 31

The ________ is the basic governing documents of a corporation that must be filed with the secretary of state of the state of incorporation.

A) debt security
B) debenture
C) certificate of authority
D) articles of incorporation

Question 32

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation are referred to as ________.

A) ultra vires rules
B) articles of incorporation
C) bylaws
D) corporation codes

Question 33

A(n)________ is a person or persons who organize and start a corporation,negotiate and enter into contracts in advance of its formation,find the initial investors to finance the corporation,and so forth.

A) incorporator
B) promoter
C) articles drafter
D) negotiator

Question 34

Which of the following is true for a corporation's liability on the promoters' contracts if the corporation is never formed?

A) The corporation assumes liability of the promoters' contract automatically upon its creation.
B) The promoter's liabilities are transferred to the board of directors of the corporation upon its formation.
C) The promoter, corporation, and the third-party enter into a novation whereby liability is solely transferred to the corporation.
D) The promoters have joint personal liability on the contract unless the third party specifically exempts them from such liability.

Question 35

Involuntary dissolution of a corporation that is ordered by the secretary of state if a corporation has failed to comply with certain procedures required by law is known as ________.

A) judicial dissolution
B) administrative dissolution
C) cumulative dissolution
D) liquidation

Question 36

The person or persons,partnerships,or corporations that are responsible for incorporation of a corporation is known as a(n)________.

A) promoter
B) shareholder
C) incorporator
D) director

Question 37

Which of the following is true about a corporation's incorporation in a state?

A) Domestic corporations can incorporate into only one state.
B) Domestic corporations can incorporate into all states in which they conduct business.
C) Alien corporations can only incorporate into one state.
D) Foreign corporations can incorporate into more than one state.

Question 38

Dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directors and a majority vote of the shares entitled to vote is known as ________.

A) liquidation
B) judicial dissolution
C) administrative dissolution
D) voluntary dissolution

Question 39

A(n)________ is a clause that can be included in the articles of incorporation that permits the corporation to engage in any activity permitted by law.

A) general-purpose clause
B) limited-purpose clause
C) dissolution clause
D) ultra vires clause

Question 40

A(n)________ is a clause that can be included in the articles of incorporation that stipulates the activities that the corporation can engage in.The corporation can engage in no other purposes or activities.

A) ultra vires clause
B) dissolution clause
C) general-purpose clause
D) limited-purpose clause

Question 41

Authorized shares that have not been sold by the corporation are known as ________ shares.

A) issued
B) unissued
C) outstanding
D) liquidated

Question 42

________ is a type of equity security that represents the residual value of a corporation.

A) Common stock
B) Preferred stock
C) Cumulative preferred stock
D) Participating preferred stock

Question 43

________ is a preferred stockholder right to be paid a stated dollar amount if a corporation is dissolved and its assets redistributed.

A) Noncumulative preference
B) Cumulative dividend preference
C) Dividend preference
D) Liquidation preference

Question 44

Which of the following criteria must be met for a company to be treated as an S corporation?

A) Shareholders must be other corporations or partnerships.
B) Nonresident aliens cannot be shareholders.
C) The corporation must have more than 100 shareholders.
D) The corporation must have more than one class of stock.

Question 45

The judicial dissolution of a corporation can be brought about if the corporation ________.

A) has a board of directors elected by its shareholders
B) is incorporated in only one state
C) exceeded or abused the authority conferred on it by law
D) submitted its articles of incorporation with the secretary of state after it was voted for by its shareholders

Question 46

Issued shares that have been repurchased by the corporation are referred to as ________.

A) outstanding shares
B) liquidated shares
C) unissued shares
D) treasury shares

Question 47

The secretary of state can obtain administrative dissolution of a corporation if it ________.

A) failed to file an annual report
B) procured its articles of incorporation through fraud
C) has already received a decree of dissolution from a court
D) is incorporated in only one state

Question 48

A(n)________ is a debt security with a maturity of five years or less.

A) bond
B) debenture
C) indenture
D) note

Question 49

If a court judicially dissolves a corporation,it enters a(n)________ that specifies the date of dissolution.

