Question 1

The concept of centralized management indicates that the management of the corporation is separated from the ownership of the corporation.

Accepted Answer

A) True 
 B)False  True

Question 2

Generally,in order to adopt an amendment to the articles of incorporation of an existing corporation,what must be done?

Accepted Answer

A)  The shareholders must vote in favor of the amendment. 
B)  The promoters must file the amendment in the state of incorporation. 
C)  The board of directors must adopt a resolution recommending the amendment and the shareholders must vote to approve the amendment. 
D)  The board of directors must adopt a resolution approving the amendment. 
E)  The board of directors must vote on the amendment as provided in the bylaws. 
A)  The shareholders must vote in favor of the amendment. 
B)  The promoters must file the amendment in the state of incorporation. 
C)  The board of directors must adopt a resolution recommending the amendment and the shareholders must vote to approve the amendment. 
D)  The board of directors must adopt a resolution approving the amendment. 
E)  The board of directors must vote on the amendment as provided in the bylaws. C

Question 3

Is it ethical for someone who is forming a risky business to use a form of business that limits that person's personal liability,when the person doing so knows that this will increase the chances that the creditors of a business will not fully collect amounts due to them? Explain your reasoning.

Accepted Answer

There are risks in all business transactions,and as long as all concerned parties are aware of who can and who cannot be held liable in a situation,then this should probably be left to the marketplace in most instances.

Question 4

A corporation must generally choose a state for incorporation where it has a business presence.

Accepted Answer

A) True 
 B)False

Question 5

Park districts may be formed as corporations.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following generally does not need to be included with the articles of incorporation?

Accepted Answer

A)  the period of duration of the corporation 
B)  the classes and preferences of stock 
C)  whether preemption rights are given to the stockholders 
D)  a copy of the bylaws 
E)  the names of the incorporators 
A)  the period of duration of the corporation 
B)  the classes and preferences of stock 
C)  whether preemption rights are given to the stockholders 
D)  a copy of the bylaws 
E)  the names of the incorporators

Question 7

A private corporation is one which:

Accepted Answer

A)  has a small number of owners who are often members of the same family 
B)  does not prepare financial statements 
C)  is owned by private entities 
D)  does not make public disclosure of information 
A)  has a small number of owners who are often members of the same family 
B)  does not prepare financial statements 
C)  is owned by private entities 
D)  does not make public disclosure of information

Question 8

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

Question 9

The bylaws of a corporation must be filed with the appropriate government official.

Accepted Answer

A) True 
 B)False

Question 10

The articles of incorporation must be approved by the state before the corporation can officially come into existence.

Accepted Answer

A) True 
 B)False

Question 11

A nonprofit corporation is:

Accepted Answer

A)  any corporation that has never made a profit 
B)  any corporation that does not intend to make a profit 
C)  a corporation formed for charitable,educational,religious,or scientific purposes that cannot make a profit 
D)  a corporation formed for charitable,educational,religious,or scientific purposes that can make a profit,although any profit may not be distributed to its members,officers,or directors 
A)  any corporation that has never made a profit 
B)  any corporation that does not intend to make a profit 
C)  a corporation formed for charitable,educational,religious,or scientific purposes that cannot make a profit 
D)  a corporation formed for charitable,educational,religious,or scientific purposes that can make a profit,although any profit may not be distributed to its members,officers,or directors

Question 12

John buys a particular issue of stock that carries a stated dividend rate of 8 percent per year; that if this dividend is not paid during a particular year,it will not be paid in a subsequent year before common stock dividends are paid; that John can exchange the stock for common stock in the future,at a specified exchange price; and that if the corporation wants to,it may buy the stock back from John at $50 per share.This stock is best described as:

Accepted Answer

A)  noncumulative,convertible,redeemable preferred 
B)  cumulative,convertible,participating preferred 
C)  noncumulative,redeemable,participating preferred 
D)  cumulative,redeemable,participating preferred 
E)  common 
A)  noncumulative,convertible,redeemable preferred 
B)  cumulative,convertible,participating preferred 
C)  noncumulative,redeemable,participating preferred 
D)  cumulative,redeemable,participating preferred 
E)  common

Question 13

Eric,Becky,and Brenda are all licensed medical doctors who form a professional corporation,Dr.Inc.,to practice medicine.They are the only shareholders.Eric negligently operates on a patient,George,seriously injuring him.George sues Dr.Inc.,Eric,Becky,and Brenda for malpractice.Assuming that the general rules of corporate liability apply,from whom may George recover?

Accepted Answer

A)  nobody 
B)  Eric only 
C)  Dr. Inc. only 
D)  either Eric or Dr. Inc 
E)  either Eric,Dr. Inc.,Becky,or Brenda 
A)  nobody 
B)  Eric only 
C)  Dr. Inc. only 
D)  either Eric or Dr. Inc 
E)  either Eric,Dr. Inc.,Becky,or Brenda

Question 14

The liquidation preference of preferred stock means that preferred shareholders receive more in the event of a corporation's liquidation.

