Deck 15: Corporations

Question 1

A corporation has an implied power to extend credit to those with whom it has a legal or contractual relationship.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

Shareholders are the ultimate authority in every corporation.

Answer 3

False

Question 4

One of the key advantages of the corporate form is the unlimited liability of its owners.

Question 5

A corporation is an artificial being.

Question 6

A corporation does not possess the same right of access to the courts as natural persons.

Question 7

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

Question 8

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

Question 9

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.

Question 10

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

Question 11

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

Question 12

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

Question 13

Many qualifications are required for directors.

Question 14

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 15

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

Question 16

State laws regarding corporations are uniform.

Question 17

The Revised Model Business Corporation Act gives a close corporation less flexibility in determining its rules of operation.

Question 18

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

Question 19

Bonds represent the borrowing of funds by firms.

Question 20

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

Question 21

Shareholders are personally liable for the debts of a corporation.

Question 22

Officers hire the directors and other executive employees.

Question 23

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

Question 24

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

Question 25

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

Question 26

Erin is a shareholder in First Aides, Inc., a homehealthcarecompany.As a shareholder, Erin

A)owns shares of stock in First Aides.
B)cannot be sued by First Aides.
C)cannot sue First Aides.
D)is liable for all the debts of First Aides.

Question 27

Charlie is the founder of Dream Job Apps Corporation.Eloise is a shareholder and director, and Francie is an officer.The daily business operations of Dream Job Apps are overseen by

A)Charlie.
B)Eloise.
C)Francie.
D)Charlie and Eloise.

Question 28

Shareholders' meetings need not occur at any certain interval.

Question 29

Ruby Red Restaurant Corporation is incorporated in South Carolina.In that state, Ruby Red is

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

Question 30

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 31

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 32

Every shareholder is entitled to examine specified corporate records.

Question 33

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 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

Directors are not obligated to refrain from self-dealing.

Question 40

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

Question 41

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 42

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 43

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 44

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 45

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 46

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 47

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 48

Wiley incorporates his business as Wiley Wire Corporation in Texas.He and his group of shareholders intend to make a profit from their sales of fencing wire.Wiley Wire Corporation is

A)a nonprofit corporation.
B)not a corporation.
C)an alien corporation.
D)a private corporation.

Question 49

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 50

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 accomplish its corporate purposes.

Question 51

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 52

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 53

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 54

Miracle Mobile Devices, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufactur-ing and distributing a newly pat-ented tablet, (2) is owned by five share-holders, (3) is subject to double taxation, and (4) has made no public offering of its shares.Miracle iss

A)an S corporation
B)a close corporation.
C)a nonprofit corporation.
D)a professional corporation.

Question 55

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 56

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 57

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 58

Wings2Go Corporation fails to hold an organizational meeting.In this circumstance, at common law Wings2Go is most likely

A)a corporation by estoppel.
B)a de facto corporation.
C)a de jure corporation.
D)ultra vires.

Question 59

Lyla is a common shareholder in Norman's Nutty Nuts Corporation.As a common shareholder, Lyla is

A)guaranteed regular payments of dividends.
B)not guaranteed any payments of dividends.
C)not given any voting rights.
D)liable for all of Norman's Nutty Nuts's debts.

Question 60

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 61

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 62

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 stock certificate.
C)a proxy.
D)a quorum.

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

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 65

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 earnings.
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 66

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 67

Urban Commerce, Inc., issues bonds, which are also known as

A)cumulative investments.
B)fixed-income securities.
C)equity securities.
D)preferred stock.

Question 68

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 69

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 70

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.

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

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.