Deck 43: Corporation: General Characteristics and Formation

Question 1

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

Answer 1

True

Question 2

The English Parliament enacted the Bubble Act in 1720 to curb the formation of chartered joint stock companies.

Answer 2

False

Question 3

Choosing the particular state in which to incorporate is one of the first critical decisions to be made after deciding to incorporate.

Answer 3

True

Question 4

The "corporate veil" means that there is a separate, legally recognized corporate entity that shields the people behind the corporation from personal liability.

Question 5

Hudson's Bay Company, founded in 1670, still operates today.

Question 6

The Citizens United case struck down some federal statutory limits on corporate electioneering communications.

Question 7

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

Question 8

Courts will occasionally determine in a the course of a lawsuit against a corporation that the usual limited liability protections for shareholders will be set aside, imposing liability on individual shareholders or entities that exist behind the corporation. This is called _____.

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

Question 9

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 at least seven shareholders.
E) operates under the statues of S corporations.

Question 10

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

Question 11

Public corporations are also known as _____ corporations.

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

Question 12

A public or municipal corporation is a governmental entity.

Question 13

For purposes of the Privileges and Immunities Clause of the Constitution, corporations are considered citizens.

Question 14

A publicly held corporation is a government entity.

Question 15

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 16

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

Question 17

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

Question 18

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 19

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) The corporation is inadequately financed.
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 20

According to the Fifth and Fourteenth Amendments, all corporations doing business in the United States also have the privilege against self-incrimination guaranteed for natural persons.

Question 21

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 22

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) respondeant corporation
E) fee simple corporation

Question 23

Eva enters into an agreement with Ron to purchase $5,000 worth of shares in Happy Supermarket Inc. before the incorporation of the Happy 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) pre-incorporation stock subscription
C) statement in lieu of prospectus
D) article of incorporation
E) certificate of incorporation

Question 24

Differentiate publicly held corporations from closely held corporations.

Question 25

_____ 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 26

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 27

Delta Inc., a large private corporation that deals in the manufacturing of car engines, is listed in the national stock exchange and has about 1,900 shareholders. The shareholders are allowed to freely transfer their interest in shares with the help of the stock exchanges and are eligible for certain dividends based on the number of shares they hold. It would be correct to say that Delta Inc. is a _____ corporation.

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

Question 28

BCT Bookstore, Inc. is a going concern, a closely held corporation; but somehow the three shareholders' attorney forgot to file the articles of incorporation. Carol has contributed the deed to her real estate to BCT Bookstore, Inc., and the deed is duly filed in the country registry. A few months later, before the articles are finally filed, she has an argument with Bob and Ted, and decides she wants her land back. Will she prevail in a lawsuit against Bob, Ted, and BCT Bookstore, Inc?

A) No, because it is probably an S corporation.
B) Yes, because it is a defacto corporation
C) No, because she has pierced the corporate veil.
D) Yes, because she is one of the incorporators of BCT Bookstore, Inc.
E) No, because she is estopped from denying the existence of the corporation.

Question 29

State atleast four differences between partnerships and corporations.

Question 30

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