Question 1

Tony and Tim are shareholders of a closely held corporation that engages in illegal activity.They mixed business and corporate assets regularly.Do Tony and Tim have limited liability?

Accepted Answer

A)  Yes,because their corporation was closely held.
B)  No,because they used the corporation to engage in illegal and wrongful acts and because they comingled personal and corporate interests.
C)  No,because closely held corporations never benefit from liability protection.
D)  Yes,because of corporation by estoppel.
E)  Yes,because limited liability is absolute.F) D) and E)
G) C) and D)

Question 2

Louisa runs a corporation which sells bracelets to generate money to run a soup kitchen that feeds the needy.The corporation earns profits,but has no shareholders.Instead,all profits are used to provide food for the needy.The corporation is most likely a ________.

Accepted Answer

A)  A corporation.
B)  Nonprofit corporation.
C)  S corporation.
D)  Public corporation.
E)  Private corporation.F) A) and E)
G) A) and D)

Question 3

Regarding promoters,which of the following is false?

Accepted Answer

A)  Promoters are agents for the company being formed.
B)  A promoter may insert a clause into a contract with a supplier stating that the corporation's adoption of the contract terminates the liability of the promoter.
C)  Promoters prepare the corporation's incorporation papers.
D)  Promoters raise capital for the infant corporation.
E)  Promoters can purchase buildings for the corporation.F) A) and C)
G) B) and D)

Question 4

[Shaky Bicycles] Lena is an incorporator who filed the articles of incorporation for XYZ Corporation,a corporation set up to sell bicycles.Lena incorrectly put the wrong street address in the document.Preetha,a manufacturer of bicycle parts,had sold a number of parts to XYZ Corporation.Unfortunately,the corporation was not making any profit,and Preetha was not paid in a timely manner.She checked the status of the corporation and discovered Lena's error.Preetha then claimed that the shareholders of XYZ Corporation were personally liable to her.Amy,another creditor of XYZ Corporation,also claimed that a shareholder,Rick,was personally liable to her.Amy alleged that Rick committed fraud against her when he told her that XYZ Corporation was making large amounts of money,that if she would only loan $50,000 to the corporation he would marry her,and that the corporation would make so much money that she would be wealthy in six months.She loaned the funds,but the corporation has been unable to pay her.Rick told her that he is sorry,but that her only avenue of recovery is through the corporation.
-Regarding the status of XYZ Corporation as a corporation,what would a court likely rule?

Accepted Answer

A)  That the business was a corporation by estoppel.
B)  That the business was not a corporation at all.
C)  That the business was a veiled corporation.
D)  That the business was a de jure corporation.
E)  That the business was a de facto corporation.F) All of the above
G) A) and E)

Question 5

A statement of purpose grants a corporation power to engage in certain business activities.

Accepted Answer

A) True 
 B)False

Question 6

Stock for sale to the general public is frequently offered by closely held corporations.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not an express power of a corporation?

Accepted Answer

A)  Power to be free from double taxation.
B)  Power to sue and be sued in the corporations' name.
C)  Power to have perpetual existence.
D)  Power to acquire property,make contracts and borrow money.
E)  Power to lend money.F) B) and D)
G) B) and E)

Question 8

In what two ways do courts interpret subscription agreements?

Accepted Answer

In some states,courts see subscription a...

Question 9

Which of the following is a disadvantage of the corporate form?

Accepted Answer

A)  Free transfer of corporate shares
B)  Double taxation
C)  Protection from liability
D)  Perpetual existence
E)  Retained earningsF) B) and E)
G) B) and D)

Question 10

A promoter is not permitted to enter into contracts.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a reason that a court would likely pierce the corporate veil?

Accepted Answer

A)  Shareholders attempt to commit fraud through a corporation.
B)  Shareholders' personal interests and corporate interests are commingled such that the corporation has no separate identity.
C)  A corporation did not follow statutory mandates regarding corporate business.
D)  A corporation has de facto status.
E)  A corporation lacks adequate capital when initially formed.F) A) and E)
G) A) and C)

Question 12

A document a corporation files with the state explaining its organization is known by which of the following terms?

Accepted Answer

A)  Proof of capitalization
B)  Certificate of organization
C)  Proof of incorporation
D)  Articles of incorporation
E)  Establishment of corporationF) A) and C)
G) C) and D)

Question 13

Regarding management of a corporation,which of the following is false?

Accepted Answer

A)  Shareholders elect a board of directors.
B)  The board of directors selects officers to manage the day-to-day business of the corporation.
C)  If shareholders die,corporations do not dissolve.
D)  In most states,corporations can exist indefinitely.
E)  Shareholders generally participate in corporate management.F) None of the above
G) C) and D)

Question 14

An individual who applies to the state for incorporation on behalf of a corporation is known as which of the following?

Accepted Answer

A)  A certification analyst
B)  A facilitator
C)  An incorporator
D)  A promoter
E)  An obtainerF) C) and D)
G) B) and E)

Question 15

Which of the following types of businesses is a business incorporated in another country?

Accepted Answer

A)  Visiting
B)  Foreign
C)  Approved
D)  Alien
E)  InterstateF) A) and B)
G) All of the above

Question 16

Convertible bonds allow shareholders to exchange their bonds for shares of company stock.

Accepted Answer

A) True 
 B)False

Question 17

Debt securities,or bonds,represent loans to a corporation from another party.

Accepted Answer

A) True 
 B)False

Question 18

Corporations distribute their income to shareholders through ________.

