Question 1

Under the RMBCA,the charter of the corporation is required to provide all of the following EXCEPT:

Accepted Answer

Under the Revised Model Business Corporation Act (RMBCA), the charter (also known as the articles of incorporation) of a corporation is required to include the number of shares authorized, the street address of the registered office, and the name and address of each incorporator. However, it is not required to include the names of the initial directors.

Question 2

Use of "Evans & Hall,Ltd." as a corporate name would be:

Accepted Answer

According to most state laws governing the naming of corporations, a corporate name must generally be distinguishable from the name of any domestic corporation or any foreign corporation authorized to do business within the state. The name "Evans & Hall, Ltd." would be permissible as long as it meets this requirement.

Question 3

A corporation formed in substantial compliance with the incorporation statute and the required organizational procedures is a:

Accepted Answer

A corporation formed in substantial compliance with the incorporation statute and the required organizational procedures is a de jure corporation. De facto corporations refer to corporations that are not created in compliance with statutory requirements but are still recognized as corporations due to their good faith effort to comply. Corporation by estoppel refers to situations where a third party is estopped from denying the existence of a corporation despite noncompliance with corporate formalities. Private corporation is a term used to describe a corporation that is not publicly traded.

Question 4

Which of the following is the basic governing document of a corporation?

Accepted Answer

The charter, also known as articles of incorporation, is the foundational document filed with the state to create a corporation. It outlines the corporation's basic structure and purpose. The bylaws are separate governing documents that outline specific procedures and rules for how the corporation will operate internally. Subscriptions and certificates of authority are not foundational documents for a corporation.

Question 5

The case of Harris v.Looney dealt with the issue of:

Accepted Answer

Harris v. Looney dealt with personal liability for a debt by a person who pretended to act on behalf of a corporation, knowing that no corporation existed. The case ruled that the person who acted as a corporation could be held personally liable for the debt.

Question 6

Corporations have achieved dominance in which of the following ways?

Accepted Answer

Corporations account for 85 percent of the gross revenues of all business entities, indicating their dominance in the business sector.

Question 7

The City of Chicago would best be described as which of the following?

Accepted Answer

The City of Chicago is a public corporation, meaning it is a municipal entity created by the state to provide public services and functions such as public safety, transportation, and utilities to its citizens. It is not a business corporation formed for profit-making purposes (Option A), a close corporation with a limited number of shareholders (Option B), or a domestic corporation with operations limited to one state (Option D).

Question 8

Which of the following is NOT a characteristic of the corporate form of doing business?

Accepted Answer

The corporate form of doing business is known for its formal organization structure, rather than informal. This is because corporations are required to adhere to legal requirements such as issuing stocks, holding shareholder meetings, and maintaining records. Limited liability, perpetual existence, and transferability of corporate shares are all characteristics of the corporate form of doing business.

Question 9

Which of the following is correct regarding a foreign corporation?

Accepted Answer

A foreign corporation must obtain a certificate of authority to transact business in a state to use the state court system for lawsuits. However, failure to obtain such a certificate does not impair the validity of contracts.

Question 10

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

The terminology used in the question suggests that the concept being described is that of "piercing the corporate veil." This is a legal principle by which a court may disregard the separate legal identity of a corporation, holding its shareholders or directors personally liable for the actions of the corporation under certain circumstances. In this case, since Bonney used the corporation to avoid personal liability, the court may apply this principle and hold him personally liable.

Question 11

All of the following are true of promoters of a corporation EXCEPT:

Accepted Answer

While promoters of a corporation do solicit investors to start the corporation, prepare the formal documents of incorporation, and may make contracts in the name of the corporation, they do not necessarily continue to solicit capital after incorporation. This may instead be the responsibility of the management of the corporation or a separate fundraising department.

Question 12

Which of the following may be used to redress the ultra vires acts committed by a corporation?

Accepted Answer

All of the above options may be used to redress the ultra vires acts committed by a corporation. Shareholders may proceed with an injunction. The corporation or shareholders may sue the present or former directors or officers who committed the acts. Finally, the attorney general of the state of incorporation may also initiate an action to prevent the corporation from engaging in unauthorized business.

Question 13

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

Accepted Answer

The RMBCA does not grant corporations the status of a "person" under the Fourth Amendment's search and seizures clause or the Fifth Amendment's self-incrimination clause.

Question 14

Which of the following may influence a promoter to choose to incorporate in a particular state?

Accepted Answer

All of the factors listed can influence a promoter's decision to incorporate in a particular state. Each state has its own corporate laws, which can affect a company's ease of formation, governance, and business operations. A promoter may also consider the state government's overall business-friendliness, accessibility, and efficiency in facilitating the incorporation and growth of a new company. Additionally, the state court system can affect the legal environment and potential liabilities faced by a corporation. Therefore, all of these factors can be important considerations for a promoter when choosing a state of incorporation.

Question 15

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.

Question 16

The possible consequences of a defective incorporation include which of the following?

Accepted Answer

A defective incorporation can result in the state bringing an action against the association for involuntary dissolution (A), a third party asserting that it is not liable to the association (B), and associates being held personally liable to a third party (C). Therefore, all of the above (D) are possible consequences of a defective incorporation.

Question 17

The incorporators would typically do which of the following?

Accepted Answer

The answer of The incorporators would typically do which of...

Question 18

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

Accepted Answer

Option (a) is correct as a corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause, as held by the Supreme Court in Santa Clara County v. Southern Pacific Railroad (1886).
Option (c) is also correct as a corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures, as held by the Supreme Court in cases such as Marshall v. Barlow's Inc. (1978). Option (b) is incorrect as corporations do not have a Fifth Amendment right against self-incrimination.

Question 19

A corporation is considered a citizen:

Accepted Answer

The best choice is (E) - "Only (a) and (b)." A corporation is considered a citizen of the state of its incorporation and the state in which it has its principal office for determining diversity of citizenship. This is important in determining whether a federal court has jurisdiction to hear a case in which the corporation is a party. The Fourteenth Amendment privileges and immunities clause do not apply to corporations, only to individuals. Therefore, it is not accurate to say that a corporation is considered a citizen under this clause.

Question 20

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 individuals or other corporations.

Quiz 33: Nature and Formation of Corporations