Question 1

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is illegal.

Accepted Answer

A) True 
 B)False

Question 2

Ivy and Justin want to form and do business as Kayak Adventures Corporation.A corporation can be owned by

Accepted Answer

A)  natural persons only.
B)  artificial persons only.
C)  artificial or natural persons.
D)  neither "artificial" nor "natural" persons.E) None of the above
F) A) and B)

Question 3

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

Accepted Answer

A)  corporations.
B)  estates.
C)  individuals.
D)  partnerships.E) All of the above
F) B) and C)

Question 4

Rhea is a director of Spex Corporation,which makes and sells sunglasses and other eyewear.As a Spex director,Rhea sits on the board,which

Accepted Answer

A)  governs Spex.
B)  is governed by the Spex incorporators.
C)  is governed by the Spex officers.
D)  is governed by the Spex shareholders.E) A) and B)
F) All of the above

Question 5

A corporation is a legal entity created and recognized by federal law.

Accepted Answer

A) True 
 B)False

Question 6

Clark is a shareholder of Bedrest Mattress Company.Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has

Accepted Answer

A)  preferred stock.
B)  a right of first refusal.
C)  a sufficient number of shares to exercise de facto control.
D)  watered stock.E) B) and C)
F) A) and D)

Question 7

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Accepted Answer

A) True 
 B)False

Question 8

Tank is a director and the majority shareholder of Unique New Investment Corporation (UNIC).Tank buys,for $1,500,an option to purchase a tract of real estate for $50,000.Tank forms Vista Property,Inc. ,to hold the option.As the majority shareholder,and thus controlling director,of UNIC,Tank orders the firm to authorize the purchase of the land from Vista Property for $500,000.Tank then has Vista Property buy the land,sell it to UNIC,and loan the money to UNIC for the purchase at a 10 percent interest rate.Wim,a minority shareholder in UNIC,complains to UNIC's board,which takes no action.Wim files a suit against Tank on UNIC's behalf.Will Wim prevail Explain.

Accepted Answer

Yes.Wim will succeed in the suit against Tank,on UNIC's behalf.This is a shareholder's derivative suit,which may be brought by a shareholder on behalf of a corporation.Some wrong must have been done to the firm,and before the suit can be brought,the board of directors must be told of the wrong and refuse to act on it.Here,the wrong has been committed by Tank,the controlling director of the firm.A director is a fiduciary with respect to his or her firm,with a duty to act in good faith,a duty of loyalty,and a duty to make a full disclosure in any transaction in which the director has a conflict of interest.In this problem,the director made an undisclosed profit in a transaction with the corporation,a transaction that the director ordered the corporation to make.As a majority shareholder,Tank owed similar duties to Wim and any other minority shareholders.Tank also breached these duties.

Question 9

For liability purposes,some courts treat professional corporations somewhat like a partnership.

Accepted Answer

A) True 
 B)False

Question 10

Shareholders are the ultimate authority in every corporation.

Accepted Answer

A) True 
 B)False  False

Question 11

Each incorporator must have an interest in the corporation.

Accepted Answer

A) True 
 B)False  False

Question 12

To pierce the corporate veil means to ignore the corporate structure,exposing the shareholders to personal liability.

Accepted Answer

A) True 
 B)False

Question 13

A holding company is a company whose business activity consists of holding shares in another company.

Accepted Answer

A) True 
 B)False

Question 14

Wild & Scenic River Tours,Inc. ,is a corporation.Wild & Scenic has the implied power to

Accepted Answer

A)  issue stocks and bonds.
B)  execute contracts and negotiable instruments.
C)  buy and sell (or lease) property.
D)  perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.E) A) and D)
F) A) and C)

Question 15

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

Accepted Answer

A)  city or county corporate codes.
B)  the Entrepreneur's Corporate Handbook.
C)  the federal Administrative Procedure Act.
D)  the Revised Model Business Corporation Act.E) A) and C)
F) B) and C)

Question 16

Start-Up Corporation substantially complies with all conditions precedent to incorporation.Start-Up has

Accepted Answer

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

Question 17

Officers hire the directors and other executive employees.

Accepted Answer

A) True 
 B)False

Question 18

Many qualifications are required for directors.

