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Q:
Fiona owns one share of stock in SK8 Boards Corporation, as evidenced by a stock certificate. Fiona loses the certificate. Her ownership of the stock is
a. forfeited immediately.
b. forfeited within ten days of a third party's claim to ownership.
c. forfeited within thirty days if she cannot find the certificate.
d. not affected.
Q:
Jaycee is a shareholder for Designer Pet Clothes, Inc. Designer Pet Clothes uses cumulative voting to elect directors. This means that the number of Jaycee's votes is determined by
a. how long Jaycee has been a shareholder.
b. the number of members of the board to be elected multiplied by the total number of voting shares Jaycee holds.
c. the number of shareholders present at the most recent shareholders' meeting.
d. the number of shareholders' meetings Jaycee has attended in the past year.
Q:
Thor Power Products Corporation permits its directors to be elected by cumulative voting. This
a. allows minority shareholders to be represented on the board.
b. assures directors that they will be selected by their peers.
c. guarantees Thor's executive officers of the final choice.
d. ensures against persons who may "cloud" the corporate direction.
Q:
Corporate business matters are presented at a shareholders' meeting in the form of
a. resolutions.
b. proxies.
c. articles of incorporation.
d. bylaws.
Q:
Niche Stores, Inc., must hold a shareholders' meeting
a. once a month.
b. once a year.
c. once every two years.
d. only when it is called by the board of directors.
Q:
Rosa and Sean are directors of Tech, Inc. Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is
a. a violation of the duty of care.
b. a preemptive right.
c. a proxy.
d. a quorum.
Q:
Louise is a director for Icy Ices, Inc. Louise is also a director for Creamy Creams, Inc. When Icy Ices enters into a contract with Creamy Creams, Louise
a. must resign from one of the boards.
b. must resign from both boards.
c. must make a full disclosure of any conflicts of interest and abstain from voting on the proposed transaction.
d. need not do anything.
Q:
Etta is a director of Trendy Stuff Corporation. Without informing Trendy, Etta goes into business with GR8 Things, Inc., in competition with Trendy. Etta is liable for breach of
a. no duty or rule
b. the business judgment rule.
c. the duty of care.
d. the duty of loyalty.
Q:
Josh is a director of Sippy Soups, Inc. Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director. Josh is liable for a breach of duty of
a. no duty or rule.
b. the business judgment rule.
c. the duty of care.
d. the duty of loyalty.
Q:
Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not
a. authorize major corporate policy decisions.
b. decide to issue stock and bonds, and declare dividends.
c. select and remove corporate officers.
d. subordinate the corporation's welfare to their personal interests.
Q:
Dave is an officer for Sweet Somethings Candies, Inc. In 2012, chocolate hearts were very popular. Acting within his managerial authority and the powers of the corporation, Dave signs a contract for an increase in chocolate heart production for 2013. In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money. Dave is most likely
a. liable for breach of duty of care.
b. liable for breach of duty of loyalty.
c. none of the choices.
d. liable for violation of the business judgment rule.
Q:
Rafi, a director of Super Service Station Corporation, does not attend a board meeting for three years. During that time, Twyla, Super's president, makes improper loans that cost the company $100,000. Rafi is most likely
a. liable for negligence or mismanagement.
b. liable for violation of the business judgment rule.
c. not liable because missing meetings is an honest mistake.
d. not liable because missing meetings is only poor judgment.
Q:
Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most corporations, Coast-to-Coast's employees include its
a. board of directors.
b. incorporators.
c. officers.
d. shareholders.
Q:
Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to
a. Frawsty's incorporators.
b. Frawsty's officers.
c. Frawsty's shareholders.
d. no one.
Q:
Odell is a director of Price Rite, Inc. As a director, with respect to the corporation, Odell is
a. a fiduciary.
b. a forum.
c. a proxy.
d. a quorum.
Q:
Nina is a director of Omega, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be
a. ambiguous and questionable.
b. arguable and defensible.
c. informed and reasonable.
d. perfect and unassailable.
