Question 1

To avoid sharing control with someone they do not know or like, it would be most effective for the shareholders of a close corporation to

Accepted Answer

A)   require more than a majority of directors approve any board action.
B)   restrict the transferability of shares to outside persons.
C)   reorganize into a sole proprietorship or partnership.
D)   hold special shareholders' or directors' meetings on an annual basis.E) None of the above
F) A) and B)

Question 2

The primary document needed to incorporate a business is

Accepted Answer

A)   the website of the secretary of state of the state of incorporation.
B)   the minutes of the first organizational meeting.
C)   the articles of incorporation.
D)   the bylaws.E) C) and D)
F) A) and D)

Question 3

Market Data Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Market Data is most likely

Accepted Answer

A)   a corporation by estoppel.
B)   a de facto corporation.
C)   a de jure corporation.
D)   ultra vires.E) A) and B)
F) A) and C)

Question 4

With the exception of malpractice, liability for torts committed by others in a firm cannot be imposed on the shareholders of

Accepted Answer

A)   a professional corporation.
B)   a benefit corporation.
C)   a close corporation.
D)   any corporation.E) None of the above
F) A) and C)

Question 5

A key advantage of the corporate form is the unlimited liability of its owners.

Accepted Answer

A) True 
 B)False

Question 6

A number of medical and investment professionals network and pool funds to invest in Medical Consult Inc. This is

Accepted Answer

A)   venture capitalizing.
B)   crowdfunding.
C)   piercing the corporate veil.
D)   ultra vires.E) All of the above
F) A) and D)

Question 7

A corporation is not liable for the misconduct of its agents or officers.

Accepted Answer

A) True 
 B)False

Question 8

A corporation is intangible and invisible, and exists only in the contemplation of the law.

Accepted Answer

A) True 
 B)False

Question 9

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.

Accepted Answer

A) True 
 B)False

Question 10

A de jure corporation is one that is formed to accomplish a single purpose within a limited time.

Accepted Answer

A) True 
 B)False

Question 11

The day-to-day operations of a corporation are overseen by

Accepted Answer

A)   the directors.
B)   the officers.
C)   the owners.
D)   the shareholders.E) C) and D)
F) All of the above

Question 12

Gwen is a holder of preferred stock in Hearthstone Hotels, Inc. Gwen

Accepted Answer

A)   has no ownership interest in the corporation.
B)   has priority over holders of common stock as to payment of dividends.
C)   follows common stockholders as to payment on the firm's termination.
D)   has a proportionate interest in the corporation with regard to control.E) C) and D)
F) A) and B)

Question 13

The implied powers of a corporation can be found in the state and federal constitutions.

Accepted Answer

A) True 
 B)False

Question 14

If a business says it is a corporation, and a third party deals with it as a corporation, neither party can question the validity of the business's status.

Accepted Answer

A) True 
 B)False

Question 15

Because it may result in a piercing of the corporate veil, shareholders' continuous use of corporate property should most especially be avoided by

Accepted Answer

A)   a benefit corporation.
B)   a publicly held corporation.
C)   no corporation-corporate shareholders' liability is limited.
D)   a close corporation.E) A) and B)
F) None of the above

Question 16

Common stockholders and preferred stockholders benefit when the market price of the stock increases.

Accepted Answer

A) True 
 B)False

Question 17

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely

Accepted Answer

A)   borrow funds to be returned on a designated maturity date.
B)   give up a share of its ownership.
C)   pool funds to invest in a business venture.
D)   pay periodic dividends.E) A) and D)
F) A) and B)

Question 18

Because corporate officers have the implied power to bind the firm in matters directly connected to its business, there is no limit to what the officer can do.

Accepted Answer

A) True 
 B)False

Question 19

Agents and employees of Deco Arts Corporation and Echo Imitations Inc. are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes? If so, how can they be punished?

Accepted Answer

Yes, the corporations can be held liable...

Question 20

A corporation is

Accepted Answer

A)   a natural being.
B)   a tangible thing.
C)   an artificial legal person.
D)   a non-entity.E) B) and C)
F) A) and D)

Exam 33: Corporate Formation and Financing

A de jure corporation is one that is formed to accomplish a single purpose within a limited time.

Correct AnswerverifiedShow Answer

Market Data Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Market Data is most likely

Correct AnswerverifiedShow Answer

A number of medical and investment professionals network and pool funds to invest in Medical Consult Inc. This is

Correct AnswerverifiedShow Answer

The implied powers of a corporation can be found in the state and federal constitutions.

Correct AnswerverifiedShow Answer

Gwen is a holder of preferred stock in Hearthstone Hotels, Inc. Gwen

Correct AnswerverifiedShow Answer

A corporation is

Correct AnswerverifiedShow Answer

Agents and employees of Deco Arts Corporation and Echo Imitations Inc. are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes? If so, how can they be punished?

Correct AnswerverifiedYes, the corporations can be held liable...View AnswerShow Answer

Because corporate officers have the implied power to bind the firm in matters directly connected to its business, there is no limit to what the officer can do.

Correct AnswerverifiedShow Answer

A key advantage of the corporate form is the unlimited liability of its owners.

Correct AnswerverifiedShow Answer

If a business says it is a corporation, and a third party deals with it as a corporation, neither party can question the validity of the business's status.

Correct AnswerverifiedShow Answer

A corporation is not liable for the misconduct of its agents or officers.

Correct AnswerverifiedShow Answer

The day-to-day operations of a corporation are overseen by

Correct AnswerverifiedShow Answer

Common stockholders and preferred stockholders benefit when the market price of the stock increases.

Correct AnswerverifiedShow Answer

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.

Correct AnswerverifiedShow Answer

Because it may result in a piercing of the corporate veil, shareholders' continuous use of corporate property should most especially be avoided by

Correct AnswerverifiedShow Answer

The primary document needed to incorporate a business is

Correct AnswerverifiedShow Answer

To avoid sharing control with someone they do not know or like, it would be most effective for the shareholders of a close corporation to

Correct AnswerverifiedShow Answer

A corporation is intangible and invisible, and exists only in the contemplation of the law.

Correct AnswerverifiedShow Answer

With the exception of malpractice, liability for torts committed by others in a firm cannot be imposed on the shareholders of

Correct AnswerverifiedShow Answer

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely

Correct AnswerverifiedShow Answer

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Yes, the corporations can be held liable...
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