Deck 19: Corporations

Question 1

Before shareholders can bring a derivative suit,they must submit a written demand to the corporation,asking the board of directors to take action.

Answer 1

True

Question 2

A corporation is referred to as a domestic corporation by its home state.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

Implied powers of a corporation are expressed in state statutes.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

A publicly held corporation is a private corporation.

Question 12

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

Question 13

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

Question 14

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

Question 15

Many states permit a corporate board to have fewer than three directors.

Question 16

When a corporation earns profits,it must distribute them to shareholders.

Question 17

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

Question 18

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

Question 19

A shareholder's right to inspect corporate books and records is unlimited.

Question 20

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 21

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 22

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 23

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 24

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 25

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 26

Whit is a director of Vids Corporation.With respect to policymaking decisions necessary to the management of corporate affairs,Whit and the other Vids directors have responsibility for

A)all of the decisions.
B)only the decisions referred to them by the shareholders.
C)only the decisions referred to them by the officers.
D)none of the decisions.

Question 27

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 28

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 29

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 30

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 31

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 32

The shares of Capital Corporation are publicly traded in securities markets.Capital Corporation is

A)a private corporation.
B)a privately held corporation.
C)a public corporation.
D)a publicly held corporation.

Question 33

Sylvia is an officer of Triad Hotel Company.As an officer,with respect to the corporation,Sylvia is

A)a fiduciary.
B)a forum.
C)a proxy.
D)a quorum.

Question 34

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 35

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 36

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.

Question 37

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 38

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 39

Bertram,Claudia,and Dynah form Eat Local,Inc. ,a closely held corporation,and agree to restrict the transfer of its stock to anyone else.A reasonable purpose for a stock transfer restriction in a closely held corporation,like the agreement between Bertram,Claudia,and Dynah,is

A)a desire to limit the participation of outsiders in the firm.
B)a goal to restrain insiders from taking advantage of their position.
C)an attempt to restrain the free flow of commerce among investors.
D)a wish to restrict the transfer of the shareholders' physical assets.

Question 40

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 41

Mitch is a director and officer of Numero Uno,Inc.Mitch makes a marketing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders.The shareholders accuse Mitch of breaching his fiduciary duty to the corporation.What is Mitch's best defense against this accusation ?Later,a resolution comes before the Numero Uno board to compete with One-of-a-Kind Corporation.Mitch is a director and shareholder of One-of-a-Kind.What is Mitch's responsibility in this situation?

Question 42

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?