Question 1

The incorporators would typically do which of the following?

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Question 2

What powers does a corporation normally possess?

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Question 3

The Revised Act authorizes shareholders in closely held corporations to adopt shareholder agreements that depart from statutory norms by altering the governance of the corporation. These agreements:

Accepted Answer

Shareholder agreements in closely held corporations terminate automatically if the corporation's shares become publicly traded, as public trading requires adherence to standard corporate governance norms.

Question 4

Corporate powers granted by the RMBCA include all but which of the following?

Accepted Answer

The RMBCA (Revised Model Business Corporation Act) grants corporations a wide range of powers, but being considered a person under the Fourth Amendment's search and seizures clause and the Fifth Amendment's self-incrimination clause is a constitutional interpretation and not a power granted by corporate legislation like the RMBCA.

Question 5

What is a Subchapter S Corporation, and what are its requirements?

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Question 6

Identify and give the basic characteristics of each of the following specialized types of corporations. 
a. Professional corporations 
b. Public corporations 
c. Nonprofit corporations

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Question 7

Which of the following would not usually be found in the articles of incorporation of a corporation?

Accepted Answer

The number of directors necessary for a quorum is typically found in the bylaws of a corporation, not in the articles of incorporation. The articles of incorporation generally include the name of the corporation, the names and addresses of the incorporators, and the number of authorized shares.

Question 8

What are the principal attributes of a corporation?

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Question 9

Identify each of the following corporations by type. 
a. Dr. Smith and Dr. Jones are both medical doctors who practice together. They incorporate their medical practice so that they can offer themselves and their employees better employment benefits. 
b. A group of concerned citizens obtains a corporate charter from the state to form a local Water Planning and Management Corporation that is authorized to do water planning on a local level and to grant permits for such purposes as the installation of ditches, and the encouragement of good water usage practices in their jurisdictional area. 
c. Agatha and Betty, who are sisters, form a corporation in which they are the sole shareholders. They plan to operate a large retail store that sells collectibles. Agatha is the president and Betty is the chairperson of the board of directors. 
d. Bill and Carl form a corporation to prevent spouse and child abuse. The corporation operates a shelter for battered women and homeless children. 
e. Zeron Corporation is incorporated in the state of West Virginia. It decides to expand its business to Kentucky. What type of corporation is it in West Virginia? What type of corporation is it in Kentucky?

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Question 10

Discuss what is required in most states to form a corporation.

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Question 11

What are the consequences of a defective incorporation?

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Question 12

Opal, a promoter of Victory Corporation, has a fiduciary duty to:

Accepted Answer

Promoters have fiduciary duties to both other promoters and the initial shareholders of the corporation they are promoting, as they must act in the best interests of the corporation and its future shareholders.

Question 13

Name the classifications of corporations.

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Question 14

Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the business from Jack, who believed that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a perm and the solution caused her customer severe burns. The customer sued the Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the Revised Model Act, what would be the result?

Accepted Answer

Under the Revised Model Business Corporation Act, individuals acting on behalf of a corporation that has not yet been formed can be held personally liable for their actions. Since Claire was the one directly involved in the negligent act, she would be personally liable. Jack, who merely provided funds under the belief that the business was incorporated, would not be held personally liable for Claire's actions.

Question 15

Whether a corporation is a de facto corporation may be challenged by:

Accepted Answer

A de facto corporation can only be challenged by the state, not by private parties or other corporations.

Question 16

What is the doctrine of ultra vires ? What is the effect of an ultra vires contract?

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Question 17

Which of the following is correct regarding the characteristics of a corporation?

Accepted Answer

Corporations are considered legal persons under the Fourteenth Amendment, allowing them equal protection under the law. They are also protected by the Fourth Amendment against unreasonable searches and seizures, similar to individuals. However, the Fifth Amendment's protection against self-incrimination does not apply to corporations.

Question 18

Which of the following is correct regarding a foreign corporation?

Accepted Answer

A foreign corporation is one that is incorporated in one state but doing business in another state. If it transacts business without qualifying, it cannot use the state court to maintain a lawsuit until it obtains a certificate of authority.

Question 19

Bill Bonney, the sole stockholder of Kidd Corporation, wrongfully used the corporation to avoid a personal liability. A court order that disregards the corporate entity and holds Bonney personally liable is called:

Accepted Answer

Piercing the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. In this case, because Bill Bonney wrongfully used the corporation to avoid personal liability, the court may decide to pierce the corporate veil to hold him personally liable.

Question 20

Define "promoter" in reference to a corporation.

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Quiz 33: Nature and Formation of Corporations