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Exam 38: Corporations: Formation and Financing

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Question 21

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

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

F) All of the above
G) C) and D)

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Question 22

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Which of the following is true regarding corporate structure in Germany?

A) Germany has three tiers of corporate power with the board at the lowest tier, management on the second tier, and the supervisory board on the top tier.
B) Germany has three tiers of corporate power with the board at the lowest tier, the supervisory board on the second tier, and management on the top tier.
C) Germany has three tiers of corporate power with management at the lowest tier, the board on the second tier, and the supervisory board on the top tier.
D) Germany has three tiers of corporate power with management at the lowest tier, the supervisory board on the second tier, and the board on the top tier.
E) Germany has three tiers of corporate power with the supervisory board at the lowest tier, management on the second tier, and the board on the top tier.

F) B) and D)
G) A) and B)

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Question 23

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"Nails." Mona and her friends Jack and Bobby, all U.S. citizens, want to open a nail salon. They would all like to avoid personal liability for debts of the business and/or 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 are concerned about double taxation with a corporation and that they are in favor of a partnership, even if personal liability is a concern. Mona said that she was concerned about the deductibility of losses if the corporate form was chosen. She did some research and suggested an S corporation to Jack and Bobby which she claimed would avoid the problem of double taxation. -Based on the information available, is there an impediment to the business qualifying as an S Corporation?

Owners of which of the following types of stock own a portion of a corporation but do not enjoy any preferences?

Through which of the following do corporations distribute their income to shareholders?

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

Which of the following is false regarding Société Anonymes (SA) and Société à Responsabilité Limitée (SARL) companies in France?

Shareholders may not be held personally liable for a defective corporation's actions.

Discuss the rights of corporations, if any, to due process. Also discuss whether corporations have protection with regard to the Fourth Amendment, and in what manner.

A corporation must be incorporated in the state in which it has its principal place of business.

Which of the following is false regarding promoters?

"Horse Tracks." Martha, Greg, and Prudence decided to form a corporation called Horse Tracks to raise horses. They all began the corporate creation process by arranging for necessary capital and financing. They raised capital from their friends by making deals whereby their friends would purchase stock in the new corporation. After the corporation was formed, a problem arose with a contract for feed that Martha, Greg, and Prudence had entered into while organizing the corporation. Belinda, the seller of the feed claimed that she had not been fully paid and threatened to sue the corporation. The contract Martha, Greg, and Prudence had with Belinda did not reference liability after the new corporation came into legal existence. Martha, Greg, and Prudence asked for a novation, but were uncertain as to whether that would occur. -Which of the following is the most likely result if Belinda sues Martha, Greg, and Prudence for unpaid amounts without a novation in place?

When a corporation is incorporated, the secretary of state usually issues a[n] ____, a document certifying that the corporation is incorporated in the state and is authorized to conduct business.

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

"Horse Tracks." Martha, Greg, and Prudence decided to form a corporation called Horse Tracks to raise horses. They all began the corporate creation process by arranging for necessary capital and financing. They raised capital from their friends by making deals whereby their friends would purchase stock in the new corporation. After the corporation was formed, a problem arose with a contract for feed that Martha, Greg, and Prudence had entered into while organizing the corporation. Belinda, the seller of the feed claimed that she had not been fully paid and threatened to sue the corporation. The contract Martha, Greg, and Prudence had with Belinda did not reference liability after the new corporation came into legal existence. Martha, Greg, and Prudence asked for a novation, but were uncertain as to whether that would occur. -Which of the following identifies the contracts Martha, Greg, and Prudence made with their friends to buy stock?

Private persons create ______ corporations for private purposes.

"Shaky Bicycles." Rhonda, an incorporator who filed the articles of incorporation for ABC Corporation, a corporation set up to sell bicycles, incorrectly put the wrong street address in the document. Helen, a manufacturer of bicycle parts, had sold a number of parts to ABC Corporation. Unfortunately, the corporation was not making any profit, and Helen was not paid in a timely manner. She checked the status of the corporation and discovered Rhonda's error. Helen then claimed that the shareholders of ABC Corporation were personally liable to her. Bernice, another creditor of ABC Corporation, also claimed that a shareholder, Slick, was personally liable to her. Bernice alleged that Slick committed fraud against her when he told her that ABC 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. Slick told her that he is sorry, but that her only avenue of recovery is through the corporation. -Which of the following would a court likely rule regarding the status of ABC Corporation as a corporation?

Which of the following types of securities represent loans to a corporation?

Which of the following if true regarding powers state incorporation statutes typically grant to corporations?

Set forth the situations under which a court is likely to pierce the corporate veil.