Accepted Answer

A) True 
 B)False

Question 15

Amy is the promoter of JKL Corporation.Before the corporation comes into existence,Amy leases office space for its headquarters.Amy signs the contract,"Amy for JKL Corporation." Due to unforeseen difficulties,JKL never comes into existence.The landlord,however,still wants Amy to pay for the office space.Amy refuses and the landlord sues.The outcome will most likely be which of the following?

Accepted Answer

A)  The landlord wins. 
B)  Amy wins,because the corporation is liable on the contract. 
C)  Amy wins,because,as the corporation never came into existence,the contract is void. 
D)  Amy wins,because the contract was ratified by the corporation. 
E)  Amy wins,because there was a valid novation. 
A)  The landlord wins. 
B)  Amy wins,because the corporation is liable on the contract. 
C)  Amy wins,because,as the corporation never came into existence,the contract is void. 
D)  Amy wins,because the contract was ratified by the corporation. 
E)  Amy wins,because there was a valid novation.

Question 16

What is the purpose of having preferred stock in addition to common stock? How is preferred stock similar to and different from common stock and debt?

Accepted Answer

In some cases preferred stock is a bette

Question 17

A state may require a foreign corporation to "qualify" in that state before the corporation may do business within that state.

Accepted Answer

A) True 
 B)False

Question 18

A note is a debt security that has an original maturity of 5 years or less.

Accepted Answer

A) True 
 B)False

Question 19

If a corporation is properly incorporated in one state and wants to do business in a second state,the corporation:

Accepted Answer

A)  must incorporate in the second state 
B)  must do nothing because being incorporated in one state entitles the corporation to do business in all states 
C)  register with the Interstate Commerce Commission 
D)  may be required to obtain a certificate of authority from the second state 
A)  must incorporate in the second state 
B)  must do nothing because being incorporated in one state entitles the corporation to do business in all states 
C)  register with the Interstate Commerce Commission 
D)  may be required to obtain a certificate of authority from the second state

Question 20

What are the advantages and disadvantages of the recently increased ability to limit one's liability when operating a business? Do the advantages outweigh the disadvantages? Should certain kinds of businesses not be permitted to operate with limited liability?

Accepted Answer

With several new forms of business organ

Exam 36: Corporate Formation and Financing

The concept of centralized management indicates that the management of the corporation is separated from the ownership of the corporation.

Generally,in order to adopt an amendment to the articles of incorporation of an existing corporation,what must be done?

Is it ethical for someone who is forming a risky business to use a form of business that limits that person's personal liability,when the person doing so knows that this will increase the chances that the creditors of a business will not fully collect amounts due to them? Explain your reasoning.

A corporation must generally choose a state for incorporation where it has a business presence.

Park districts may be formed as corporations.

Which of the following generally does not need to be included with the articles of incorporation?

A private corporation is one which:

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:

The bylaws of a corporation must be filed with the appropriate government official.

The articles of incorporation must be approved by the state before the corporation can officially come into existence.

A nonprofit corporation is:

The liquidation preference of preferred stock means that preferred shareholders receive more in the event of a corporation's liquidation.

What is the purpose of having preferred stock in addition to common stock? How is preferred stock similar to and different from common stock and debt?

A state may require a foreign corporation to "qualify" in that state before the corporation may do business within that state.

A note is a debt security that has an original maturity of 5 years or less.

If a corporation is properly incorporated in one state and wants to do business in a second state,the corporation:

What are the advantages and disadvantages of the recently increased ability to limit one's liability when operating a business? Do the advantages outweigh the disadvantages? Should certain kinds of businesses not be permitted to operate with limited liability?

Legal Heritage and the Information Age

Court Systems and Jurisdiction

Judicial, Alternative, and Online Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Strict Liability and Product Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crimes

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

Internet Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Sales and Lease Warranties

Creation of Negotiable Instruments

Transferability and Holder In Due Course

Liability,Defenses and Discharge

Checks, the Banking System, and E-Money

Creditor's and Debtor's Rights

Secured Transactions and Electronic Filing

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, Agents, and Independent Contractors

Employment,Worker Protection,and Immigration Laws

Labor Law and Collective Bargaining

Equal Opportunity in Employment

Small Businesses, Entrepreneurs, and General Partnerships

Limited Partnerships and Limited Liability Limited Partnerships

Corporate Governance and the Sarbanes Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchises and Special Forms of Business

Investor Protection and Online Securities Transactions

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection and Global Warming

Antitrust Law and Unfair Trade Practices

Personal Property and Bailment

Real Property

Landlord Tenant Law and Land Use Regulation

Insurance

Accountants' Liability

Wills, Trusts, and Elder Law

Family Law

International and World Trade Law

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