Question 1

In a merger situation, which of the following is a term for the corporation that does not continue to exist?

Accepted Answer

A)   The declined corporation
B)   The removed corporation
C)   The absorbed corporation
D)   The concealed corporation
E)   The deceased corporationF) B) and D)
G) B) and E)

Question 2

Corporations are not required to indicate in the name of the corporation that the business is incorporated.

Accepted Answer

A) True 
 B)False

Question 3

Merger requires shareholder approval, but consolidation does not.

Accepted Answer

A) True 
 B)False

Question 4

Reference - Kite Sales. Wendy is president of a business that manufactures kites. The kites of her company, ABC Kites, are sold to large toy stores. After Wendy learned a great deal about kites, she started to make kites at home and to promote them to large toy stores. She also started selling kites to friends. Some of the directors learned about her kite sales and accused her of wrongdoing. Wendy denied any wrongdoing. What remedy will be imposed on Wendy, if any, for her home kite sales?

Accepted Answer

A)   Nothing because Wendy did not engage in any wrongdoing.
B)   She will be required to cede to the corporation half of any profits she earned as a result of the breach.
C)   She will be required to cede to the corporation only profits she earned as a result of the breach that the corporation can prove by a preponderance of the evidence it lost as a result of her actions.
D)   She will be required to cede to the corporation any profits she earned as a result of the breach unless she can by a preponderance of the evidence that the corporation lost no sales as a result of her actions.
E)   She will be required to cede to the corporation all the profits she earned as a result of the breach.F) C) and D)
G) B) and D)

Question 5

Which of the following is acceptable in the name of a corporation to signify that the business is a corporation?

Accepted Answer

A)   Company
B)   Corporation
C)   Inc.
D)   Company, Corporation, and Inc.
E)   Company and limited, but not Inc.F) B) and D)
G) D) and E)

Question 6

Reference - Skateboard Growth. Both Bernie and John were presidents of small businesses manufacturing and selling skateboards. Bernie's store was called "Skateboard City" and John's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health" and simply amend the articles of consolidation. Bernie was concerned, however, with the change because he was contemplating filing a lawsuit against Hank who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Greg who fell when a wheel came off on a skateboard sold by Bernie's corporation resulting in a serious ankle sprain and medical bills. After investigation, Bernie is aware that the wheel was negligently attached to the skateboard. Bernie told John that one reason he wanted to retain John's name was to prevent Greg from being able to recover against him. Which of the following is true regarding Bernie's belief that Greg will be unable to collect anything for the accident after the joinder of the businesses?

Accepted Answer

A)   Bernie is correct that Greg will be unable to win in litigation against the surviving company so long as the joinder is completed before Greg files the lawsuit.
B)   Bernie is correct that Greg will be unable to win in litigation against the surviving company regardless of whether the lawsuit occurs before or after the joinder as long as no judgment is entered prior to the joinder.
C)   Bernie is correct that Greg will be unable to sue the surviving company unless Greg files in court an objection to the joinder and prevails.
D)   Bernie is correct that Greg will be unable to win in litigation against the surviving company unless Greg can establish fraud in connection with the joinder.
E)   Bernie is incorrect, and the joinder will have no effect on the lawsuit.F) A) and B)
G) A) and C)

Question 7

In most states, a corporation's bylaws can negate preemptive rights.

Accepted Answer

A) True 
 B)False

Question 8

A corporation is a[n] _______________ corporation in the state in which it is incorporated.

Accepted Answer

A)   Domestic
B)   Home
C)   Recognized
D)   Approved
E)   CertifiedF) C) and D)
G) All of the above

Question 9

How is the number of corporate directors determined?

Accepted Answer

A)   In the discretion of the president of the corporation.
B)   By vote of the stockholders in compliance with state law.
C)   According to the corporate articles or bylaws in compliance with state law.
D)   According to the number of shares issued.
E)   According to the amount of profit projected by incorporators for the first year.F) A) and E)
G) None of the above

Question 10

Which of the following is a term for profits kept by a corporation for reinvestment?

Accepted Answer

A)   Added earnings
B)   Retained earnings
C)   Approved income
D)   Added profit
E)   Saved profitF) A) and B)
G) A) and D)

Question 11

According to the Revised Model Business Corporation Act, which of the following should articles of incorporation include?

Accepted Answer

A)   The name of the corporation.
B)   The name of the registered agent.
C)   The names and addresses of the incorporators.
D)   The name of the corporation, the name of the registered agent, and the names and addresses of the incorporators.
E)   The name of the corporation and the registered agent, but not the names and addresses of the incorporators.F) A) and B)
G) A) and C)

Question 12

A corporation must be dissolved if over 50% of the shareholders die.

Accepted Answer

A) True 
 B)False

Question 13

In a hostile takeover situation, what does the term "going private" reference?

Accepted Answer

A)   A leveraged buyout
B)   A management buyout
C)   An approved buyout
D)   A corporate buyout
E)   A closely managed buyoutF) D) and E)
G) A) and B)

Question 14

A shareholder can sue a director or officer if the shareholder feels that the director or officer has caused harm to the business by violating a fiduciary duty.

Accepted Answer

A) True 
 B)False

Question 15

Reference - Nails. Mona and her friends Jack and Bobby, all U.S. citizens, want to open a nail salon in Tennessee. They would all like to avoid personal liability for debts of the business and for wrongful acts of each other. They would also like to avoid taxation as much as possible. Mona is in favor of a corporation and asks if there is any problem with that form of business. Jack and Bobby say that they want to receive profit distributions and that they are concerned about excessive taxation with a corporation. Jack and Bobby urged the formation of a partnership even in the face of personal liability. Mona did some research and suggested an S corporation to Jack and Bobby. Would the proposed business qualify as an S corporation if it is incorporated in Delaware?

