Question 1

Big Corporation (BC) was dominated by its president, Mr. Vincent. He used his dominance for an improper purpose-defrauding lenders to the corporation. As a result, a court can:

Accepted Answer

As the president of Big Corporation, Mr. Vincent was acting as an agent of the corporation. Therefore, he cannot be criminally liable for the fraud committed by him, but he can be held personally liable for the debts to those lenders. The court cannot terminate the corporate charter of BC or compel him to resign for committing fraud.

Question 2

Nearly all corporations whose veils are pierced are:

Accepted Answer

Nearly all corporations whose veils are pierced are close corporations,since domination is more easily accomplished in a close corporation than in a publicly held one.

Question 3

Ala Foreign Corporation is incorporated in the state of Alabama. However, it is running 90 percent of its operations from the state of Indiana. Such a type of corporation is called a(n):

Accepted Answer

A foreign corporation may conduct most of its business in a state other than the one in which it is incorporated.Such a corporation is called a pseudo-foreign corporation in the state in which it conducts most of its business.

Question 4

QT Inc., is incorporated in Alabama, has offices in Nebraska, has a manufacturing plant in Delaware, and conducts most of its sales from Virginia. Regulation of its internal affairs will be exercised only by:

Accepted Answer

Regulation of the internal affairs of a corporation-that is,the relation between the corporation and its directors,officers,and shareholders-is usually exercised only by the state of incorporation.Since QT,Inc.is incorporated in Alabama,regulation of its internal affairs will be exercised only by Alabama.

Question 5

To prove domination, it is _____ to show that there is only one shareholder.

Accepted Answer

To prove domination,it is not sufficient,or even necessary,to show that there is only one shareholder.

Question 6

Jim created a shoe-manufacturing corporation by contributing $1,000. He stayed as the sole shareholder and director of the corporation. To inject further capital into the corporation, he loaned the corporation $100,000 and secured the loan in exchange for all the corporation's assets. Five years into operations, the corporation has still failed to make profits and consequently files for bankruptcy. Who has been defrauded?

Accepted Answer

Nonshareholder creditors have been defrauded because Jim secured the loan with all of the corporation's assets, meaning that in the event of bankruptcy, the creditors will only be able to recover their funds after Jim has been paid back for his loan. This puts the creditors at a disadvantage and they may not be able to recover the full amount owed to them.

Question 7

Katie Kuric is the only shareholder, director, and officer of two corporations, Multimedia Corporation and Kuric Network Television Corporation (KNT). Multimedia produces television shows and movies. KNT broadcasts television programming over the air and on cable. KNT purchases much of its TV programs and movies from Multimedia. KNT often pays Multimedia for the TV shows and movies more than a year after payment is due, without being required to pay interest or a late payment penalty. What risk is Katie taking by allowing KNT to pay Multimedia late?

Accepted Answer

By allowing KNT to repeatedly pay Multimedia late without interest or penalty, Katie is essentially providing KNT with an interest-free loan. This could be seen as defrauding Multimedia's creditors, who may have expected timely and interest-bearing payments. As the only shareholder, director, and officer of both corporations, Katie is at risk of having the corporate veil of KNT pierced if Multimedia's creditors sue to collect what they are owed.

Question 8

A pastor of a church (a nonprofit corporation) believes that his salary is too small to cover his meager expenses. When repeated requests to management and superiors do not lead to a salary increase, he starts supplementing his salary with church donations. What risk is he running?

Accepted Answer

The pastor is running the risk of piercing the veil between himself and the church because he is essentially defrauding church members by using their donations for personal gain. This could lead to legal repercussions and potentially harm the reputation and financial stability of the church.

Question 9

Anderson incorporated his new company, Pearl Inc., in the business of manufacturing rubber. After some years, he opened his own subsidiary rubber manufacturing company. The new subsidiary company is a success. Meanwhile, the workers of Pearl Inc., claimed that payment of bonus is due and they are demanding the same from the subsidiary company. In this case, are both Pearl Inc., and its subsidiary liable?

Accepted Answer

A subsidiary is a separate legal entity and is not liable for the debts of its parent company. Therefore, the subsidiary is not liable for the bonus payment due to the workers of Pearl Inc.

Question 10

Harold and Dorothy own all of the shares of Ace Corporation. Robert, Ace's landlord, sued Ace for unpaid rent. Robert received a $10,000 judgment against Ace. When Robert tried to collect on the judgment, he discovered that Ace Corporation had no assets. He then discovered that Harold and Dorothy no longer operate Ace Corporation. They now operate Optimus Corporation as the only shareholders. Harold and Dorothy had no assets in their names. However, upon further investigation, Robert discovered that Optimus had numerous assets. He reviewed the financial documentation, discovering that Optimus pays for Harold and Dorothy's mortgage, medical bills, and grocery bills. Can a court pierce the corporate veil? Discuss.

