Question 1

Nearly all corporations whose veils are pierced are:

Accepted Answer

Nearly all corporations whose veils are pierced are close corporations,since domination is more easily accomplished in a close corporation than in a publicly held one.

Question 2

Forming a business with a high debt-to-equity ratio is an example of:

Accepted Answer

Forming a business with a high debt-to-equity ratio is an example of thin capitalization.

Question 3

Outland Corporation is incorporated in Wyoming,where it has its executive office.It has a manufacturing plant in Utah,and a warehouse in New Mexico,where most of its sales are made.Outland is subject to taxation in:

Accepted Answer

A state's imposition of a tax must serve a legitimate state interest and be reasonable in relation to a foreign corporation's contacts with the state.Since Outland Corporation has reasonable contacts in Wyoming (executive office),Utah (manufacturing plant),and New Mexico (warehouse),it is subject to taxation in Wyoming,Utah,and New Mexico.

Question 4

Jim created a shoe-manufacturing corporation by contributing $1,000.He stayed as the sole shareholder and director of the corporation.To inject further capital into the corporation,he loaned the corporation $100,000 and secured the loan in exchange for all the corporation's assets.Five years into operations,the corporation has still failed to make profits and consequently files for bankruptcy.Who has been defrauded?

Accepted Answer

In this case,the nonshareholder-creditors of the shoe-manufacturing corporation have been defrauded due to thin capitalization of the corporation by Jim.

Question 5

Most of the states have passed _____ to permit their courts to exercise jurisdiction under the decision of the International Shoe case.

Accepted Answer

Most of the states have passed long-arm statutes to permit their courts to exercise jurisdiction under the decision of the International Shoe case.

Question 6

In which of the following situations will a business incorporated in Ohio be required to qualify to do business in Kentucky?

Accepted Answer

If a business incorporated in Ohio maintains a stock of goods in Kentucky from which it sells to customers in Kentucky,then it will be required to qualify to do business in Kentucky.

Question 7

Big Corporation (BC)was dominated by its president,Mr.Vincent.He used his dominance for an improper purpose-defrauding lenders to the corporation.As a result,a court can:

Accepted Answer

A member is not personally liable for a nonprofit corporation's acts or liabilities merely by being a member.However,a court may pierce the veil of a nonprofit corporation if it is used to defraud creditors,circumvent a statute,or evade an existing obligation,the same grounds on which a for-profit corporation's veil may be pierced.

Question 8

A state may impose its laws on a foreign corporation if such imposition does not violate the Constitution of the United States,notably the Due Process Clause of the Fourteenth Amendment and the Commerce Clause.The leading case in this area is the _____ case.

Accepted Answer

A state may impose its laws on a foreign corporation if such imposition does not violate the Constitution of the United States,notably the Due Process Clause of the Fourteenth Amendment and the Commerce Clause.The Due Process Clause requires that a foreign corporation have sufficient contacts with a state before a state may exercise jurisdiction over the corporation.The leading case in this area is the International Shoe case.

Question 9

Katie Kuric is the only shareholder,director,and officer of two corporations,Multimedia Corporation and Kuric Network Television Corporation (KNT).Multimedia produces television shows and movies.KNT broadcasts television programming over the air and on cable.KNT purchases much of its TV programs and movies from Multimedia.KNT often pays Multimedia for the TV shows and movies more than a year after payment is due,without being required to pay interest or a late payment penalty.What risk is Katie taking by allowing KNT to pay Multimedia late?

Accepted Answer

If Multimedia's creditors are being defrauded because KNT is consistently being late in paying,then Katie runs the risk of KNT's veil being pierced and KNT being held liable for Multimedia's debts.

Question 10

QT Inc. ,is incorporated in Alabama,has offices in Nebraska,has a manufacturing plant in Delaware,and conducts most of its sales from Virginia.Regulation of its internal affairs will be exercised only by:

Accepted Answer

Regulation of the internal affairs of a corporation-that is,the relation between the corporation and its directors,officers,and shareholders-is usually exercised only by the state of incorporation.Since QT Inc. ,is incorporated in Alabama,regulation of its internal affairs will be exercised only by Alabama.

Question 11

What is the number of events considered sufficient under the minimum contacts test to confer jurisdiction on a state's courts?

Accepted Answer

Under the minimum contacts test,even an isolated event may be sufficient to confer jurisdiction on a state's courts.

Question 12

Ala Foreign Corporation is incorporated in the state of Alabama.However,it is running 90 percent of its operations from the state of Indiana.Such a type of corporation is called a(n):

Accepted Answer

A foreign corporation may conduct most of its business in a state other than the one in which it is incorporated.Such a corporation is called a pseudo-foreign corporation in the state in which it conducts most of its business.

Question 13

Since the level of doing business that constitutes intrastate business for qualification purposes has been difficult to define,the Model Business Corporation Act lists several activities that do not require qualification.One such activity is:

Accepted Answer

Since the level of doing business that constitutes intrastate business for qualification purposes has been difficult to define,the MBCA lists several activities that do not require qualification.Some of the activities include (1)Maintaining,defending or settling any proceeding; (2)holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs; (3)maintaining bank accounts; (4)maintaining offices for the transfer,exchange and registration of the corporation's own securities; (5)selling through independent contractors; (6)soliciting or obtaining orders,whether by mail or through employees or agents or otherwise,if the orders require acceptance outside this state before they become contracts.

Question 14

Which of the following activities is classified as doing business for the purpose of intrastate business qualification?

Accepted Answer

Maintaining an office to conduct intrastate business,selling personal property not in interstate commerce,entering into contracts relating to local business or sales,or owning or using real estate for general corporate purposes does constitute doing intrastate business.

Question 15

A state law regulating the activities of a foreign corporation does not unduly burden interstate commerce if:

Accepted Answer

When a foreign corporation enters interstate commerce to do intrastate business in a state,the state may regulate the corporation's activities,provided the regulation does not unduly burden interstate commerce.A state law regulating the activities of a foreign corporation does not unduly burden interstate commerce if (1)the law serves a legitimate state interest, (2)the state has chosen the least burdensome means of promoting that interest,and (3)that legitimate state interest outweighs the statute's burden on interstate commerce.

Question 16

Anderson incorporated his new company,Pearl Inc. ,in the business of manufacturing rubber.After some years,he opened his own subsidiary rubber manufacturing company.The new subsidiary company is a success.Meanwhile,the workers of Pearl Inc. ,claimed that payment of bonus is due and they are demanding the same from the subsidiary company.In this case,are both Pearl Inc. ,and its subsidiary liable?

Accepted Answer

Ordinarily,the parent is liable for its own obligations and the subsidiary is liable for its own obligations,but the parent is not liable for its subsidiary's debts and the subsidiary is not liable for the parent's debts.

Question 17

Which of the following documents is required for a foreign corporation to do intrastate business in a state?

Accepted Answer

A certificate of authority is required for a foreign corporation to do intrastate business in a state.

Question 18

According to the Supreme Court of the United States,a foreign corporation may be brought into a state's court in connection with its activities within the state,provided that the state does not violate the corporation's due process rights under the Fourteenth Amendment of the Constitution and its rights under the:

Accepted Answer

The Supreme Court of the United States has held that a foreign corporation may be brought into a state's court in connection with its activities within the state,provided that the state does not violate the corporation's due process rights under the Fourteenth Amendment of the Constitution and its rights under the Commerce Clause.

Question 19

To prove domination,it is _____ to show that there is only one shareholder.

Accepted Answer

To prove domination,it is not sufficient,or even necessary,to show that there is only one shareholder.

Question 20

Under the _____ Clause,the power to regulate interstate trade is given to the federal government.

Accepted Answer

Under the Commerce Clause,the power to regulate interstate commerce is given to the federal government.The states have no power to exclude or to discriminate against foreign corporations that are engaged solely in interstate commerce.

Quiz 41: History and Nature of Corporations