Question 1

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

Accepted Answer

A holding company is a company whose primary purpose is to own and control other companies, by acquiring and holding shares in those companies.

Question 2

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

Accepted Answer

A corporation can bring a lawsuit in its own name to seek damages for harm caused by a third party. It is not necessary for only the shareholders to bring such a suit. However, shareholders may have the right to bring a derivative lawsuit on behalf of the corporation if the board of directors fails to act.

Question 3

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

Accepted Answer

This is a requirement of a director's fiduciary duty to act in the best interest of the corporation and avoid any actions that may benefit them personally. Failure to disclose a conflict of interest can lead to legal and financial consequences.

Question 4

Many qualifications are required for directors.

Accepted Answer

The answer of Many qualifications are required for directors....

Question 5

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

Accepted Answer

According to corporate governance principles, directors have the right to participate in all board of directors' meetings.

Question 6

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

Accepted Answer

A corporation can be held liable for the criminal acts of its employees if it can be proven that those acts were committed within the scope of their employment or with the knowledge and approval of the corporation's management. This is known as vicarious liability.

Question 7

Shareholders' meetings need not occur at any certain interval.

Accepted Answer

Shareholders' meetings are required to be held at least once a year as per the laws and regulations of most jurisdictions.

Question 8

Officers hire the directors and other executive employees.

Accepted Answer

Officers do not hire directors and other executive employees as they are usually appointed by the board of directors.

Question 9

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

Accepted Answer

The articles of incorporation outline the basic information about the corporation and serve as a legal document that establishes the corporation's existence and authority. They also dictate the corporation's purpose, structure, and governing rules.

Question 10

Corporate profits can be subject to double taxation.

Accepted Answer

Corporate profits are subject to taxation at the corporate level and then again at the individual level when they are distributed as dividends to shareholders. This results in double taxation.

Question 11

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

Accepted Answer

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is legal. It is known as a shareholder agreement and can include provisions such as right of first refusal and buy-sell agreements to protect the interests of the shareholders and the corporation.

Question 12

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

Accepted Answer

The answer of A corporation is a legal entity created...

Question 13

Directors are not obligated to refrain from self-dealing.

Accepted Answer

Directors have a fiduciary duty to act in the best interests of the company and its shareholders. Self-dealing, where a director puts their own interests ahead of the company's, is a breach of this duty and is generally prohibited. Directors are legally required to disclose any potential conflicts of interest and are often required to recuse themselves from decisions where such conflicts may arise.

Question 14

Shareholders are personally liable for the debts of a corporation.

Accepted Answer

Shareholders have limited liability, meaning they are not personally liable for the debts of a corporation beyond their investment in the company. This is one of the main advantages of operating a business as a corporation.

Question 15

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

Accepted Answer

When the corporate veil is pierced, the shareholders' personal assets can be at risk as their legal protection as owners of a corporation is disregarded, leading to personal liability for the corporation's debts and obligations.

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.

Accepted Answer

This is true. Any corporation formed in a foreign country but engaged in business in the United States is considered an alien corporation.

Question 17

Each incorporator must have an interest in the corporation.

Accepted Answer

The answer of Each incorporator must have an interest in...

Question 18

Every shareholder is entitled to examine specified corporate records.

Accepted Answer

According to most corporate laws, shareholders have the right to examine certain corporate records such as financial statements, minutes of board meetings, and shareholder lists. However, there may be certain restrictions or limitations on this right depending on the jurisdiction and the specific company's bylaws.

Question 19

Shareholders are the ultimate authority in every corporation.

Accepted Answer

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Question 20

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

Accepted Answer

Professional corporations are typically created by professionals such as doctors, lawyers, and accountants to limit personal liability for the actions of other professionals in the business. However, in some cases, courts may treat professional corporations similarly to partnerships for liability purposes. This means that individual professionals may still be held liable for the actions of their colleagues within the corporation.

Quiz 19: Corporations