Question 1

Quotient Corporation provides tax and accounting services. Like other corporations, Quotient's constitutional rights do not include

Accepted Answer

Quotient Corporation, like other corporations, does not have a privilege against self-incrimination as that right is reserved for individuals. It is important to note that corporations do have some constitutional rights, such as the right to due process and freedom from unreasonable searches and seizures. However, the right of access to courts may vary depending on the specific legal issue at hand.

Question 2

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen's officers. As with other corporations, the responsibility for the overall management of Kleen rests with

Accepted Answer

The board of directors has the ultimate responsibility for the management of a corporation, including making strategic decisions, appointing officers, and overseeing their work. As shareholders and directors, Inez and Jason would be part of this board and have input into the management of the company, but the final responsibility rests with the board as a whole. The officers, including Lily and Moe, are responsible for day-to-day operations and implementing the board's decisions, but ultimately they answer to the board of directors. While the owners (i.e. the shareholders) have a stake in the success of the corporation and may have input into certain decisions, they do not have direct responsibility for the management of the company.

Question 3

Digitech is a foreign corporation, which means that Digitech

Accepted Answer

A foreign corporation is one that is chartered in a different country than the one in which it is doing business. As a result, it may be required to obtain a certificate of authority to conduct business in the state or country where it seeks to operate.

Question 4

Dependable Appliances, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufactur?ing and distributing a newly pat?ented kitchen appliance, (2) is owned by five share?holders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Dependable is

Accepted Answer

Dependable Appliances, Inc. is a close corporation because it is owned by a small number of shareholders and has made no public offering of its shares. It is subject to double taxation, which rules out the possibility of it being an S corporation. It is also not a nonprofit corporation or a professional corporation, as it is a for-profit corporation that manufactures and distributes a patented appliance.

Question 5

The shares of Capital Corporation are publicly traded in securities mar?kets. Capital Corporation is

Accepted Answer

The fact that the shares of Capital Corporation are publicly traded in securities markets indicates that it is a publicly held corporation.

Question 6

Ruby Red Corporation has six shareholders, four of whom are members of the same family. All of Ruby's shareholders agree in writing to operate without shareholders' meetings. Under the Revised Model Business Corporation Act, this most likely warrants

Accepted Answer

According to the Revised Model Business Corporation Act, a corporation may operate without holding shareholders' meetings if all shareholders agree in writing. Therefore, there would be no penalties or sanctions imposed on Ruby Red Corporation for operating without shareholders' meetings.

Question 7

Fact Pattern 38-1B 
Standard Company and Typical Corporation form United, Inc., a close corporation, and agree to restrict the transfer of its stock to anyone else. SC sells its physical assets, but not its United stock, to Variety, Inc. TC files a suit against SC.
-Refer to Fact Pattern 38-1B. Under the reasoning of the court in Case 38.2, Salt Lake Tribune Publishing Co. v. AT&T Corp., SC's sale of its assets

Accepted Answer

According to the court's reasoning in Salt Lake Tribune Publishing Co. v. AT&T Corp., the sale of physical assets by a shareholder does not invalidate a stock transfer restriction unless the sale is made with the intent to circumvent or evade the restriction. In this case, SC did not sell its United stock, and there is no indication that the sale was made to evade the restriction, so the restriction remains valid and enforceable. Therefore, choice A is the best answer.

Question 8

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a legal entity created and recognized by

Accepted Answer

A corporation is created and recognized by state law. Each state has its own laws and regulations regarding the formation and registration of corporations. Therefore, Finn and Glenda would need to comply with the specific requirements of the state in which they plan to form their corporation.

Question 9

Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining operation. In the course of this employment, Stefan disposes of the mine's waste illegally. Liability for this crime most likely rests with

Accepted Answer

Both Raw Resources Corporation and Stefan can be held liable. Stefan, as the individual who committed the act, is directly responsible. Raw Resources Corporation can also be held liable under the doctrine of respondeat superior, which holds employers accountable for the actions of employees performed within the scope of their employment.

Question 10

Convenience Mart, Inc., is a close corporation. Convenience Mart is

Accepted Answer

Close corporations have the ability to restrict the transfer of their stock, which is not a typical power of a public corporation.

