Deck 36: Corporate Formation and Financing

Question 1

A(n)________ is a fictitious legal entity that is created according to statutory requirements.

A)corporation
B)cartel
C)outfit
D)conference

Answer 1

A

Question 2

Guarantees that establish a debtor-creditor relationship in which the corporation borrows money from the investor to whom a debt security is issued are known as ________.

A)authorized shares
B)preferred stocks
C)common stocks
D)fixed income securities

Answer 2

D

Question 3

A panel of persons who are elected by the shareholders that make policy decisions concerning the operation of a corporation is known as the ________.

A)legal aides
B)cartel
C)consortium
D)board of directors

Answer 3

D

Question 4

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

A)spectators
B)shareholders
C)electors
D)associates

Question 5

________ are powers beyond express powers that allow a corporation to accomplish its corporate purpose.

A)Cumulative powers
B)Corporation codes
C)Ultra vires acts
D)Implied powers

Question 6

A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

A)debenture
B)bond
C)note
D)treasury share

Question 7

Issued shares that have been repurchased by the corporation are referred to as ________.

A)outstanding shares
B)liquidated shares
C)unissued shares
D)treasury shares

Question 8

A contract between a corporation and a holder that contains the terms of a debt security is known as a(n)________.

A)bond
B)indenture
C)debenture
D)liquidation

Question 9

An act by a corporation that is beyond its express or implied powers is called a(n)________.

A)Subchapter Revision S Act
B)novation act
C)cooperate code act
D)ultra vires act

Question 10

Which of the following would generally be considered an express power of a corporation?

A)opening a bank account
B)issuing notes and bonds
C)purchasing advertisement
D)purchasing insurance

Question 11

Which of the following is true of treasury shares?

A)They cannot be issued by the corporation.
B)They cannot be voted by the corporation.
C)They are owned by shareholders.
D)They are only issued by governments.

Question 12

Authorized shares that have not been sold by the corporation are known as ________.

A)issued shares
B)unissued shares
C)outstanding shares
D)liquidated shares

Question 13

A long-term debt security that is secured by some form of collateral is referred to as a ________.

A)treasury share
B)bond
C)note
D)debenture

Question 14

A corporation in the state in which it was formed is referred to as a(n)________.

A)foreign corporation
B)domestic corporation
C)alien corporation
D)overseas corporation

Question 15

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n)________.

A)promoter
B)authorized shareholder
C)registered agent
D)incorporator

Question 16

Which of the following must be true for a corporation to elect statutory close corporation status?

A)The corporation must have 100 or more shareholders.
B)The corporation must have 50 or fewer shareholders.
C)The corporation must contain a board of directors.
D)The corporation must have a set of bylaws.

Question 17

A(n)________ is a debt security with a maturity of five years or less.

A)bond
B)debenture
C)indenture
D)note

Question 18

Which of the following elects members of the board of directors for a corporation?

A)the CEO
B)corporate officers
C)shareholders
D)employees

Question 19

________ is a general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

A)Limited-purpose clause
B)Limited liability of shareholders
C)Preferred shareholder rule
D)Nonparticipating shareholder rule

Question 20

Which of the following can end the existence of a corporation?

A)voluntary termination by shareholder
B)death of a shareholder
C)bankruptcy of a shareholder
D)voluntary termination by the corporation's creditors

Question 21

In debt securities,the corporation is the debtor and the holder is the creditor.

Question 22

Publicly held corporations are corporations run by the government.

Question 23

Only outstanding shares have the right to vote.

Question 24

The earnings of a not-for-profit corporation are distributed among its members.

Question 25

Shareholders are liable for the debt and obligations of a corporation.

Question 26

Involuntary dissolution of a corporation that is ordered by the secretary of state if a corporation has failed to comply with certain procedures required by law is known as ________.

A)judicial dissolution
B)administrative dissolution
C)cumulative dissolution
D)liquidation

Question 27

Shareholders cannot seek an injunction against an ultra vires act by a corporation.

Question 28

The board of directors makes policy decisions concerning the operation of a corporation.

Question 29

Shareholders of a closely held corporation play a minor role in its management.

Question 30

Which of the following has a fixed maturity date?

A)bonds
B)stocks
C)cumulative preferred stock
D)participating preferred stock

Question 31

A foreign corporation can conduct commerce in a state if it obtains a certificate of authority from the state.

Question 32

Judicial dissolution of a corporation can be instituted by the attorney general of the state of incorporation if the corporation ________.

A)procured its articles of incorporation through fraud
B)did not pay its franchise fee
C)failed to file an annual report
D)failed for 60 days to maintain a registered agent in the state

Question 33

Authorized shares that have been sold by the corporation are called issued shares.

Question 34

Treasury shares cannot be issued by the corporation.

Question 35

Corporation codes regulate the formation,operation,and dissolution of corporations.

Question 36

Dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directors and a majority vote of the shares entitled to vote is known as ________.

A)liquidation
B)judicial dissolution
C)administrative dissolution
D)voluntary dissolution

Question 37

Corporations are not allowed to enter into contracts in their own name.

Question 38

Shares that are repurchased by a corporation are called unissued shares.

Question 39

A corporation is a foreign corporation in states other than the one in which it is incorporated.

Question 40

A corporation reimbursing its employees for expenses would fall under its implied powers.

Question 41

Which of the following is a definition of a foreign corporation?

A)A corporation with incorporations in multiple states.
B)A corporation in the state in which it is incorporated.
C)A corporation in states other than the one in which it is incorporated.
D)A corporation in the United States which has been incorporated in another country.

Question 42

________ are corporations that have many shareholders and whose securities are often traded on national stock exchanges.

A)Closely held corporations
B)Non-profit corporations
C)Publicly held corporations
D)Shore-up corporations

Question 43

What is an indenture agreement?