Q:
Mickey is a director of Fine Art Dealers, Inc. Mickey is trained in art valuation. Fine Art Dealers makes several purchases in which it pays too much money for artwork. Mickey approves all the transactions without reading the details. Mickey is most likely
a. liable for breach of the duty of care.
b. not liable for breach of the duty of care.
c. liable for breach of duty of loyalty.
d. liable for violation of the business judgment rule.
Q:
RayAnn is a corporate officer for Timmy's Trees, Inc. As a corporate officer, RayAnn is
a. the head of the board of directors.
b. involved in the day-to-day operations of Timmy's Trees.
c. not involved in the day-to-day operations of Timmy's Trees.
d. in charge of selecting members of the board of directors.
Q:
The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the minimum number of these directors
a. who must be at odds in a dispute to call for its resolution.
b. who must be present to validly transact business.
c. that the shareholders may remove from office at any one time.
d. whose positions must be vacant to warrant an election.
Q:
Great Gates, Inc. has a board of ten directors. Great Gates' bylaws do not state any quorum requirements. In most states, a quorum for Great Gates will be defined as
a. two directors.
b. six directors.
c. nine directors.
d. ten directors.
Q:
Doyle and Emily are officers of Fresh Bottled Water Corporation. As corporate officers, their compensation is determined by Fresh's
a. directors.
b. incorporators.
c. other officers.
d. shareholders.
Q:
Dennis is a promoter for the soon-to-be-incorporated firm of eBroadcast Sports, Inc. Dennis signs a contract with Fitz & Geraldo, Accountants, to render their services before eBroadcast Sports is incorporated and for one year after the incorporation. eBroadcast Sports is incorporated. Three months later, after Fitz & Geraldo has continued performing under the contract, the eBroadcast Sports board of directors tells the accountants that it is canceling their contract. Fitz & Geraldo files a suit against Dennis and eBroadcast Sports, alleging breach of contract. Will Fitz & Geraldo prevail?
Q:
Starr Cardio, Inc., is a small business. Ted, Uma, and eleven other members of the Starr family own all of its stock. Currently, Starr's income is taxed at the corporate level and, after being distributed to the family members, at the shareholder level. Can Starr retain its corporate status but otherwise avoid this double taxation? If so, how?
Q:
Qiara is a holder of preferred stock in Rio Grande Irrigation & Development, Inc. Qiara has priority over holders of Rio common stock as to
a. nothing.
b. payments of dividends.
c. the date on which Rio must repurchase the shares.
d. upward changes in the market price of the shares.
Q:
Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they
a. are guaranteed to receive more than the amount of their investment.
b. are the last to receive returns for their investment.
c. have priority to the firm's assets if it becomes insolvent.
d. reside in the state of the firm's incorporation.
Q:
Lyla is a common shareholder in Norman's Nutty Nuts Corporation. As a common shareholder, Lyla is
a. guaranteed regular payments of dividends.
b. not guaranteed any payments of dividends.
c. not given any voting rights.
d. liable for all of Norman's Nutty Nuts's debts.
Q:
Urban Commerce, Inc., issues bonds, which are also known as
a. cumulative investments.
b. fixed-income securities.
c. equity securities.
d. preferred stock.
Q:
Perfect Tone Phones, Inc. is a corporation. Perfect Tone's implied powers enable it to
a. amend the articles of incorporation.
b. bring a derivative suit.
c. declare dividends.
d. borrow funds, extend credit, and make charitable contributions.
Q:
O.K. Oil holds itself out to others as being a corporation but makes no attempt to incorporate. In this circumstance, O.K. is most likely
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. ultra vires.
Q:
Luke is an owner of Lucky Luke's Corporation. Luke uses the corporate entity of Lucky Luke's to perpetuate fraud. In this case, a court is likely to expose Luke to personal liability by
a. piercing the corporate veil.
b. issuing a de facto judgment.
c. issuing a de jure judgment.
d. issuing a ultra vires judgment.