Answer: D 
 Close corporations are typically taxed in the same manner as a partnership, which means the income is taxed at the individual level rather than the corporate level.

Therefore, the correct answer would be a combination of choices C and D: 
Answer: CD 
 Close corporations have the ability to restrict the transfer of their stock and are typically taxed in the same manner as a partnership.

Question 11

To qualify as a professional corporation, Medical Clinic, P.C.,

Accepted Answer

To qualify as a professional corporation, Medical Clinic, P.C., must be a corporation formed by professionals. The other options (granting all shareholders voting rights and having at least thirty-five shareholders) are not requirements for a professional corporation.

Question 12

A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate for a purpose other than making a profit. SDC is

Accepted Answer

SDC is attempting to incorporate for a purpose other than making a profit, indicating that they are likely a nonprofit corporation. This means that any profits the corporation generates will be used to support its mission rather than distributed to shareholders.

Question 13

Pola and Quint want to form and do business as River Tours Corporation. A corporation can consist of

Accepted Answer

A corporation can consist of one or more natural persons. Therefore, Pola and Quint can form and do business as River Tours Corporation.

Question 14

Boutique Corporation would like to change its corporate status to avoid in?come taxes at the corporate level. To qualify, the shareholders must not be

Accepted Answer

The answer of Boutique Corporation would like to change its...

Question 15

Motor Parts Maker, Inc. (MPM), is a corporation. Norm is an MPM offi?cer. In a criminal case, Fifth Amendment rights belong to

Accepted Answer

The Fifth Amendment right against self-incrimination applies to individuals, not corporations. Therefore, Norm, as an individual, can invoke this right, but MPM, as a corporation, cannot.

Question 16

Skyla and Terry want to form and do business as Unique Boutique Corporation. Most statutes governing the formation and use of corporations are guided by

Accepted Answer

The Revised Model Business Corporation Act is a standardized set of laws that govern the formation and use of corporations in most states. It provides a model for states to follow in drafting their own corporate laws, and is widely used as a guideline by state legislatures.

Question 17

Micro Chips, Inc., is incorporated in the state of New Jersey and is doing busi?ness in the state of New York. In New York, it is properly referred to as

Accepted Answer

A corporation is considered foreign in any state other than its state of incorporation. Therefore, Micro Chips, Inc. is a foreign corporation in New York, since it is incorporated in New Jersey.

Question 18

Bernie and Chan want to form a corporation to market MP3 accessories. The first step in the incorporation procedure is to

Accepted Answer

The first step in the incorporation process is to select a state in which to incorporate. This is because each state has different laws and regulations regarding corporations, such as taxes, fees, and filing requirements. Once a state is chosen, the articles of incorporation can be filed and a corporate charter obtained. The first organizational meeting would then be held to establish bylaws, elect officers, and take care of other initial business.

Question 19

Jim and Kiley are architects and members of J&K, P.C., a profes?sional corporation. Jim supervises Luc, an employee of the firm. As a member, Jim

Accepted Answer

As a supervising member of the firm, Jim may be personally liable for any malpractice committed by an employee under his supervision, such as Luc. Therefore, he has limited liability for any acts of malpractice committed by Luc. However, Jim is not personally liable for any torts committed by Kiley, as she is also a member of the professional corporation with limited liability.

Question 20

Fact Pattern 38-1B 
Standard Company and Typical Corporation form United, Inc., a close corporation, and agree to restrict the transfer of its stock to anyone else. SC sells its physical assets, but not its United stock, to Variety, Inc. TC files a suit against SC.
-Refer to Fact Pattern 38-1B. Ac?cording to the court in Case 38.2, Salt Lake Tribune Publishing Co. v. AT&T Corp., a reasonable purpose for a stock transfer re?striction in a close corpora?tion, like the agreement between SC and TC, is

Accepted Answer

The court in Salt Lake Tribune Publishing Co. v. AT&T Corp. recognized that a reasonable purpose for a stock transfer restriction in a close corporation is to limit the participation of outsiders in the firm, which is consistent with the agreement between Standard Company and Typical Corporation. This helps maintain a close-knit group of shareholders with a shared vision for the company.

Quiz 38: Corporationsformation and Financing