Question 44

A(n)________ is a person who organizes and starts a corporation,negotiates and enters into contracts in advance of its formation,finds the initial investors to finance the corporation,and so forth.

A)incorporator
B)promoter
C)articles drafter
D)negotiator

Question 45

The debt security of notes does not have a maturity period.

Question 46

What are the express powers of a corporation?

Question 47

Which of the following must be included in the articles of incorporation?

A)The minutes of the first organizational meeting of the board of directors.
B)The number of shares the corporation is authorized to issue.
C)The dissolution terms of the incorporation.
D)The corporate seal must be used in the articles of incorporation.

Question 48

The person responsible for incorporation of a corporation is known as a(n)________.

A)promoter
B)shareholder
C)incorporator
D)director

Question 49

A corporation in the United States that has been incorporated in another country is referred to as a(n)________ corporation.

A)foreign
B)domestic
C)onshore
D)alien

Question 50

A corporation is a(n)________ corporation in the state in which it is incorporated.

A)offshore
B)domestic
C)alien
D)foreign

Question 51

The ________ is the basic governing document of a corporation which must be filed with the secretary of state of the state of incorporation.

A)debt security
B)redeemable stock
C)certificate of authority
D)articles of incorporation

Question 52

Which of the following is true for a corporation's incorporation in a state?

A)A corporation can incorporate in only one state.
B)A corporation can incorporate in all states where it conducts business.
C)Alien corporations can only incorporate in one state.
D)Foreign corporations can incorporate in more than one state.

Question 53

Which of the following acts is seen as conclusive proof for the existence of a corporation?

A)creation of the promoter's contracts
B)filing the articles of incorporation
C)acquiring a domain name for the corporation
D)selecting a state for incorporation

Question 54

Compare and contrast publicly held and closely held corporations.

Question 55

Which of the following is true of an amendment of the articles of incorporation that does not affect the rights attached to shares?

A)The shareholders need to propose a resolution of recommending such an amendment.
B)The shareholders need to provide vote of approval for the amendment.
C)The board of directors can approve the amendment without shareholder approval.
D)The amendment need not be filed with the secretary of state of the state of incorporation.

Question 56

A corporation that is incorporated in another country is known as a(n)________.

A)alien corporation
B)public corporation
C)domestic corporation
D)municipal corporation

Question 57

Which of the following is true for a corporation's liability on the promoters' contracts if the corporation is never formed?

A)The corporation assumes liability of the promoters' contract automatically upon its creation.
B)The promoter's liabilities are transferred to the board of directors of the corporation upon its formation.
C)The promoter, the corporation, and the third-party enter into a novation whereby liability is solely transferred to the corporation.
D)The promoters have joint personal liability on the contract unless the third party specifically exempts them from such liability.

Question 58

A corporation is dissolved upon the effective date of the articles of dissolution.

Question 59

A(n)________ is a clause that can be included in the articles of incorporation that permits the corporation to engage in any activity permitted by law.

A)general purpose clause
B)limited purpose clause
C)dissolution clause
D)ultra vires clause

Question 60

Secured bondholders can foreclose on collateral in the event of nonpayment of interest.

Question 61

A corporate name cannot contain the word University if it is not authorized to conduct the business of granting undergraduate and graduate degrees.

Question 62

Which of the following is true of a C Corporation?

A)It cannot have more than 50 shareholders.
B)Shareholders of such a corporation don't pay tax on their dividends.
C)It must have more than 100 shareholders.
D)Nonresident aliens cannot be shareholders.

Question 63

Explain how articles of incorporations may be amended.

Question 64

A corporation can be incorporated in several states.

Question 65

The articles of incorporation must contain the name and address of every incorporator.

Question 66

The Revised Model Business Corporation ACT (RMBCA)provides that corporate existence begins when the articles of incorporation are filed.

Question 67

Incorporators cannot become shareholders of the corporation they are associated with.

Question 68

The registered office in the articles of incorporation must be the same as the corporation's place of business.

Question 69

________ is a type of equity security that represents the value of a corporation.

A)Common stock
B)Preferred stock
C)Cumulative preferred stock
D)Participating preferred stock

Question 70

A C corporation pays taxes at the corporate level and the shareholder's level.

Question 71

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing a corporation are referred to as ________.

A)ultra vires rules
B)articles of incorporation
C)bylaws
D)corporation codes

Question 72

A(n)________ is a clause that can be included in the articles of incorporation that stipulates the activities that the corporation can engage in.The corporation can engage in no other purposes or activities.

A)ultra vires clause
B)dissolution clause
C)general purpose clause
D)limited purpose clause

Question 73

Which of the following is true of corporate bylaws?

A)They only contain rules on how the corporation can deal with the government.
B)They are only adopted by the shareholders of the corporation.
C)They are not binding on the directors, or shareholders of the corporation.
D)They do not have to be filed with any government official.

Question 74

According to the RMBCA,only corporations with 50 or fewer shareholders may elect statutory close corporation status.

Question 75

________ is a preferred stockholder right to be paid a stated dollar amount if a corporation is dissolved and its assets redistributed.

A)Noncumulative preference
B)Cumulative dividend preference
C)Dividend preference
D)Liquidation preference

Question 76

Bylaws of a corporation must be filed with a government official.

Question 77

Any corporation with more than 100 shareholders is automatically considered a C corporation for federal income tax purposes.

Question 78

The shareholders of the corporation have the absolute right to amend bylaws.

Question 79

Amendments to the articles of incorporation must be filed with the secretary of state of the state of incorporation.

Question 80

Stocks for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends are known as ________.

A)cumulative preferred stocks
B)noncumulative preferred stocks
C)common stocks
D)participating preferred stocks