Question 1

Jen and Kay would like to form Lunch Garden, Inc., to enter the food vending business. Most likely, the articles of incorporation for the firm will not include​

Accepted Answer

The articles of incorporation typically include the corporate name, the name and address of a registered agent, and the number of shares authorized to be issued. However, the minutes of the first organizational meeting are not typically included in the articles of incorporation.

Question 2

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to​

Accepted Answer

Self-dealing refers to situations where a director uses their position to benefit themselves rather than the company. This is not a right that directors have and is in fact prohibited. The other options, reimbursement, inspection, and participation, are all rights that directors have in varying degrees depending on the company's bylaws and state laws.

Question 3

EZ Hauling holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, EZ Hauling is most likely​

Accepted Answer

EZ Hauling would be considered a corporation by estoppel because it has represented itself as a corporation to others, even though it has not gone through the formal process of incorporation. This legal principle prevents the business from denying its corporate status to third parties who have dealt with it under the assumption it was a corporation.

Question 4

Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to​

Accepted Answer

Implied powers of a corporation refer to the powers that are not expressly mentioned in the articles of incorporation but are reasonably necessary to carry out the corporation's purpose. Borrowing and lending funds are implied powers of a corporation, which enable it to achieve its objectives effectively. Option A is incorrect as corporations have some implied powers. Option B is incorrect because implied powers do not allow corporations to disregard corporate formalities entirely. Option C is incorrect because implied powers may enable a corporation to bind itself to actions only if they are necessary to accomplish the corporation's purpose.

Question 5

Vince buys 500 shares of common stock in Water Services, Inc. As a shareholder of record, Vince owns a proportionate interest with regard to Water's​

Accepted Answer

As a shareholder of record, Vince owns a proportionate interest in Water Services, Inc.'s net assets, control, and earnings. This is a fundamental principle of shareholder ownership in a corporation.

Question 6

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is​

Accepted Answer

As a corporate officer, Ann is an employee of the firm who holds a management position with decision-making authority. She does not necessarily head the board of directors, employ the firm, or have a role in approving shareholders.

Question 7

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve​

Accepted Answer

Shareholders typically have the authority to approve or reject significant corporate actions such as mergers or acquisitions. The other options listed may not require shareholder approval.

Question 8

Security Insurance, Inc. has a board of five directors. Security's bylaws do not state any quorum requirements. In most states, a quorum for Security's board meetings would be​

Accepted Answer

In most states, a quorum for a board of five members is the majority, which would be three directors.

Question 9

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and​

Accepted Answer

The standard of due care requires directors to make informed and reasonable decisions, but not necessarily perfect, unquestionable, or indefensible decisions.

Question 10

Gina is a director on the board of Home Furnishings Inc. As a director, she may not​

Accepted Answer

As a director, Gina has a legal and ethical responsibility to act in the best interests of the company and its stakeholders. This means that she cannot subordinate the firm's welfare to her personal interests, such as using insider information for personal gain or accepting bribes from vendors. However, she has the authority to participate in major corporate policy decisions, decide to issue stock and bonds, and declare dividends, as well as select and remove corporate officers, as part of her governance role.

Question 11

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they​

Accepted Answer

As holders of common stock, Blair and Chanel are the last to receive returns for their investment, which means they have a residual position in the overall financial structure of Discount Retail. This means that they receive any remaining profits after all other stakeholders have been paid, but they are also the first to bear any losses or risks associated with the company's performance. They are not guaranteed to receive more than the amount of their investment, nor do they have priority to the firm's assets if it becomes insolvent. The state of the firm's incorporation is irrelevant to their position as common stockholders.

Question 12

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, Wings2Go is most likely​

Accepted Answer

A de facto corporation is a corporation that has not met all legal requirements for incorporation but is recognized as a corporation due to its good faith effort to comply with the law. In this case, Wings2Go failed to hold an organizational meeting, but it still attempted to comply with the law by filing articles of incorporation and attempting to operate as a corporation. Therefore, it is most likely a de facto corporation.

Question 13

Charlie, Dora, and Ethel are the first directors on the board of Face Time Corporation, a social media host. Subsequent directors are elected by a majority vote of Face Time's​

Accepted Answer

Directors are elected by shareholders in most corporations. Thus, option D - shareholders - is the most appropriate choice.

Question 14

Harry and Ilene want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. To avoid income taxes at the corporate level, they should form​

Accepted Answer

Forming an S corporation would allow Harry and Ilene to avoid income taxes at the corporate level, as S corporations are not subject to federal income tax. Instead, the income, deductions, and credits of the corporation are passed through to the shareholders, who report them on their individual tax returns. A close corporation may provide some benefits, such as flexible management and limited liability, but it does not offer the same tax advantages as an S corporation. An alien corporation refers to a foreign corporation doing business in the United States, while a private corporation is not a recognized legal entity in the United States.

