Question 1

How are directors chosen after incorporation?

Accepted Answer

Typically, after incorporation shareholders use a majority vote to elect directors.

Question 2

If a corporation has fewer than ________________ shareholders, the Revised Model Business Corporation Act allows companies to eliminate the board of directors entirely.

Accepted Answer

If a corporation has fewer than 50 shareholders, Section 7.32 of RMBCA allows companies to eliminate the board of directors altogether.

Question 3

How are directors chosen during incorporation?

Accepted Answer

Because there are no shareholders in the beginning, either the incorporators appoint board members or the corporate articles name the board members.

Question 4

Which of the following types of securities represent ownership in a corporation?

Accepted Answer

Equity securities represent ownership in a corporation.

Question 5

If the incorporator or promoters make an error or omission during the incorporation process, courts may rule that the organization is not a corporation, in which case the organization is a[n] _______________ corporation.

Accepted Answer

If the incorporator or promoters make an error or omission during the incorporation process, courts may rule that the organization is not a corporation, in which case, the organization is a defective corporation.

Question 6

In order to prevent a defective corporation from escaping corporate responsibility a court may hold that that the entity is a[n] _______________.

Accepted Answer

Through corporation by estoppels, courts estop (prevent) the corporation from denying its corporate status.

Question 7

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Accepted Answer

Owners of preferred stock, or preferred shares, enjoy preferences with respect to assets and dividends.

Question 8

Owners of which of the following types of stock own a portion of a corporation but do not enjoy any preferences?

Accepted Answer

Owners of common stock, or common shares, own a portion of a corporation but do not enjoy any preferences.

Question 9

For which of the following may a director generally be removed?

Accepted Answer

Directors can be removed from their positions for cause-for failing to perform a required duty.

Question 10

According to the Revised Model Business Corporation Act, which of the following should articles of incorporation include?

Accepted Answer

According to RMBCA, a corporation's articles of incorporation must include (1) the name of the corporation, (2) the address of the registered office, (3) the name of the registered agent the names and addresses of the incorporators.

Question 11

Which of the following in the corporate formation process provides basic information about the corporation?

Accepted Answer

The articles of incorporation provide basic information about a corporation.

Question 12

Which of the following is a term for a requirement that a minimum number of directors be present at a meeting for decisions made at the meeting to be valid?

Accepted Answer

A minimum number of directors, or a quorum, must be present at each meeting of the board of directors for decisions made at the meeting to be valid.

Question 13

How is the number of corporate directors determined?

Accepted Answer

The corporate articles or bylaws specify the number of corporate directors; and in the past, the minimum number of directors required was three, but today many states allow fewer.

Question 14

Which of the following is an individual who applies to the state for incorporation on behalf of a corporation?

Accepted Answer

An incorporator is an individual who applies to the state for incorporation on behalf of a corporation.

Question 15

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

Accepted Answer

A de facto corporation has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated.

Question 16

When a corporation is incorporated, the secretary of state usually issues a[n] _______________, a document certifying that the corporation is incorporated in the state and is authorized to conduct business.

Accepted Answer

A certificate of incorporation is a document certifying that the corporation is incorporated in the state and is authorized to conduct business.

Question 17

Which of the following types of securities represent loans to a corporation?

Accepted Answer

Debt securities represent loans to a corporation.

Question 18

Although most states allow for longer terms, for how long do directors typically serve?

Accepted Answer

Directors typically serve for one year, but most state statutes allow for longer terms if the terms of the various directors are staggered.

Question 19

Which of the following is another name for debt securities?

Accepted Answer

Debt securities are also known as bonds.

Question 20

Corporate _______________ are rules and regulations that govern the corporation's internal management.

Accepted Answer

Bylaws are rules and regulations that govern a corporation's internal management.

Quiz 22: Corporations: Formation and Organization