Accepted Answer

A)   No, because there must be at least 100 shareholders involved.
B)   No, because a business must operate as a partnership for at least two years before converting to an S corporation and also because it must be incorporated under the state law of the location of the principal place of business.
C)   No, because a business must operate as a regular corporation for at least two years before converting to an S corporation.
D)   Yes, so long as more than one class of shares is issued.
E)   Yes, so long as only one class of shares is issued.F) B) and C)
G) C) and D)

Question 16

Reference - Nails. Mona and her friends Jack and Bobby, all U.S. citizens, want to open a nail salon in Tennessee. They would all like to avoid personal liability for debts of the business and for wrongful acts of each other. They would also like to avoid taxation as much as possible. Mona is in favor of a corporation and asks if there is any problem with that form of business. Jack and Bobby say that they want to receive profit distributions and that they are concerned about excessive taxation with a corporation. Jack and Bobby urged the formation of a partnership even in the face of personal liability. Mona did some research and suggested an S corporation to Jack and Bobby. Would an S corporation provide the favorable tax treatment that the parties desire in a corporate form of business?

Accepted Answer

A)   No, because an S corporation is taxed in the same way as a regular corporation.
B)   Yes, but the S corporation is not needed because either a partnership or a regular corporation in their situation would provide the same benefits as an S corporation.
C)   Yes, with the only tax benefit being the avoidance of double taxation.
D)   Yes, because the S corporation would avoid the double taxation problem involved with a regular corporation and provide other tax benefits as well.
E)   No, because while the parties could form an S corporation, the tax benefits of an S corporation are only available to corporations with at least 100 shareholders.F) B) and C)
G) A) and B)

Question 17

Which of the following owns a corporation?

Accepted Answer

A)   Directors
B)   Officers
C)   Shareholders
D)   Affiliates
E)   The stateF) A) and B)
G) B) and D)

Question 18

Aggressors often try to win the favor of a few institutional investors that own large block of shares.

Accepted Answer

A) True 
 B)False

Question 19

Corporations have only those powers that states grant them.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true regarding stock certificates?

Accepted Answer

A)   Each certificate includes the corporation's name.
B)   Each certificate includes the number of shares represented by the certificate.
C)   A shareholder's ownership in the corporation does not depend on her possession of the physical stock certificate.
D)   Each certificate includes the corporation's name, each certificate includes the number of shares represented by the certificate, and a shareholder's ownership in the corporation does not depend on her possession of the physical stock certificate.
E)   Each certificate includes the corporation's name and each certificate includes the number of shares represented by the certificate, but a shareholder's ownership in the corporation does depend on her possession of the physical stock certificate.F) A) and C)
G) B) and E)

Exam 22: Corporations: Formation and Organization

A corporation is a[n] _______________ corporation in the state in which it is incorporated.

Correct Answer
verified

In a hostile takeover situation, what does the term "going private" reference?

Correct Answer
verified

Aggressors often try to win the favor of a few institutional investors that own large block of shares.

Correct Answer
verified

Which of the following owns a corporation?

Correct Answer
verified

Correct Answer
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Merger requires shareholder approval, but consolidation does not.

Correct Answer
verified

A corporation must be dissolved if over 50% of the shareholders die.

Correct Answer
verified

Which of the following is a term for profits kept by a corporation for reinvestment?

Correct Answer
verified

Corporations have only those powers that states grant them.

Correct Answer
verified

According to the Revised Model Business Corporation Act, which of the following should articles of incorporation include?

Correct Answer
verified

In a merger situation, which of the following is a term for the corporation that does not continue to exist?

Correct Answer
verified

Which of the following is acceptable in the name of a corporation to signify that the business is a corporation?

Correct Answer
verified

In most states, a corporation's bylaws can negate preemptive rights.

Correct Answer
verified

Corporations are not required to indicate in the name of the corporation that the business is incorporated.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A shareholder can sue a director or officer if the shareholder feels that the director or officer has caused harm to the business by violating a fiduciary duty.

Correct Answer
verified

How is the number of corporate directors determined?

Correct Answer
verified

Correct Answer
verified

Which of the following is true regarding stock certificates?

Correct Answer
verified

Exam 22: Corporations: Formation and Organization

A corporation is a[n] _______________ corporation in the state in which it is incorporated.

Correct AnswerverifiedShow Answer

In a hostile takeover situation, what does the term "going private" reference?

Correct AnswerverifiedShow Answer

Aggressors often try to win the favor of a few institutional investors that own large block of shares.

Correct AnswerverifiedShow Answer

Which of the following owns a corporation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Merger requires shareholder approval, but consolidation does not.

Correct AnswerverifiedShow Answer

A corporation must be dissolved if over 50% of the shareholders die.

Correct AnswerverifiedShow Answer

Which of the following is a term for profits kept by a corporation for reinvestment?

Correct AnswerverifiedShow Answer

Corporations have only those powers that states grant them.

Correct AnswerverifiedShow Answer

According to the Revised Model Business Corporation Act, which of the following should articles of incorporation include?

Correct AnswerverifiedShow Answer

In a merger situation, which of the following is a term for the corporation that does not continue to exist?

Correct AnswerverifiedShow Answer

Which of the following is acceptable in the name of a corporation to signify that the business is a corporation?

Correct AnswerverifiedShow Answer

In most states, a corporation's bylaws can negate preemptive rights.

Correct AnswerverifiedShow Answer

Corporations are not required to indicate in the name of the corporation that the business is incorporated.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A shareholder can sue a director or officer if the shareholder feels that the director or officer has caused harm to the business by violating a fiduciary duty.

Correct AnswerverifiedShow Answer

How is the number of corporate directors determined?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding stock certificates?

Correct AnswerverifiedShow Answer

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