Deck 34: Corporate Formation and Financing

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

A foreign corporation normally does not need a certificate of authority to sell goods or services via the Internet or by mail.

Answer 3

True

Question 4

A partnership cannot be a shareholder in an S corporation.

Question 5

A corporate name must include the word Corporation, Incorporated, Company, or Limited, or abbreviations of these terms.

Question 6

The U.S. Postal Service is a public corporation.

Question 7

When a corporation earns profits, it must pass them on to shareholders in the form of dividends.

Question 8

State laws regarding corporations are uniform.

Question 9

If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.

Question 10

A corporation is an artificial being.

Question 11

An alien corporation is a corporation formed in another country.

Question 12

Selecting the state in which to incorporate is an important step in the incorporation procedure.

Question 13

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

Question 14

A publicly held corporation is any corporation whose shares are publicly traded in a securities market.

Question 15

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

Question 16

The state can suspend the entity's corporate status until the taxes are paid or even dissolve the corporation for failing to pay taxes.

Question 17

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

Question 18

The day-to-day business of a corporation is managed by officers employed by the board of directors.

Question 19

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

Question 20

A close corporation can operate as an S corporation.

Question 21

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 22

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.

Question 23

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

Question 24

Bylaws are the internal rules of management for a corporation.

Question 25

Bonds represent the borrowing of funds by firms.

Question 26

Skyla and Terry want to form and do business as Unique Boutique Corporation. Its existence depends generally on

A) city or county corporate codes.
B) the Entrepreneur's Corporate Handbook.
C) the federal Administrative Procedure Act.
D) state law.

Question 27

A corporation has perpetual existence in most states unless the ar?ti?cles of incorporation state otherwise.

Question 28

Erin is a shareholder in African Adventures. As a shareholder, Erin

A) owns shares of stock in African Adventures.
B) is the founder of African Adventures.
C) has no say in the election of African Adventure's board of directors.
D) is liable for all the debts of African Adventures.

Question 29

The date when the principal of a bond is returned to the investor is called the maturity date.

Question 30

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

Question 31

A de jure corporation is one that is not properly formed.

Question 32

The purpose of a corporation may be specified in its articles of incorporation.

Question 33

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

Question 34

The registered agent is the person who can receive legal punishment (such as fines and imprisonment) on behalf of the corporation.

Question 35

The articles of incorporation serve as a primary source of authority for the corporation's future organization and business functions.

Question 36

George is the founder of Excellent Exotics Corporation. Wilson is a shareholder and director and Bill is an officer. The daily business operations of Excellent Exotics are overseen by

A) Bill.
B) Wilson.
C) George.
D) George and Wilson.

Question 37

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

Question 38

In the absence of express constitutional, statutory, or other provisions, the corporation has no implied powers.

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

A court will pierce the corporate veil of a corporation that is formed to evade an existing legal obligation.

Question 41

Smalltown, Alabama is incorporated by the government. Smalltown is

A) a foreign corporation.
B) a public corporation.
C) a private corporation.
D) an alien corporation.

Question 42

Yellowbox, a DVD rental company, would like to change its corporate status to that of an S corporation to avoid in?come taxes at the corporate level. To qualify, Yellowbox must

A) be located in the United States.
B) have more than one hundred shareholders.
C) be a non-profit corporation.
D) have more than one class of stock.

Question 43

Boutique Corporation would like to change its corporate status to that of an S corporation 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 44

Ruby Red 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 non-entity.

Question 45

Myron and Norah would like to form Originals, Inc., to do business in the art market. Generally, the articles of incorporation for a corporation do not include

A) the corporate name.
B) the nature and purpose of the corporation.
C) the capital structure of the corporation.
D) the minutes of the first organizational meeting.

Question 46

Painless Dental Equipment Company is incorporated in Colorado. In Wyoming, Painless is

A) a domestic corporation.
B) a foreign corporation.
C) an alien corporation.
D) a non-entity.

Question 47

Hudson and Ilka want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. 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 48

Breads & Brews, 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 49

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 is

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

Question 50

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 51

Olinka is a registered agent for Pads, Pods & Phones, Inc., which incorporated in California. As a registered agent, Olinka

A) agreed to buy stock in Pads, Pods & Phones before it existed.
B) applied to California on behalf of Pads, Pods & Phones to obtain its corporate charter.
C) represents Pads, Pods & Phones as a marketing agent.
D) receives legal documents on behalf of Pads, Pods & Phones.

Question 52

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 53

The shares of Home Mortgage Corporation are publicly traded in securities mar?kets. Home Mortgage Corporation is

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

Question 54

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 55

Custom Business Applications Corporation substantially complies with all conditions prece?dent to incorpo?ration. Custom Business is most likely

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

Question 56

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 57

The abbreviation "P.A." in the name "Conrad & Drake, Accountants, 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 58

Bay City Merchants Corporation has six shareholders, four of whom are members of the same family. All of Bay City'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 Bay City.
C) the imprisonment of Bay City's shareholders.
D) the piercing of Bay City's corporate veil.

Question 59

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is

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

Question 60

The articles of Equestrian Stables Inc. list an incorrect address for its incorporator. Under this circumstance, Equestrian Stables is most likely

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

Question 61

When a conflict arises among the documents that involve Express Flights Corporation, the first priority for resolving the conflict is given to

A) resolutions of the board of directors.
B) Express Flights's bylaws.
C) state statues.
D) the U.S. Constitution.

Question 62

Qiara is a holder of preferred stock in Rio Grande Irrigation & Development, Inc. Qiara has priority over holders of Rio common stock as to

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

Question 63

Memphis Music Makers Incorporated has a stated purpose to sell musical instruments. If chief executive officer Tabitha contracts with Frenzied Firearms in Memphis Music Makers's name to sell a shotgun, she has likely committed

A) an ultra vires act.
B) a de facto act.
C) a de jure act.
D) a legal act.

Question 64

Perfect Tone Phones, Inc. is a corporation. Perfect Tone's implied powers enable it to

A) amend the articles of incorporation.
B) bring a derivative suit.
C) declare dividends.
D) borrow funds, extend credit, and make charitable contributions.

Question 65

Luke is an owner of Lucky Luke's Corporation. Luke uses the corporate entity of Lucky Luke's to perpetuate fraud. In this case, a court is likely to expose Luke to personal liability by

A) piercing the corporate veil.
B) issuing a de facto judgment.
C) issuing a de jure judgment.
D) issuing a ultra vires judgment.

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 oth?er?wise avoid this double taxation? If so, how?

Question 67

O.K. Oil holds itself out to others as being a corporation but makes no attempt to incorporate. In this circumstance, O.K. is most likely

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

Question 68

Dennis is a promoter for the soon-to-be-incorporated firm of eBroadcast Sports, Inc. Dennis signs a contract with Fitz & Geraldo, Accountants, to render their services before eBroadcast Sports is incorporated and for one year after the in?corporation. eBroadcast Sports is incorporated. Three months later, after Fitz & Geraldo has continued performing under the contract, the eBroadcast Sports board of directors tells the accountants that it is canceling their con?tract. Fitz & Geraldo files a suit against Dennis and eBroadcast Sports, alleging breach of contract. Will Fitz & Geraldo prevail?

Question 69

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

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

Question 70

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they

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

Question 71

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 72

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.