Question 15

The board of Management Consultants, Inc., can delegate some of its responsibilities to​

Accepted Answer

The board of Management Consultants, Inc., can delegate some of its responsibilities to the firm's officers. This is a common practice in businesses where the officers are responsible for the day-to-day operations of the company. However, ultimate responsibility remains with the board of directors. Incorporators are individuals who filed the articles of incorporation and are not involved in the day-to-day operations of the company. Shareholders, on the other hand, have ownership in the company but do not have decision-making authority. Therefore, they cannot be delegated responsibilities by the board of directors. Option D, "no one," is not accurate as it is possible for the board to delegate some responsibilities to others within the company.

Question 16

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of​

Accepted Answer

Ernie has breached the duty of care as a director by failing to evaluate the transactions properly. As a property appraiser, he had a special duty to use his expertise in evaluating the purchases made by Five-Star Properties, Inc.

Question 17

Roy, a director of Service & Sales Corporation, does not attend a board meeting for three years. During that time, Terry, the firm's president, makes improper loans that cost the company $10 million. Roy is most likely liable for breach of​

Accepted Answer

The answer of Roy, a director of Service & Sales...

Question 18

Like the bylaws of other corporations, the bylaws of Rocks, Paper & Scissors, Inc.,​

Accepted Answer

The bylaws of a corporation are typically adopted at its first organizational meeting, so option C is the best choice. Option A is not necessarily true, as the operating name of the corporation may have been established in other paperwork or through state registration. Option B is specific to corporations that issue stock, and is not relevant to all corporations. Option D is not required for the adoption of bylaws.

Question 19

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of​

Accepted Answer

Carlo's opposition to the tender offer, even though it is in the company's best interest, is a clear violation of his duty of loyalty. As a director, Carlo has a legal and ethical obligation to act in the best interest of the company and its shareholders, and his actions to protect his own position on the board are in direct violation of this duty. The duty of loyalty requires directors to put the interests of the company and its shareholders above their own personal interests, and Carlo's actions clearly fall short of this standard.

Question 20

Flo and Glen form Health Food Inc. to coordinate the purchase, sale, and delivery of food products from organic farms to hospitals and other institutions. The stated purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is​

Accepted Answer

Health Food Inc. is a benefit corporation, as its stated purpose is to have a positive impact on society and the environment while also making a profit. Benefit corporations are a type of corporation that are legally required to consider the impact of their decisions on stakeholders beyond just their shareholders, such as their employees, customers, and the environment.

Quiz 19: Corporations

Jen and Kay would like to form Lunch Garden, Inc., to enter the food vending business. Most likely, the articles of incorporation for the firm will not include​

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to​

EZ Hauling holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, EZ Hauling is most likely​

Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to​

Vince buys 500 shares of common stock in Water Services, Inc. As a shareholder of record, Vince owns a proportionate interest with regard to Water's​

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is​

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve​

Security Insurance, Inc. has a board of five directors. Security's bylaws do not state any quorum requirements. In most states, a quorum for Security's board meetings would be​

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and​

Gina is a director on the board of Home Furnishings Inc. As a director, she may not​

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they​

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, Wings2Go is most likely​

Charlie, Dora, and Ethel are the first directors on the board of Face Time Corporation, a social media host. Subsequent directors are elected by a majority vote of Face Time's​

Harry and Ilene want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. To avoid income taxes at the corporate level, they should form​

The board of Management Consultants, Inc., can delegate some of its responsibilities to​

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of​

Roy, a director of Service & Sales Corporation, does not attend a board meeting for three years. During that time, Terry, the firm's president, makes improper loans that cost the company $10 million. Roy is most likely liable for breach of​

Like the bylaws of other corporations, the bylaws of Rocks, Paper & Scissors, Inc.,​

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of​

Flo and Glen form Health Food Inc. to coordinate the purchase, sale, and delivery of food products from organic farms to hospitals and other institutions. The stated purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is​

Jen and Kay would like to form Lunch Garden, Inc., to enter the food vending business. Most likely, the articles of incorporation for the firm will not include

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to

EZ Hauling holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, EZ Hauling is most likely

Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to

Vince buys 500 shares of common stock in Water Services, Inc. As a shareholder of record, Vince owns a proportionate interest with regard to Water's

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve

Security Insurance, Inc. has a board of five directors. Security's bylaws do not state any quorum requirements. In most states, a quorum for Security's board meetings would be

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and

Gina is a director on the board of Home Furnishings Inc. As a director, she may not

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, Wings2Go is most likely

Charlie, Dora, and Ethel are the first directors on the board of Face Time Corporation, a social media host. Subsequent directors are elected by a majority vote of Face Time's

Harry and Ilene want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. To avoid income taxes at the corporate level, they should form

The board of Management Consultants, Inc., can delegate some of its responsibilities to

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of

Roy, a director of Service & Sales Corporation, does not attend a board meeting for three years. During that time, Terry, the firm's president, makes improper loans that cost the company $10 million. Roy is most likely liable for breach of

Like the bylaws of other corporations, the bylaws of Rocks, Paper & Scissors, Inc.,

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of

Flo and Glen form Health Food Inc. to coordinate the purchase, sale, and delivery of food products from organic farms to hospitals and other institutions. The stated purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is