Deck 21: Corporation: General Characteristics and Formation

Question 1

A charter is a contract between the state and the corporation.

Answer 1

True

Question 2

The corporate veil creates a separate,legally recognized corporate entity and shields the people behind the corporation from personal liability.

Answer 2

True

Question 3

In a publicly held corporation,which has many shareholders,the separation of ownership and control is less pronounced.

Answer 3

False

Question 4

Choosing the particular venue in which to incorporate is the first critical decision to be made after deciding to incorporate.

Question 5

Two main advantages of trading or joint stock companies are continuing fund of capital and limited liability.

Question 6

What is the significance of the Bubble Act?

A)It was enacted to do away with hot cargo agreements.
B)It was enacted to do away with runaway shop agreements.
C)It was enacted to do away with closed shop agreements.
D)It was enacted to do away with unchartered joint-stock companies.
E)It was enacted to do away with employee discrimination at workplace.

Question 7

In the seventeenth century,kings extracted higher taxes and intervened more directly in the affairs of businesses by refusing to permit them to operate in corporate form except by royal grant.This came to be known as the _____.

A)concession theory
B)equity theory
C)hierarchy of needs theory
D)libertarian theory
E)civil law theory

Question 8

Corporations are citizens under the Privileges and Immunities Clause of the Constitution.

Question 9

A publicly held corporation is a government entity.

Question 10

A public or municipal corporation is a nongovernmental entity.

Question 11

A corporate veil could be pierced in which of the following circumstances?

A)When the corporate acts like a closely held corporation.
B)When the corporation fails to have more than 100 shareholders.
C)When the corporation does not act as if it were one.
D)When the publicly held corporation provides free transferability of shares.
E)When a corporation does not have a single uniform class of stock.

Question 12

A closely held corporation is generally small because various economic and legal reasons prevent them from being large.

Question 13

Prior to the 1800s,incorporation was granted in United States only by special acts of state legislatures.

Question 14

As per the Fifth and Fourteenth Amendments,the corporations in United States also have the privilege against self-incrimination guaranteed for natural persons.

Question 15

Even if the incorporators omit important steps,it is still possible for a court,under estoppel principles,to treat the business as a corporation.

Question 16

Failure to follow corporate formalities may subject stockholders to personal liability.

Question 17

A de facto corporation meets all the necessary legal requirements.

Question 18

Setting the protection of the corporation aside for litigation purposes,and imposing liability on individual shareholders or entities that exist behind the corporation is called _____.

A)ultra vires
B)piercing the corporate veil
C)strict foreclosure
D)renunciation of a corporation
E)takingover

Question 19

The English Parliament enacted the Bubble Act in 1720 to curb the formation of closed shop agreements.

Question 20

Which of the following is true of partnerships and corporations?

A)Partnerships are easier to form when compared to corporations.
B)All the shareholders in a publicly held corporation have equal rights in management and conduct of business.
C)Partners can easily transfer their interest in partnerships through stocks when compared to corporations.
D)Ownership and control of partnerships are separated.
E)A corporation is a conduit for income and is not taxed as a separate entity.

Question 21

A corporation that exists in law,having met all of the necessary legal requirements is called a _____.

A)de facto corporation
B)de jure corporation
C)S corporation
D)delectus respondeant corporation
E)fee simple defeasible corporation

Question 22

Which of the following is true of a publicly held corporation?

A)It is a governmental organization.
B)It is a corporation not organized for profit.
C)It is often called a municipal corporation.
D)The stock in a publicly held corporation is widely held.
E)The shareholders in a publicly held corporation are fewer in number.

Question 23

The ultimate goal of the incorporation process is issuance of a _____,a basic document of incorporation filed in the appropriate public office.

A)memorandom of association
B)doctrine of ultra vires
C)corporate charter
D)corporate veil
E)deed of trust

Question 24

A corporation that exists in fact,though it has not met all of the necessary legal requirements is called a _____.

A)de facto corporation
B)de jure corporation
C)S corporation
D)delectus respondeant corporation
E)fee simple defeasible corporation

Question 25

A municipal corporation:

A)is not organized for profit.
B)has more than 100 shareholders.
C)is also known as a publicly held corporation.
D)has atleast a minimum of seven shareholders.
E)operates under the statues of S corporations.

Question 26

_____ are individuals who take the steps necessary to form the corporation,and they often will receive stock in exchange for their efforts.

A)Scienters
B)Promoters
C)Stockholders
D)Bondholders
E)Zero coupon bondholders

Question 27

Differentiate publicly held corporations from closely held corporations.

Question 28

Which of the following is true of a closely held corporation?

A)It is a governmental organization.
B)It is a corporation not organized for profit.
C)It is often called a municipal corporation.
D)The stock in a closely held corporation is widely held.
E)The shareholders in a closely held corporation are fewer in number.

Question 29

Eva enters into an agreement with Ron to purchase $5,000 worth of shares in Happy Supermarket Inc.before the incorporation of the Supermarket.The offer is deemed accepted at the moment the supermarket is incorporated.This offer or agreement is also known as _____.

A)the doctrine of ultra vires
B)preincorporation stock subscription
C)statement in lieu of prospectus
D)article of incorporation
E)certificate of incorporation

Question 30

Public corporations are also known as _____ corporations.

A)closely held
B)S
C)nonprofit
D)professional
E)municipal

Question 31

State atleast four differences between partnerships and corporations.

Question 32

Delta Inc.,a large private corporation that deals in the manufacturing of car engines,is listed in the national stock exchange and has about 1,000 shareholders.The shareholders are allowed to freely transfer their interest in shares with the help of the stock exchanges and are eligible certain dividends based on the number of shares they hold.It can be said that Delta Inc.is a _____ corporation.

A)closely held
B)closed shop
C)nonprofit
D)publicly held
E)professional