Accepted Answer

A) True 
 B)False

Question 19

Gladys is a shareholder of Frozen Yogurt,Inc.As a shareholder,Gladys must approve

Accepted Answer

A)  amending the bylaws.
B)  declaring a corporate dividend.
C)  hiring a chief executive officer.
D)  issuing additional shares.E) A) and C)
F) None of the above

Question 20

Sullivan and Taylor want to form a corporation to provide catering services.The first step in the incorporation procedure is to

Accepted Answer

A)  file the articles of incorporation.
B)  hold the first organizational meeting.
C)  secure a corporate name.
D)  select a state in which to incorporate.E) A) and C)
F) A) and B)

Exam 19: Corporations

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is illegal.

Correct Answer
verified

Ivy and Justin want to form and do business as Kayak Adventures Corporation.A corporation can be owned by

Correct Answer
verified

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

Correct Answer
verified

Rhea is a director of Spex Corporation,which makes and sells sunglasses and other eyewear.As a Spex director,Rhea sits on the board,which

Correct Answer
verified

A corporation is a legal entity created and recognized by federal law.

Correct Answer
verified

Clark is a shareholder of Bedrest Mattress Company.Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has

Correct Answer
verified

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Correct Answer
verified

For liability purposes,some courts treat professional corporations somewhat like a partnership.

Correct Answer
verified

Shareholders are the ultimate authority in every corporation.

Correct Answer
verified
False

Each incorporator must have an interest in the corporation.

Correct Answer
verified
False

To pierce the corporate veil means to ignore the corporate structure,exposing the shareholders to personal liability.

Correct Answer
verified

A holding company is a company whose business activity consists of holding shares in another company.

Correct Answer
verified

Wild & Scenic River Tours,Inc. ,is a corporation.Wild & Scenic has the implied power to

Correct Answer
verified

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

Correct Answer
verified

Start-Up Corporation substantially complies with all conditions precedent to incorporation.Start-Up has

Correct Answer
verified

Officers hire the directors and other executive employees.

Correct Answer
verified

Many qualifications are required for directors.

Correct Answer
verified

Gladys is a shareholder of Frozen Yogurt,Inc.As a shareholder,Gladys must approve

Correct Answer
verified

Sullivan and Taylor want to form a corporation to provide catering services.The first step in the incorporation procedure is to

Correct Answer
verified

Exam 19: Corporations

An agreement between shareholders to restrict the transfer of a closely held corporation's stock is illegal.

Correct AnswerverifiedShow Answer

Ivy and Justin want to form and do business as Kayak Adventures Corporation.A corporation can be owned by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Rhea is a director of Spex Corporation,which makes and sells sunglasses and other eyewear.As a Spex director,Rhea sits on the board,which

Correct AnswerverifiedShow Answer

A corporation is a legal entity created and recognized by federal law.

Correct AnswerverifiedShow Answer

Clark is a shareholder of Bedrest Mattress Company.Clark will be deemed to have a fiduciary duty to Bedrest and its minority shareholders if he has

Correct AnswerverifiedShow Answer

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

Correct AnswerverifiedShow Answer

For liability purposes,some courts treat professional corporations somewhat like a partnership.

Correct AnswerverifiedShow Answer

Shareholders are the ultimate authority in every corporation.

Correct AnswerverifiedFalse

Each incorporator must have an interest in the corporation.

Correct AnswerverifiedFalse

To pierce the corporate veil means to ignore the corporate structure,exposing the shareholders to personal liability.

Correct AnswerverifiedShow Answer

A holding company is a company whose business activity consists of holding shares in another company.

Correct AnswerverifiedShow Answer

Wild & Scenic River Tours,Inc. ,is a corporation.Wild & Scenic has the implied power to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Start-Up Corporation substantially complies with all conditions precedent to incorporation.Start-Up has

Correct AnswerverifiedShow Answer

Officers hire the directors and other executive employees.

Correct AnswerverifiedShow Answer

Many qualifications are required for directors.

Correct AnswerverifiedShow Answer

Gladys is a shareholder of Frozen Yogurt,Inc.As a shareholder,Gladys must approve

Correct AnswerverifiedShow Answer

Sullivan and Taylor want to form a corporation to provide catering services.The first step in the incorporation procedure is to

Correct AnswerverifiedShow Answer

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False

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False

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