Q:
Memphis Music Makers Incorporated has a stated purpose to sell musical instruments. If chief executive officer Tabitha contracts with Frenzied Firearms in Memphis Music Makers's name to sell a shotgun, she has likely committed
a. an ultra vires act.
b. a de facto act.
c. a de jure act.
d. a legal act.
Q:
When a conflict arises among the documents that involve Express Flights Corporation, the first priority for resolving the conflict is given to
a. resolutions of the board of directors.
b. Express Flights's bylaws.
c. state statues.
d. the U.S. Constitution.
Q:
Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, at common law Wings2Go is most likely
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. ultra vires.
Q:
The articles of Equestrian Stables Inc. list an incorrect address for its incorporator. Under this circumstance, Equestrian Stables is most likely
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. ultra vires.
Q:
Custom Business Applications Corporation substantially complies with all conditions precedent to incorporation. Custom Business is most likely
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. ultra vires.
Q:
Olinka is a registered agent for Pads, Pods & Phones, Inc., which incorporated in California. As a registered agent, Olinka
a. agreed to buy stock in Pads, Pods & Phones before it existed.
b. applied to California on behalf of Pads, Pods & Phones to obtain its corporate charter.
c. represents Pads, Pods & Phones as a marketing agent.
d. receives legal documents on behalf of Pads, Pods & Phones.
Q:
Like the bylaws of other corporations, the bylaws of Retail Sales, Inc.,
a. establish the operating name of the corporation.
b. establish the value and classes of corporate stock.
c. were adopted at its first organizational meeting.
d. were submitted for approval to the public official in charge.
Q:
Stan incorporates his scientific products business as Tech Supply, Inc. Unless the articles of incorporation state otherwise, Tech Supply most likely has
a. a finite, yet-to-be-determined existence.
b. a one-year, nonrenewable existence.
c. a one-year, renewable existence.
d. perpetual existence.
Q:
Myron and Norah would like to form Originals, Inc., to do business in the art market. Generally, the articles of incorporation for a corporation do not include
a. the corporate name.
b. the nature and purpose of the corporation.
c. the capital structure of the corporation.
d. the minutes of the first organizational meeting.
Q:
Breads & Brews, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of
a. each of the corporation's incorporators.
b. each of the corporation's shareholders.
c. the corporation.
d. the corporation's initial registered agent.
Q:
The abbreviation "P.A." in the name "Conrad & Drake, Accountants, P.A." means that this organization is
a. a private association.
b. a professional association.
c. a public association.
d. a publicly administered corporation.
Q:
Hudson and Ilka want to market a new line of kayaks and related gear under the brand name Journeys as a corporationJourneys Inc. To avoid income taxes at the corporate level, they should form
a. a C corporation.
b. a close corporation.
c. an S corporation.
d. a private corporation.
Q:
Yellowbox, a DVD rental company, would like to change its corporate status to that of an S corporation to avoid income taxes at the corporate level. To qualify, Yellowbox must
a. be located in the United States.
b. have more than one hundred shareholders.
c. be a non-profit corporation.
d. have more than one class of stock.
Q:
Boutique Corporation would like to change its corporate status to that of an S corporation to avoid income taxes at the corporate level. To qualify, the shareholders must not be
a. corporations.
b. estates.
c. individuals.
d. partnerships.
Q:
Miracle Mobile Devices, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufacturing and distributing a newly patented tablet, (2) is owned by five shareholders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Miracle is
a. an S corporation.
b. a close corporation.
c. a nonprofit corporation.
d. a professional corporation.
Q:
Smalltown, Alabama is incorporated by the government. Smalltown is
a. a foreign corporation.
b. a public corporation.
c. a private corporation.
d. an alien corporation.
Q:
The shares of Home Mortgage Corporation are publicly traded in securities markets. Home Mortgage Corporation is
a. a close corporation.
b. a privately held corporation.
c. a public corporation.
d. a publicly held corporation.
