Deck 19: Corporations

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Many qualifications are required for directors.

Question 5

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

Question 6

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

Question 7

Shareholders' meetings need not occur at any certain interval.

Question 8

Officers hire the directors and other executive employees.

Question 9

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

Question 10

Corporate profits can be subject to double taxation.

Question 11

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is illegal.

Question 12

A corporation is a legal entity created and recognized by federal law.

Question 13

Directors are not obligated to refrain from self-dealing.

Question 14

Shareholders are personally liable for the debts of a corporation.

Question 15

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

Question 16

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 17

Each incorporator must have an interest in the corporation.

Question 18

Every shareholder is entitled to examine specified corporate records.

Question 19

Shareholders are the ultimate authority in every corporation.

Question 20

For liability purposes,some courts treat professional corporations somewhat like a partnership.

Question 21

Clark is a shareholder of Bedrest Mattress Company.Clark will be deemed to have a fiduci?ary duty to Bedrest and its minority share?holders if he has

A)preferred stock.
B)a right of first refusal.
C)a sufficient number of shares to exercise de facto control.
D)watered stock.

Question 22

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

A)board of directors.
B)incorporators.
C)officers.
D)shareholders.

Question 23

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 24

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 25

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 26

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 27

Bev is a shareholder of All-Terrain Vehicle Company.As a share?holder,Bev does not have

A)a right to compensation.
B)dividend rights.
C)inspection rights.
D)preemptive rights.

Question 28

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

A)forfeited immediately.
B)forfeited within ten days of a third party's claim to ownership.
C)forfeited within thirty days if she cannot find the certificate.
D)not affected.

Question 29

Start-Up Corporation substantially complies with all conditions prece?dent to incorpo?ration.Start-Up has

A)corporate existence by estoppel.
B)de facto existence.
C)de jure existence.
D)ultra vires existence.

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

VeriVisual Company makes HD 3D film and video equipment.VeriVisual is like most cor?porations in that its officers are hired by the firm's

A)board of directors.
B)incorporators.
C)other officers.
D)shareholders.

Question 32

Boutique Corporation would like to change its corporate status to avoid in?come taxes at the corporate level.To qualify,the shareholders must not be

A)corporations.
B)estates.
C)individuals.
D)partnerships.

Question 33

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 34

Rhea is a director of Spex Corporation,which makes and sells sunglasses and other eyewear.As a Spex director,Rhea sits on the board,which

A)governs Spex.
B)is governed by the Spex incorporators.
C)is governed by the Spex officers.
D)is governed by the Spex shareholders.

Question 35

Ruben is a shareholder of Speed Bikes Company (SBC).When the direc?tors fail to undertake an action to redress a wrong suffered by SBC,Ruben files a suit on the firm's behalf.Any damages recovered by Ruben's suit will normally go to

A)Ruben.
B)SBC.
C)SBC's directors.
D)the state in which SBC is incorporated.

Question 36

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 37

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 38

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 preemptive right.
C)a proxy.
D)a quorum.

Question 39

Reba is a director of Quantum Mechanix Corporation.Reba's rights,as a di?rector,do not include a right to

A)indemnification.
B)inspection.
C)participation.
D)self-dealing.

Question 40

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 41

Tank is a director and the majority shareholder of Unique New Investment Corporation (UNIC).Tank buys,for $1,500,an option to purchase a tract of real estate for $50,000.Tank forms Vista Property,Inc. ,to hold the option.As the majority shareholder,and thus controlling director,of UNIC,Tank orders the firm to authorize the pur?chase of the land from Vista Property for $500,000.Tank then has Vista Property buy the land,sell it to UNIC,and loan the money to UNIC for the purchase at a 10 percent interest rate.Wim,a minority shareholder in UNIC,complains to UNIC's board,which takes no action.Wim files a suit against Tank on UNIC's behalf.Will Wim prevail? Explain.

Question 42

Officers and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a fed?eral 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?