A) arraignment
B) dissolution journal
C) dissolution deed
D) decree of dissolution

Question 50

The WaterGlove Corporation issues ________ preferred stock that requires the payment of a quarterly dividend of $5.00 per share.The WaterGlove Corporation falls behind with four quarterly payments,i.e.,$20.00 per share of preferred stock.The next quarter,the corporation makes a profit of $25.00 per share.The corporation must pay the $20.00 per share of arrearages to the preferred shareholders plus this quarter's payment of $5.00 per share.

A) convertible
B) redeemable
C) cumulative
D) participating

Question 51

A contract between a corporation and a holder that contains the terms of a debt security is known as a(n)________.

A) bond
B) indenture
C) debenture
D) liquidation

Question 52

A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

A) debenture
B) bond
C) note
D) treasury share

Question 53

A long-term debt security that is secured by some form of collateral is referred to as a ________.

A) treasury share
B) bond
C) note
D) debenture

Question 54

Which of the following is true of treasury shares?

A) They cannot be issued by the corporation.
B) They cannot be voted by the corporation.
C) They are owned by shareholders.
D) They are paid dividends for.

Question 55

On the judicial side,Delaware has a special court that hears and decides business cases known as the ________.

A) court of arbitration
B) court of chancery
C) court of record
D) court of inquiry

Question 56

Which of the following shares have the right to vote?

A) unissued shares
B) treasury shares
C) outstanding shares
D) liquidated shares

Question 57

Stock for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends are known as ________.

A) cumulative preferred stocks
B) noncumulative preferred stocks
C) common stocks
D) participating preferred stock

Question 58

Stock that permits a corporation to buy back the preferred stock at some future date is known as ________ stock.

A) cumulative preferred
B) participating preferred
C) convertible preferred
D) redeemable preferred

Question 59

Which of the following has a fixed maturity date?

A) bonds
B) common stock
C) cumulative preferred stock
D) participating preferred stock

Question 60

Which of the following is true of an S corporation?

A) The corporation can have no more than 100 shareholders.
B) Only foreign corporations can be an S corporation.
C) They are taxed at the corporate level.
D) The corporation must be a member of an affiliated group of corporations.

Question 61

Profit corporations are private corporations that are created to conduct a business for profit and can distribute profits to shareholders in the form of dividends.

Question 62

Nonprofit corporations are prohibited by law from distributing profits to their members,directors,and officers.

Question 63

The corporate officers appoint directors to run the corporation's day-to-day operations.

Question 64

A registered agent is a person or corporation that is empowered to accept service of process on behalf of a corporation.

Question 65

The parties who sign the articles of incorporation are called promoters.

Question 66

Administrative dissolution is the dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directors and a majority vote of the shares entitled to vote.

Question 67

A general-purpose clause stipulates the specific purposes and activities that the corporation can engage in.

Question 68

The death,insanity,or bankruptcy of a shareholder,a director,or an officer dissolves a corporation.

Question 69

Privately held corporations are for-profit corporations that have hundreds or thousands of shareholders,and their shares are traded on organized securities markets.

Question 70

Even if the corporation agrees to be bound to the contract,the promoter remains liable on the contract unless the parties enter into a novation.

Question 71

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

Question 72

Nonprofit corporations are private corporations that are formed for charitable,educational,religious,or scientific purposes.

Question 73

Implied powers allow a corporation to exceed its express powers in order to accomplish its corporate purpose.

Question 74

Small corporations generally opt to incorporate in the state with the laws that are most favorable to the corporation's internal operations.

Question 75

Professional corporations are also referred to as public corporations.

Question 76

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

Question 77

Articles of incorporation must include the name and address of each promoter.

Question 78

Corporation codes are state statutes that regulate the formation,operation,and dissolution of corporations.

Question 79

Common stockholders are issued common stock certificates to evidence their ownership interest in the corporation.

Question 80

All states have adopted the Revised Model Business Corporation Act (RMBCA).