Question 1

The right to be paid before preferred stockholders if the corporation is dissolved and liquidated is called a "liquidation preference."

Accepted Answer

A) True 
 B)False

Question 2

Corporations generate over ________ percent of the United States' gross business receipts.

Accepted Answer

A)  twenty-five 
B)  forty-five 
C)  sixty-five 
D)  eighty-five 
E)  ninety-five 
A)  twenty-five 
B)  forty-five 
C)  sixty-five 
D)  eighty-five 
E)  ninety-five

Question 3

A large corporation will typically choose to incorporate in the state with the laws that are most favorable to the corporation's internal operations.

Accepted Answer

A) True 
 B)False

Question 4

"Par value" is usually an accurate measure of a stock's market value when the stock is originally issued.

Accepted Answer

A) True 
 B)False

Question 5

Why should shareholders of a corporation not be held liable for corporate contracts and torts?

Accepted Answer

It would be very difficult to convince i

Question 6

The board of directors appoints corporate officers to run the corporation's "day-to-day" operations.

Accepted Answer

A) True 
 B)False

Question 7

An organizational meeting of the initial directors of the corporation must be held after the articles of incorporation are filed.

Accepted Answer

A) True 
 B)False

Question 8

A corporation is terminated if a shareholder dies,becomes insane or goes bankrupt.

Accepted Answer

A) True 
 B)False

Question 9

If a corporation has not commenced business or issued any shares,it may be dissolved by a vote of the majority of the incorporators or initial directors.

Accepted Answer

A) True 
 B)False

Question 10

A corporation cannot be found civilly or criminally liable for violations of law.

Accepted Answer

A) True 
 B)False

Question 11

Most cities and towns are formed as "quasi-private" corporations.

Accepted Answer

A) True 
 B)False

Question 12

Corporations are the most dominant form of business organization in the United States.

Accepted Answer

A) True 
 B)False

Question 13

Both the directors and shareholders of Big X Corporation are tired of the business,and want to end it.How should they proceed?

Accepted Answer

A)  The board of directors should recommend dissolution, the shareholders should vote on the issue of dissolution, and assuming there is a majority vote by the shareholders favoring dissolution, articles of dissolution must be filed with the secretary of state in the state of incorporation. 
B)  All that is necessary is a shareholder vote in favor of dissolution. 
C)  All that is necessary is that the board of directors vote in favor of dissolution. 
D)  If both the board of directors and the shareholders vote in favor of dissolution, all business dealings must cease, notice must be placed in newspapers of general circulation, and signs must be posted at all places of business. 
E)  The board of directors should vote, and articles of dissolution must be filed with the secretary of state in the state of incorporation, but there is no requirement that shareholders vote on the issue of dissolution. 
A)  The board of directors should recommend dissolution, the shareholders should vote on the issue of dissolution, and assuming there is a majority vote by the shareholders favoring dissolution, articles of dissolution must be filed with the secretary of state in the state of incorporation. 
B)  All that is necessary is a shareholder vote in favor of dissolution. 
C)  All that is necessary is that the board of directors vote in favor of dissolution. 
D)  If both the board of directors and the shareholders vote in favor of dissolution, all business dealings must cease, notice must be placed in newspapers of general circulation, and signs must be posted at all places of business. 
E)  The board of directors should vote, and articles of dissolution must be filed with the secretary of state in the state of incorporation, but there is no requirement that shareholders vote on the issue of dissolution.

Question 14

If a corporation commits an "ultra vires act," which of the following is not an available remedy?

Accepted Answer

A)  The shareholders may sue for an injunction prohibiting the act. 
B)  The shareholders may sue the corporate officers or directors for damages. 
C)  The state attorney general may bring criminal charges against the corporate officers and/or directors. 
D)  The state attorney general may sue to dissolve the corporation. 
E)  The corporation itself can sue its officers or directors for damages. 
A)  The shareholders may sue for an injunction prohibiting the act. 
B)  The shareholders may sue the corporate officers or directors for damages. 
C)  The state attorney general may bring criminal charges against the corporate officers and/or directors. 
D)  The state attorney general may sue to dissolve the corporation. 
E)  The corporation itself can sue its officers or directors for damages.

Question 15

Which of the following would not be a typical item of business at the organizational meeting of a corporation?

