Exam 36: Corporate Formation and Financing

Corporations must be incorporated in the states in which they do most of their business.

One of the characteristics of corporations,especially large corporations,is a separation of ownership and control.Why is there this separation of ownership and control? What are its advantages and disadvantages? What risks does it pose and to whom?

Mary is planning to form a corporation to manufacture and distribute electric solar panels.She will sell the panels only in the Rocky Mountain states.These panels will be manufactured at two factories,one in Illinois and one in Florida.The headquarters of this company will be in Louisiana.In which state(s)could Mary incorporate this business?

Corporations exist in perpetuity unless a specific duration is stated in the corporation's articles of incorporation.

A debenture is a long-term secured debt instrument.

A foreign corporation is one that:

Most corporations are private.

Corporations formed under general incorporating laws may engage in businesses such as banking,insurance,and the operation of public utilities.

Which of the following is not a characteristic of a corporation?

Shareholders are elected by the board of directors so that they can make policy decisions.

Maria has started a computer accessory manufacturing and sales business that she really became involved in accidentally.She never planned to have a business,but had made a certain accessory that her friends thought was interesting,and she made some for them.Suddenly people were paying her,and then she started selling through a Web site.She has never formed any type of business entity.Now that Maria wants to sell these accessories in Japan,she thinks she might need to look into the choice of entity.Discuss Maria's options for her business in the United States,and how she might operate in Japan.

Termination only occurs after the winding up of the corporation's affairs.

The bylaws must be adopted at the organizational meeting of the initial board of directors.

A corporation can be dissolved:

Betty is considering forming a business in Colorado.She is thinking about a business that would rent in-line skates to customers and transport them to the top of Mount Evans,west of Denver.The road up Mount Evans is the highest paved road in the United States and reaches just over 14,000 feet above sea level.Customers could skate from the top at 14,000 feet to a point in a nearby town at about 8,000 feet above sea level.The customers would skate about 35 miles,nearly all of which is downhill.Betty is considering whether or not she should form a corporation to operate this business.What are the advantages and disadvantages of forming a corporation? Is there any way she could avoid or compensate for any of the disadvantages?

What additional factors should one consider in deciding whether to incorporate a business when the business will operate internationally?

Donna formed a corporation several years ago by issuing 500 shares of stock.There are 10 shareholders,with the smallest shareholder owning 25 shares,and Donna holding the most at 100 shares.The corporation needs additional cash,but the current shareholders do not wish to have any additional shareholders.What are their options and what additional factors should the current shareholders consider in raising the additional cash?

Convertible preferred stock is stock that can be converted to stock of another corporation.

A publicly held corporation is one that is owned by a few shareholders who are often family members,relatives,or friends.

Mallard Corporation is incorporated in Iowa and does business in Ohio.This corporation is: