Deck 34: Corporate Formation and Financing

Question 1

Generally,there is a uniform body of national corporate law.

Answer 1

False

Question 2

A business that holds itself out as being a corporation may not be able to deny corporate status,even if it makes no attempt to incorporate.

Answer 2

True

Question 3

A close corporation cannot operate as an S corporation.

Answer 3

False

Question 4

Normally,corporate shareholders are personally liable for the obligations of the corporation.

Question 5

A corporate director is an "owner" of the corporation.

Question 6

A holding company is a company whose business activity consists of holding shares in another company.

Question 7

Corporate officers hire corporate directors.

Question 8

A state constitution may resolve a conflict among documents involving a corporation.

Question 9

A foreign corporation is a corporation formed in another country.

Question 10

A corporation is liable for the torts committed by its officers within the course and scope of their employment.

Question 11

The choice of a corporate name is subject to state approval.

Question 12

A business incorporated in one state has an automatic right to do business in any other state.

Question 13

Express powers of a corporation can be found in the corporate bylaws.

Question 14

A corporation cannot be formed without a profit-making purpose.

Question 15

A corporation's internal management structure is described in its articles or bylaws.

Question 16

A corporation has perpetual existence in most states unless the articles of incorporation state otherwise.

Question 17

Promoters,not incorporators,must execute the articles of incorporation.

Question 18

Express powers of a corporation can be found in the law of the state of incorporation.

Question 19

A shareholder in a professional corporation can be liable for malpractice arising from the rendering of professional services.

Question 20

A corporation whose shares are held by relatively few persons is a partnership.

Question 21

Any person who buys preferred stock has priority over a holder of common stock to payment on the corporation's dissolution.

Question 22

Any person who buys common stock acquires voting rights in a corporation.

Question 23

Venture capital is capital provided to new business ventures by professional,outside investors.

Question 24

"Piercing the corporate veil" means revealing to shareholders the internal rules of corporate management.

Question 25

A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation.

Question 26

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

Question 27

Common stock provides a proportionate interest in the corporation with regard to control.

Question 28

Preferred shares normally have a fixed maturity date on which the firm must pay them off.

Question 29

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

Question 30

Ivy and Justin want to form and do business as Kayak Adventures Corporation.A corporation can be owned by

A)natural persons only.
B)artificial persons only.
C)artificial or natural persons.
D)neither "artificial" nor "natural" persons.

Question 31

Skyla and Terry want to form and do business as Unique Boutique Corporation.The state statute governing the formation and operation of their corporation is most likely 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 32

Firms are obligated to return a principal amount per share to each holder of common stock.

Question 33

A court will not pierce the corporate veil of a corporation that is merely too "thinly" capitalized.

Question 34

Common stock provides a proportionate interest in the corporation with regard to net assets.

Question 35

Bonds represent the purchase of ownership in a business firm.

Question 36

Stocks represent the borrowing of funds by firms.

Question 37

Usually,a private equity firm buys an entire corporation and may later reorganize it as a publicly held corporation.

Question 38

Finn and Glenda want to form and do business as Hobby Crafts Corporation.A corporation is a legal entity created and recognized by

A)a central federal administrative agency.
B)a city or county clerk's office.
C)an artificial legal person.
D)state law.

Question 39

Pola and Quincey want to form and do business as River Tours Corporation.A corporation can consist of

A)no natural persons.
B)one natural person but not more.
C)one or more natural persons.
D)only more than one natural person.

Question 40

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation.Lily and Moe are Kleen's officers.As in other corporations,the responsibility for the overall management of Kleen rests with

A)the board of directors.
B)the officers.
C)the owners.
D)the shareholders.

Question 41

Suki is a registered agent for Trans-state Trucking,Inc.(TTI),which incorporated in Utah.As a registered agent,Suki

A)agreed to buy stock in TTI before it existed.
B)applied to Utah on behalf of TTI to obtain its corporate charter.
C)does business for TTI in Utah.
D)receives legal documents on behalf of TTI.

Question 42

Felicity and Gideon want to form and do business as Home Healthcare Corporation.A corporation is

A)a natural being.
B)a tangible thing.
C)an artificial person.
D)a visible radiance.

Question 43

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 44

A firm named Scientific Discovery Corporation (SDC)makes an attempt to incorporate for a purpose other than making a profit.SDC is

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

Question 45

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 accom?plish its corporate purposes.

Question 46

Convenience Mart,Inc.,is a close 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 47

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 48

Ruby Red Corporation has six shareholders,four of whom are members of the same family.All of Ruby's shareholders agree in writing to operate without shareholders' meetings.Under the Revised Model Business Corporation Act,this most likely warrants

A)no penalties or sanctions.
B)the imposition of a fine on Ruby.
C)the imprisonment of Ruby's shareholders.
D)the piercing of Ruby's corporate veil.

Question 49

Gelato Ice,Inc.,is incorporated in the state of New Jersey and is doing business in the state of New York.In New York,Gelato is properly referred to as

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

Question 50

Like the bylaws of other corporations,the bylaws of Retail Sales,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 51

To qualify as a professional corporation,Medical Clinic,P.C.,

A)must be a corporation formed by professionals.
B)must grant all shareholders voting rights.
C)must have at least thirty-five shareholders.
D)all of the choices.

Question 52

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 53

Stable Foundation Construction Corporation's articles list an incorrect address for its incorporator.Under this circumstance,Stable is most likely

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

Question 54

Superior Home Products,Inc.,is a corporation.Superior's implied powers enable it to

A)amend the articles of incorporation.
B)bring a derivative suit.
C)declare dividends.
D)perform all acts reasonably appropriate and necessary to accom?plish its corporate purposes.

Question 55

Eager Beaver Corporation fails to adopt bylaws.Under this circumstance,Eager Beaver is most likely

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

Question 56

Stan incorporates his scientific products business as Tech Supply,Inc.Unless the articles of incorporation state otherwise,Tech Supply most likely has

A)a finite,yet-to-be-determined existence.
B)a one-year,nonrenewable existence.
C)a one-year,renewable existence.
D)perpetual existence.

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 piercing of O.K.'s corporate veil.
D)a review of Pure Fuel's articles of incorporation.

Question 58

Raw Resources Corporation authorizes Stefan,its employee,to oversee its mining operation.In the course of this employment,Stefan commits a tort.Liability for this tort most likely rests with

A)neither Raw Resources nor Stefan.
B)Raw Resources and Stefan.
C)Raw Resources but not Stefan.
D)Stefan but not Raw Resources.

Question 59

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 60

Caffeine Café,Inc.,files its articles of incorporation with the appropriate government agency.Least likely to appear in the articles is the name of

A)each of the corporation's incorporators.
B)each of the corporation's shareholders.
C)the corporation.
D)the corporation's initial registered agent.

Question 61

Financial Innovations,Inc.,issues bonds,which are also known as

A)cumulative investments.
B)debt securities.
C)equity securities.
D)preferred stock.

Question 62

Lita is a holder of preferred stock in Mighty Clean Detergents,Inc.Lita has priority over holders of Mighty common stock as to

A)nothing.
B)payments of dividends.
C)the date on which Mighty must repurchase the shares.
D)upward changes in the market price of the shares.

Question 63

Discount Factory Outlets,Inc.,issues bonds.Bonds

A)are issued by businesses only.
B)are sometimes referred to as "stock with preferences."
C)have maturity dates.
D)require periodic interest payments from their owners.

Question 64

Mari buys 500 shares of common stock in National Livestock Traders,Inc.As a shareholder of record,Mari owns a proportionate interest in terms of

A)control,earnings,and net assets.
B)control only.
C)earnings and net assets only.
D)neither control nor earnings and net assets.

Question 65

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 66

Incredible eSales Corporation is a new Internet business.How can Incredible eSales obtain capital to finance its operations

Question 67

Dag and Elke are holders of common stock in Fragrances,Inc.(FI).Like other holders of common stock,they have a residual position in the overall financial structure of FI,because they

A)are guaranteed to receive more than the amount of their investment.
B)are the last to receive payment for their investment.
C)have priority to FI's assets if FI becomes in?solvent.
D)reside in the state of FI's incorporation.

Question 68

Omega Corporation makes and markets digital timers,clocks,and related products.Like other business corporations,Omega issues securities to

A)increase its market share.
B)obtain financing.
C)reduce its production costs.
D)safeguard its facilities.