Accepted Answer

A)  adoption of bylaws 
B)  election of corporate officers 
C)  selection of promoters 
D)  authorizing the issuance of shares of stock 
E)  choosing an auditor 
A)  adoption of bylaws 
B)  election of corporate officers 
C)  selection of promoters 
D)  authorizing the issuance of shares of stock 
E)  choosing an auditor

Question 16

The uniform law,issued in 1984 by the Committee on Corporate Laws of the American Bar Association,that regulates the formation,operation and termination of corporations is the:

Accepted Answer

A)  Model Business Corporation Act. 
B)  Uniform Commercial Code. 
C)  Revised Model Business Corporation Act. 
D)  Standard Incorporation Act. 
E)  Revised Standard Incorporation Act. 
A)  Model Business Corporation Act. 
B)  Uniform Commercial Code. 
C)  Revised Model Business Corporation Act. 
D)  Standard Incorporation Act. 
E)  Revised Standard Incorporation Act.

Question 17

Which of the following is true about the purpose(s)of a corporation?

Accepted Answer

A)  A corporation is considered to be formed for any lawful purpose, and can therefore engage in any legal activity. 
B)  A corporation must identify all specific purposes for which it has been formed. 
C)  A corporation can have more than one purpose, but the purposes must be related; if they are not, the state will order the corporation split up into two or more separate corporations. 
D)  A corporation can have either a general purpose or a limited purpose. 
E)  The secretary of state's office will review new filings of articles of incorporation to prevent the formation of too many corporations with identical purposes. 
A)  A corporation is considered to be formed for any lawful purpose, and can therefore engage in any legal activity. 
B)  A corporation must identify all specific purposes for which it has been formed. 
C)  A corporation can have more than one purpose, but the purposes must be related; if they are not, the state will order the corporation split up into two or more separate corporations. 
D)  A corporation can have either a general purpose or a limited purpose. 
E)  The secretary of state's office will review new filings of articles of incorporation to prevent the formation of too many corporations with identical purposes.

Question 18

What is the advantage of an "S" Corporation,in comparison to a partnership?

Accepted Answer

An "S" Corporation is taxed much like a

Question 19

Members of a professional corporation are usually held liable for the torts committed by the corporation's agents or employees.

Accepted Answer

A) True 
 B)False

Question 20

When a promoter enters into a contract on behalf of a corporation that is not yet formed,the corporation will become liable on the contract:

Accepted Answer

A)  at the time the promoter enters into the contract. 
B)  when the corporation comes into existence. 
C)  once the corporation has elected its initial board of directors. 
D)  only if the corporation, once formed, agrees to be liable on the contract. 
E)  only in the case of a novation. 
A)  at the time the promoter enters into the contract. 
B)  when the corporation comes into existence. 
C)  once the corporation has elected its initial board of directors. 
D)  only if the corporation, once formed, agrees to be liable on the contract. 
E)  only in the case of a novation.

Exam 27: Corporate Formation and Financing

The right to be paid before preferred stockholders if the corporation is dissolved and liquidated is called a "liquidation preference."

Corporations generate over ________ percent of the United States' gross business receipts.

A large corporation will typically choose to incorporate in the state with the laws that are most favorable to the corporation's internal operations.

"Par value" is usually an accurate measure of a stock's market value when the stock is originally issued.

Why should shareholders of a corporation not be held liable for corporate contracts and torts?

The board of directors appoints corporate officers to run the corporation's "day-to-day" operations.

An organizational meeting of the initial directors of the corporation must be held after the articles of incorporation are filed.

A corporation is terminated if a shareholder dies,becomes insane or goes bankrupt.

If a corporation has not commenced business or issued any shares,it may be dissolved by a vote of the majority of the incorporators or initial directors.

A corporation cannot be found civilly or criminally liable for violations of law.

Most cities and towns are formed as "quasi-private" corporations.

Corporations are the most dominant form of business organization in the United States.

Both the directors and shareholders of Big X Corporation are tired of the business,and want to end it.How should they proceed?

If a corporation commits an "ultra vires act," which of the following is not an available remedy?

Which of the following would not be a typical item of business at the organizational meeting of a corporation?

The uniform law,issued in 1984 by the Committee on Corporate Laws of the American Bar Association,that regulates the formation,operation and termination of corporations is the:

Which of the following is true about the purpose(s)of a corporation?

What is the advantage of an "S" Corporation,in comparison to a partnership?

Members of a professional corporation are usually held liable for the torts committed by the corporation's agents or employees.

When a promoter enters into a contract on behalf of a corporation that is not yet formed,the corporation will become liable on the contract:

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