Exam 33: Corporate Formation and Financing

If the procedures for incorporation are not followed precisely, others may be able to challenge the existence of the corporation.

Any corporation whose shares are publicly traded in securities markets is

Pipe Inc.'s stated purpose is to install plumbing. Pipe contracts with Quality Contracting to pour a new building's foundation despite lacking the skill and license to do such work. This is most likely

A corporation is recognized under U.S. law as a person.

To help small businesses raise capital, the Securities and Exchange Commission allows the companies to advertise investment opportunities to the public. This most likely encourages

A corporation needs to be careful about whom it hires because a firm may be liable for the misconduct of its employees.

In many states, close corporations have more flexibility in determining their rules of operation.

Corporate shareholders will most likely be held personally liable for the firm's debts if they

Issuing securities is the only way for a new corporation to raise capital.

A businessperson who enters into a contract with an investor on behalf of a future corporation is not personally liable on the deal, even though the firm is not yet formed, because the nature of investment is risk.

Shareholders' assumption of personal liability, as guarantors, for the obligations of a corporation can enable the firm to obtain credit.

The primary document needed to incorporate a business is the articles of incorporation-the primary source of authority for the firm's organization and functions.