Question 1

Explain requirements for formation of an S corporation.

Accepted Answer

To qualify for S corporation status,a co

Question 2

Which of the following is true regarding taxation of losses of a C corporation?

Accepted Answer

A)  The operating loss is passed on to shareholders, but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level, and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level, shareholders receive no tax benefit, and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction, they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10% of the losses per year. 
A)  The operating loss is passed on to shareholders, but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level, and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level, shareholders receive no tax benefit, and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction, they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10% of the losses per year.

Question 3

Define class voting. Why would a group of investors be interested in a guarantee of class voting?

Accepted Answer

Class voting occurs when the charter or

Question 4

If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith,a court may treat the entity as a(n)________.

Accepted Answer

A)  de jure corporation 
B)  real corporation 
C)  de facto corporation 
D)  equitable corporation 
A)  de jure corporation 
B)  real corporation 
C)  de facto corporation 
D)  equitable corporation

Question 5

In most jurisdictions,there is no quorum unless the holders of at least _______ of the outstanding shares are present in person or by proxy.

Accepted Answer

A)  25% 
B)  33% 
C)  50% 
D)  75% 
A)  25% 
B)  33% 
C)  50% 
D)  75%

Question 6

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

Accepted Answer

A) True 
 B)False

Question 7

What did the court rule on appeal in Estate of Countryman v.Farmers Cooperative Association,the case in the text in which the plaintiffs attempted to hold a 95% owner of an LLC personally liable in tort as a manager when propane gas delivered by the LLC exploded?

Accepted Answer

A)  That only the LLC could be held liable. 
B)  That the manager was subject to liability along with the LLC regardless of whether it could be established that the manager participated in tortuous conduct in performing his duties. 
C)  That only the manager, not the LLC, could be held liable. 
D)  That the manager was not protected from liability if he participated in tortuous conduct in performing his duties. 
A)  That only the LLC could be held liable. 
B)  That the manager was subject to liability along with the LLC regardless of whether it could be established that the manager participated in tortuous conduct in performing his duties. 
C)  That only the manager, not the LLC, could be held liable. 
D)  That the manager was not protected from liability if he participated in tortuous conduct in performing his duties.

Question 8

Which of the following statements is not true regarding the characteristics of a corporation?

Accepted Answer

A)  A corporation is a legal entity distinct from its owners. 
B)  A corporation is owned by shareholders. 
C)  The corporation itself is responsible for its liabilities. 
D)  The board of directors implements the decisions of the officers. 
A)  A corporation is a legal entity distinct from its owners. 
B)  A corporation is owned by shareholders. 
C)  The corporation itself is responsible for its liabilities. 
D)  The board of directors implements the decisions of the officers.

Question 9

An S corporation cannot have more than one class of stock.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?

Accepted Answer

A)  A sole proprietorship can be created without formal agreements or state filings. 
B)  The proprietor reports income from the business on a personal tax return. 
C)  The proprietor alone bears liability for the losses. 
D)  It is usually easy for sole proprietorships to raise capital. 
A)  A sole proprietorship can be created without formal agreements or state filings. 
B)  The proprietor reports income from the business on a personal tax return. 
C)  The proprietor alone bears liability for the losses. 
D)  It is usually easy for sole proprietorships to raise capital.

Question 11

A member of the board who also serves as an officer is a(n)________ director.

Accepted Answer

A)  inside 
B)  interested 
C)  outside 
D)  employed 
A)  inside 
B)  interested 
C)  outside 
D)  employed

Question 12

A ________ is a public offer to all the shareholders of a corporation to buy their shares at a stated price.

Accepted Answer

A)  leveraged buy out 
B)  tender offer 
C)  target bid 
D)  merger 
A)  leveraged buy out 
B)  tender offer 
C)  target bid 
D)  merger

Question 13

Cumulative voting allows a greater control by the management interests of a corporation.

Accepted Answer

A) True 
 B)False

Question 14

A creditor of a sole proprietorship may seek recovery only from business assets of the sole proprietorship,not from personal assets of the sole proprietor.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true regarding the effect of the death of a partner on a general partnership?