Accepted Answer

The answer of Harold and Dorothy own all of the...

Question 11

Which of the following documents is required for a foreign corporation to do intrastate business in a state?

Accepted Answer

A foreign corporation must obtain a certificate of authority from the state in order to do intrastate business. This certificate grants the corporation permission to conduct business within the state and to avail itself of the state's legal system. The other options listed are not necessary for a foreign corporation to do intrastate business.

Question 12

Which of the following activities is classified as doing business for the purpose of intrastate business qualification?

Accepted Answer

Maintaining an office to conduct intrastate business,selling personal property not in interstate commerce,entering into contracts relating to local business or sales,or owning or using real estate for general corporate purposes does constitute doing intrastate business.

Question 13

In which of the following situations will a business incorporated in Ohio be required to qualify to do business in Kentucky?

Accepted Answer

If a business incorporated in Ohio maintains a stock of goods in Kentucky from which it sells to customers in Kentucky,then it will be required to qualify to do business in Kentucky.

Question 14

Fantase Corporation has a union contract. To avoid the contract, the shareholders plan to form a new corporation. They also elect to transfer their business interest to the new corporation. Is the new corporation liable to the employees for union contract?

Accepted Answer

The answer of Fantase Corporation has a union contract. To...

Question 15

Since the level of doing business that constitutes intrastate business for qualification purposes has been difficult to define, the Model Business Corporation Act lists several activities that do not require qualification. One such activity is:

Accepted Answer

According to the Model Business Corporation Act, a corporation does not need to qualify to do business in a state if it is only soliciting orders by mail (or other non-physical means) that require acceptance outside the state. Therefore, option B is the correct choice. Options A, C, and D are activities that are not specifically exempted by the Act and may require qualification depending on the specific circumstances.

Question 16

Forming a business with a high debt-to-equity ratio is an example of:

Accepted Answer

Forming a business with a high debt-to-equity ratio is an example of thin capitalization, which means that the company has relatively little equity compared to its debt. This can be financially risky, as a downturn in business could leave the company unable to pay its debts. It can also be seen as a way to avoid taxes or transfer profits out of a country.

Question 17

Rement Corporation is incorporated under the laws of New Jersey. Rement maintains a sales agent in New York City, who makes contracts in New York City. Can New York impose an income tax on Rement's profits from its New York sales at the same rate it taxes income from domestic New York corporations?

Accepted Answer

The answer of Rement Corporation is incorporated under the laws...

Question 18

Wheelies is an auto parts retailer. It operates a retail megastore in a city where the city ordinance prohibits retailers from being open on consecutive Sundays. The management of Wheelies realizes that their maximum sales happen on Sundays. They create a wholly-owned subsidiary, CarBasics, and start leasing the megastore building and its inventory to CarBasics every alternate Sunday. Who is liable for violating the city ordinance?

Accepted Answer

Both Wheelies and CarBasics are liable for violating the city ordinance as it is clear that the intention behind creating a wholly-owned subsidiary and leasing the store was to circumvent the law and continue sales on consecutive Sundays.

Question 19

The National Collegiate Athletic Association Inc., (NCAA) is incorporated in Indiana. The NCAA accredits college athletic programs and sanctions and regulates athletic competitions among its member colleges. The NCAA selects New Orleans, Louisiana as the site of its men's college basketball 1999 Final Four, with Tulane University as the host school. To assist Tulane's hosting of the Final Four, NCAA officials make several trips to New Orleans in the course of one year. For nine days immediately and during the Final Four, NCAA officials are in New Orleans. Altogether, NCAA officials spend 23 days in New Orleans. Is the NCAA required to qualify to do business in Louisiana?

Accepted Answer

The answer of The National Collegiate Athletic Association Inc., (NCAA)...

Question 20

Tennessee-Alabama Fireworks Company (TAF) is incorporated in Tennessee. It maintains year-round retail stores in Tennessee and Alabama. It also sells fireworks to individual consumers at a gas station parking lot in Indiana for a period of 20 days before the Fourth of July. Must TAF qualify to do business in Indiana?

Accepted Answer

The answer of Tennessee-Alabama Fireworks Company (TAF) is incorporated in...

Quiz 41: History and Nature of Corporations