Q:
Bay City Merchants Corporation has six shareholders, four of whom are members of the same family. All of Bay City's shareholders agree in writing to operate without shareholders' meetings. Under the Revised Model Business Corporation Act, this most likely warrants
a. no penalties or sanctions.
b. the imposition of a fine on Bay City.
c. the imprisonment of Bay City's shareholders.
d. the piercing of Bay City's corporate veil.
Q:
A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate for a purpose other than making a profit. SDC is
a. a foreign corporation.
b. an alien corporation.
c. a nonprofit corporation.
d. not a corporation.
Q:
Wiley incorporates his business as Wiley Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing wire. Wiley Wire Corporation is
a. a nonprofit corporation.
b. not a corporation.
c. an alien corporation.
d. a private corporation.
Q:
Painless Dental Equipment Company is incorporated in Colorado. In Wyoming, Painless is
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a non-entity.
Q:
Ruby Red Corporation is incorporated in South Carolina. In that state, Ruby Red is
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a non-entity.
Q:
Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is
a. a natural person.
b. a tangible thing.
c. an artificial legal person.
d. a visible radiance.
Q:
Erin is a shareholder in African Adventures. As a shareholder, Erin
a. owns shares of stock in African Adventures.
b. is the founder of African Adventures.
c. has no say in the election of African Adventure's board of directors.
d. is liable for all the debts of African Adventures.
Q:
George is the founder of Excellent Exotics Corporation. Wilson is a shareholder and director and Bill is an officer. The daily business operations of Excellent Exotics are overseen by
a. Bill.
b. Wilson.
c. George.
d. George and Wilson.
Q:
Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen's officers. As in other corporations, the responsibility for the overall management of Kleen rests with
a. the board of directors.
b. the officers.
c. the owners.
d. the shareholders.
Q:
Pola and Quincey want to form and do business as River Tours Corporation. A corporation can consist of
a. no natural persons.
b. one natural person but not more.
c. one or more natural persons.
d. only more than one natural person.
Q:
Skyla and Terry want to form and do business as Unique Boutique Corporation. Its existence depends generally on
a. city or county corporate codes.
b. the Entrepreneur's Corporate Handbook.
c. the federal Administrative Procedure Act.
d. state law.
Q:
Any person who buys preferred stock has priority over a holder of common stock to payment on the corporation's dissolution.
Q:
The date when the principal of a bond is returned to the investor is called the maturity date.
Q:
Bonds represent the borrowing of funds by firms.
Q:
A court will pierce the corporate veil of a corporation that is formed to evade an existing legal obligation.
Q:
In the absence of express constitutional, statutory, or other provisions, the corporation has no implied powers.
Q:
A corporation has an implied power to extend credit to those with whom it has a legal or contractual relationship.
Q:
Express powers of a corporation can be found in the articles of incorporation.
Q:
A state constitution may resolve a conflict among documents involving a corporation.
Q:
A business that holds itself out as being a corporation may not be able to deny corporate status, even if it makes no attempt to incorporate.
Q:
A de jure corporation is one that is not properly formed.
Q:
The registered agent is the person who can receive legal punishment (such as fines and imprisonment) on behalf of the corporation.
Q:
The articles of incorporation serve as a primary source of authority for the corporation's future organization and business functions.
Q:
Bylaws are the internal rules of management for a corporation.
Q:
A corporation has perpetual existence in most states unless the articles of incorporation state otherwise.
Q:
The purpose of a corporation may be specified in its articles of incorporation.
Q:
A corporate name must include the word Corporation, Incorporated, Company, or Limited, or abbreviations of these terms.
Q:
Selecting the state in which to incorporate is an important step in the incorporation procedure.
Q:
A partnership cannot be a shareholder in an S corporation.
Q:
A close corporation can operate as an S corporation.
Q:
If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.
Q:
A corporation whose shares are held by relatively few persons is a close corporation.
Q:
The Revised Model Business Corporation Act gives a close corporation less flexibility in determining its rules of operation.