Accepted Answer

A)  The partnership ceases to exist immediately upon the death of any partner. 
B)  The partnership ceases to exist 10 days after the death of any partner. 
C)  The remaining partners must by operation of law continue the partnership for at least one year. 
D)  Within 90 days, the remaining partners may elect to continue the partnership. 
A)  The partnership ceases to exist immediately upon the death of any partner. 
B)  The partnership ceases to exist 10 days after the death of any partner. 
C)  The remaining partners must by operation of law continue the partnership for at least one year. 
D)  Within 90 days, the remaining partners may elect to continue the partnership.

Question 16

B corporations have no duty to maximize shareholder value even when there is a change of control.

Accepted Answer

A) True 
 B)False

Question 17

Mike owns a small but successful coffee house.He decides to incorporate. Considering only tax benefits,should Mike form a C corporation or a subchapter S corporation and why? Discuss taxation under both forms.

Accepted Answer

Mike should form an S corporation in ord

Question 18

Partners owe each other a duty of care but not a duty of loyalty.

Accepted Answer

A) True 
 B)False

Question 19

In _______ voting,a shareholder can cast one vote for each share the shareholder owns for each nominee whereas in _______ voting,a shareholder may cast all of his or her votes for one nominee or allocate them among the nominees as the shareholder sees fit.

Accepted Answer

A)  cumulative, straight 
B)  absolute, cumulative 
C)  straight, cumulative 
D)  straight, absolute 
A)  cumulative, straight 
B)  absolute, cumulative 
C)  straight, cumulative 
D)  straight, absolute

Question 20

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

Accepted Answer

A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding-up 
A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding-up

Exam 19: Forms of business organizations

Explain requirements for formation of an S corporation.

Which of the following is true regarding taxation of losses of a C corporation?

Define class voting. Why would a group of investors be interested in a guarantee of class voting?

If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith,a court may treat the entity as a(n)________.

In most jurisdictions,there is no quorum unless the holders of at least _______ of the outstanding shares are present in person or by proxy.

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

What did the court rule on appeal in Estate of Countryman v.Farmers Cooperative Association,the case in the text in which the plaintiffs attempted to hold a 95% owner of an LLC personally liable in tort as a manager when propane gas delivered by the LLC exploded?

Which of the following statements is not true regarding the characteristics of a corporation?

An S corporation cannot have more than one class of stock.

Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?

A member of the board who also serves as an officer is a(n)________ director.

A ________ is a public offer to all the shareholders of a corporation to buy their shares at a stated price.

Cumulative voting allows a greater control by the management interests of a corporation.

A creditor of a sole proprietorship may seek recovery only from business assets of the sole proprietorship,not from personal assets of the sole proprietor.

Which of the following is true regarding the effect of the death of a partner on a general partnership?

B corporations have no duty to maximize shareholder value even when there is a change of control.

Mike owns a small but successful coffee house.He decides to incorporate. Considering only tax benefits,should Mike form a C corporation or a subchapter S corporation and why? Discuss taxation under both forms.

Partners owe each other a duty of care but not a duty of loyalty.

In _______ voting,a shareholder can cast one vote for each share the shareholder owns for each nominee whereas in _______ voting,a shareholder may cast all of his or her votes for one nominee or allocate them among the nominees as the shareholder sees fit.

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

law, value creation, and risk management

Ethics ant the law

Courts, sources of law, and dispute resolution

Constitutional bases for business regulation

Agency

Administrative Law

Contracts

sales,licensing,and e-commerce

Torts and Privacy protection

product liability

Intellectual property

The employment agreement

civil rights and employment discrimination

Criminal law

Environmental law

Antitrust

Consumer Protection

real property and land use

Directors, Officers, and Controlling Shareholders

Public and Private Offerings of Securities

Securities Fraud and insider trading

Debtor-Creditor Relations and Bankruptcy

International Business

Filters

In _ voting,a shareholder can cast one vote for each share the shareholder owns for each nominee whereas in _ voting,a shareholder may cast all of his or her votes for one nominee or allocate them among the nominees as the shareholder sees fit.