Accepted Answer

A)  Allowances
B)  Dividends
C)  Provisions
D)  Allocations
E)  GrantsF) A) and B)
G) A) and E)

Question 19

Which of the following was the result on appeal in Federal Election Comm'n v.Beaumont,the case in the text in which the Supreme Court considered whether certain of the Federal Election Commission's regulations including,for example,regulating corporate political participation through the use of PAC's,constitute unconstitutional limits on speech?

Accepted Answer

A)  That the regulations permissibly regulated speech because the regulations allowed some control of campaign activity without jeopardizing the associational rights of advocacy organizations' members.
B)  That the regulations permissibly regulated speech because nonprofit corporations,unlike corporations operated on a for profit basis,lack constitutional protection in the area of free speech.
C)  That the regulations impermissibly regulated speech because,using a strict scrutiny standard,the regulations were overly broad.
D)  That the regulations impermissibly regulated speech because unreasonable distinctions were made between exemptions granted to certain nonprofit corporations but not to others.
E)  That the regulations impermissibly regulated speech because nonprofit corporations were treated differently than corporations operated on a for profit basis.F) A) and C)
G) A) and B)

Question 20

Which of the following is false regarding the question presented in the Case Opener regarding Facebook's status as a corporation?

Accepted Answer

A)  Its corporate status allows it to acquire property.
B)  Its corporate status allows it to make contracts.
C)  Its corporate status allows it to sue and be sued.
D)  Its corporate status allows it to enjoy existence for up to 100 years.
E)  Its corporate status allows it to make charitable donations.F) C) and E)
G) D) and E)

Exam 38: Corporations: Formation and Financing

Which of the following is not a reason that a court would likely pierce the corporate veil?

Correct Answer
verified

Correct Answer
verified

Convertible bonds allow shareholders to exchange their bonds for shares of company stock.

Correct Answer
verified

A document a corporation files with the state explaining its organization is known by which of the following terms?

Correct Answer
verified

Corporations distribute their income to shareholders through ________.

Correct Answer
verified

A promoter is not permitted to enter into contracts.

Correct Answer
verified

Debt securities,or bonds,represent loans to a corporation from another party.

Correct Answer
verified

Louisa runs a corporation which sells bracelets to generate money to run a soup kitchen that feeds the needy.The corporation earns profits,but has no shareholders.Instead,all profits are used to provide food for the needy.The corporation is most likely a ________.

Correct Answer
verified

Tony and Tim are shareholders of a closely held corporation that engages in illegal activity.They mixed business and corporate assets regularly.Do Tony and Tim have limited liability?

Correct Answer
verified

In what two ways do courts interpret subscription agreements?

Correct Answer
verified
In some states,courts see subscription a...
View Answer

Regarding management of a corporation,which of the following is false?

Correct Answer
verified

Which of the following is a disadvantage of the corporate form?

Correct Answer
verified

An individual who applies to the state for incorporation on behalf of a corporation is known as which of the following?

Correct Answer
verified

Stock for sale to the general public is frequently offered by closely held corporations.

Correct Answer
verified

Which of the following is false regarding the question presented in the Case Opener regarding Facebook's status as a corporation?

Correct Answer
verified

A statement of purpose grants a corporation power to engage in certain business activities.

Correct Answer
verified

Regarding promoters,which of the following is false?

Correct Answer
verified

Which of the following types of businesses is a business incorporated in another country?

Correct Answer
verified

Correct Answer
verified

Which of the following is not an express power of a corporation?

Correct Answer
verified

Exam 38: Corporations: Formation and Financing

Which of the following is not a reason that a court would likely pierce the corporate veil?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Convertible bonds allow shareholders to exchange their bonds for shares of company stock.

Correct AnswerverifiedShow Answer

A document a corporation files with the state explaining its organization is known by which of the following terms?

Correct AnswerverifiedShow Answer

Corporations distribute their income to shareholders through ________.

Correct AnswerverifiedShow Answer

A promoter is not permitted to enter into contracts.

Correct AnswerverifiedShow Answer

Debt securities,or bonds,represent loans to a corporation from another party.

Correct AnswerverifiedShow Answer

Louisa runs a corporation which sells bracelets to generate money to run a soup kitchen that feeds the needy.The corporation earns profits,but has no shareholders.Instead,all profits are used to provide food for the needy.The corporation is most likely a ________.

Correct AnswerverifiedShow Answer

Tony and Tim are shareholders of a closely held corporation that engages in illegal activity.They mixed business and corporate assets regularly.Do Tony and Tim have limited liability?

Correct AnswerverifiedShow Answer

In what two ways do courts interpret subscription agreements?

Correct AnswerverifiedIn some states,courts see subscription a...View AnswerShow Answer

Regarding management of a corporation,which of the following is false?

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of the corporate form?

Correct AnswerverifiedShow Answer

An individual who applies to the state for incorporation on behalf of a corporation is known as which of the following?

Correct AnswerverifiedShow Answer

Stock for sale to the general public is frequently offered by closely held corporations.

Correct AnswerverifiedShow Answer

Which of the following is false regarding the question presented in the Case Opener regarding Facebook's status as a corporation?

Correct AnswerverifiedShow Answer

A statement of purpose grants a corporation power to engage in certain business activities.

Correct AnswerverifiedShow Answer

Regarding promoters,which of the following is false?

Correct AnswerverifiedShow Answer

Which of the following types of businesses is a business incorporated in another country?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an express power of a corporation?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In some states,courts see subscription a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified