Question 1

Shareholders have unlimited liability that can exceed the extent of their capital contributions.

Accepted Answer

A) True 
 B)False

Question 2

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:

Accepted Answer

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

Question 3

In a corporation,out of the number of shares authorized,the number outstanding,and the number issued,which must be at least as large as the other two?

Accepted Answer

A)  issued 
B)  outstanding 
C)  authorized 
D)  None of these are correct. 
A)  issued 
B)  outstanding 
C)  authorized 
D)  None of these are correct.

Question 4

If preferred stock is "participating," this means that the preferred shareholders:

Accepted Answer

A)  are entitled to share,to some extent,in dividends over and above the stated dividend on the preferred stock 
B)  are entitled to vote along with common shareholders 
C)  have an absolute right to receive their dividends 
D)  are part of the management of the corporation 
E)  are not entitled to preference in receiving dividends 
A)  are entitled to share,to some extent,in dividends over and above the stated dividend on the preferred stock 
B)  are entitled to vote along with common shareholders 
C)  have an absolute right to receive their dividends 
D)  are part of the management of the corporation 
E)  are not entitled to preference in receiving dividends

Question 5

A corporation can sue or be sued in its own name.

Accepted Answer

A) True 
 B)False

Question 6

Huey,Dewey and Louie form a corporation.Each member has equal shares,and Huey is designated as the CEO.Dewey and Louis are not corporate officers.The company borrows $1,000,000 from the Bank of Donald.Within the year,the company goes broke and out of business,through no fault of the organization.The company has only about $100,000 of assets when the business goes under.How will the bank recover its money?

Accepted Answer

A)  The bank will take the $100,000 in assets,and Huey,Dewey and Louie will each be liable for $300,000 of the loan. 
B)  The bank will take the $100,000 in assets,and Huey will be liable for the remaining $900,000. 
C)  The bank will take the $100,000 in assets,and can choose to go after each shareholder Huey,Dewey and Louie,if any individual is solvent. 
D)  The bank will take the $100,000 in assets,and take a loss on the remaining $900,000 balance. 
A)  The bank will take the $100,000 in assets,and Huey,Dewey and Louie will each be liable for $300,000 of the loan. 
B)  The bank will take the $100,000 in assets,and Huey will be liable for the remaining $900,000. 
C)  The bank will take the $100,000 in assets,and can choose to go after each shareholder Huey,Dewey and Louie,if any individual is solvent. 
D)  The bank will take the $100,000 in assets,and take a loss on the remaining $900,000 balance.

Question 7

Which of the following is not true about promoters of a corporation?

Accepted Answer

A)  A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,after the corporation is formed,the third party agrees to a novation. 
B)  A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,at the time the contract is entered into,the third party agrees to a novation to occur automatically upon the valid creation of the corporation. 
C)  The creation of the corporation does not automatically release the promoter from contracts entered into on behalf of the corporation. 
D)  If the corporation fails to come into existence,the promoter cannot be held liable on a contract entered into on behalf of the corporation. 
A)  A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,after the corporation is formed,the third party agrees to a novation. 
B)  A promoter can be relieved of liability on a contract entered into on behalf of a corporation with a third party if,at the time the contract is entered into,the third party agrees to a novation to occur automatically upon the valid creation of the corporation. 
C)  The creation of the corporation does not automatically release the promoter from contracts entered into on behalf of the corporation. 
D)  If the corporation fails to come into existence,the promoter cannot be held liable on a contract entered into on behalf of the corporation.

Question 8

A promoter can be held liable on a contract entered into on behalf of a corporation that is not yet formed.

Accepted Answer

A) True 
 B)False

Question 9

The Revised Model Business Corporation Act is a federal statute effecting corporations.

Accepted Answer

A) True 
 B)False

Question 10

A corporation formed for scientific purposes would be a profit corporation.

Accepted Answer

A) True 
 B)False

Question 11

The DEF Corporation is incorporated in Texas.It wishes to do business in Oklahoma.Before DEF can legally do business in Oklahoma,which of the following must it do?

Accepted Answer

A)  Nothing; DEF automatically has a constitutional right to do business in Oklahoma. 
B)  DEF must incorporate in Oklahoma. 
C)  DEF must qualify (register) to do business in Oklahoma. 
D)  DEF must domicile itself in Oklahoma. 
E)  Since DEF is a Texas corporation,it cannot do business in Oklahoma. 
A)  Nothing; DEF automatically has a constitutional right to do business in Oklahoma. 
B)  DEF must incorporate in Oklahoma. 
C)  DEF must qualify (register) to do business in Oklahoma. 
D)  DEF must domicile itself in Oklahoma. 
E)  Since DEF is a Texas corporation,it cannot do business in Oklahoma.

Question 12

Corporations generally become bound to promoters' contracts as soon as the corporation is formed.

Accepted Answer

A) True 
 B)False

Question 13

Rover Corporation is a regular corporation that has not elected S corporation status.In 1992,Rover earns $100,000; in 1993,Rover distributes $50,000 to its shareholders.Which of the following best describes the tax consequences to Rover and its shareholders?

Accepted Answer

A)  The shareholders are taxed on $100,000 in 1992; Rover is not subject to tax. 
B)  Rover is taxed on $100,000 in 1992; the shareholders are not subject to tax. 
C)  Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1992. 
D)  Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1993. 
E)  Neither Rover nor its shareholders are subject to tax. 
A)  The shareholders are taxed on $100,000 in 1992; Rover is not subject to tax. 
B)  Rover is taxed on $100,000 in 1992; the shareholders are not subject to tax. 
C)  Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1992. 
D)  Rover is taxed on $100,000 in 1992; the shareholders are taxed on $50,000 in 1993. 
E)  Neither Rover nor its shareholders are subject to tax.

Question 14

A "closely held corporation" is a corporation that is owned by:

Accepted Answer

A)  a large number of members of the public 
B)  the government 
C)  doctors,lawyers,or other professionals 
D)  a few shareholders,usually family members 
E)  a nonprofit organization 
A)  a large number of members of the public 
B)  the government 
C)  doctors,lawyers,or other professionals 
D)  a few shareholders,usually family members 
E)  a nonprofit organization

Question 15

Larry was asked by one of his clients how to define a nonprofit corporation.Larry was unsure,so he asks you for help.Which of the following best describes the essence of nonprofit corporations?

Accepted Answer

A)  They are usually created for charitable,educational,scientific,or religious purposes. 
B)  They may not make a profit. 
C)  They may make a profit,but the profit cannot benefit any officer,director,or member. 
D)  A and B only 
E)  A and C only 
A)  They are usually created for charitable,educational,scientific,or religious purposes. 
B)  They may not make a profit. 
C)  They may make a profit,but the profit cannot benefit any officer,director,or member. 
D)  A and B only 
E)  A and C only

Question 16

Professional corporations in some states do not provide limited liability with respect to the professional malpractice of other shareholders.

Accepted Answer

A) True 
 B)False

Question 17

A corporation is a domestic corporation in the state in which it is incorporated.

Accepted Answer

A) True 
 B)False

Question 18

The Zazu-Zazu Corporation has recently hit upon hard times.It has been sued several times,and,after being executed on,two judgments remain unsatisfied.Zazu-Zazu has failed to file its last two annual reports.In these circumstances,who can have Zazu-Zazu dissolved?

Accepted Answer

A)  the board with approval of a majority of the shareholders 
B)  the secretary of state 
C)  the creditors 
D)  A and B only 
E)  A,B,and C 
A)  the board with approval of a majority of the shareholders 
B)  the secretary of state 
C)  the creditors 
D)  A and B only 
E)  A,B,and C

Question 19

The City of Maysville has formed a separate corporation to operate the water system for the city.This corporation is best described as what type of corporation?

Accepted Answer

A)  public 
B)  private 
C)  profit 
D)  nonprofit 
E)  closely held 
A)  public 
B)  private 
C)  profit 
D)  nonprofit 
E)  closely held

Question 20

Which of the following is true?

Accepted Answer

A)  Foreign corporations and alien corporations both refer to corporations incorporated in other nations. 
B)  Foreign corporations are corporations that are formed in other nations originally,but are now incorporated in the local state. 
C)  Alien corporations are corporations that are incorporated in other nations,and foreign corporations are corporations that are incorporated in other states. 
D)  The law of most states usually treats alien corporations and foreign corporations differently. 
A)  Foreign corporations and alien corporations both refer to corporations incorporated in other nations. 
B)  Foreign corporations are corporations that are formed in other nations originally,but are now incorporated in the local state. 
C)  Alien corporations are corporations that are incorporated in other nations,and foreign corporations are corporations that are incorporated in other states. 
D)  The law of most states usually treats alien corporations and foreign corporations differently.

Exam 36: Corporate Formation and Financing

Shareholders have unlimited liability that can exceed the extent of their capital contributions.

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:

In a corporation,out of the number of shares authorized,the number outstanding,and the number issued,which must be at least as large as the other two?

If preferred stock is "participating," this means that the preferred shareholders:

A corporation can sue or be sued in its own name.

Which of the following is not true about promoters of a corporation?

A promoter can be held liable on a contract entered into on behalf of a corporation that is not yet formed.

The Revised Model Business Corporation Act is a federal statute effecting corporations.

A corporation formed for scientific purposes would be a profit corporation.

The DEF Corporation is incorporated in Texas.It wishes to do business in Oklahoma.Before DEF can legally do business in Oklahoma,which of the following must it do?

Corporations generally become bound to promoters' contracts as soon as the corporation is formed.

Rover Corporation is a regular corporation that has not elected S corporation status.In 1992,Rover earns $100,000; in 1993,Rover distributes $50,000 to its shareholders.Which of the following best describes the tax consequences to Rover and its shareholders?

A "closely held corporation" is a corporation that is owned by:

Larry was asked by one of his clients how to define a nonprofit corporation.Larry was unsure,so he asks you for help.Which of the following best describes the essence of nonprofit corporations?

Professional corporations in some states do not provide limited liability with respect to the professional malpractice of other shareholders.

A corporation is a domestic corporation in the state in which it is incorporated.

The Zazu-Zazu Corporation has recently hit upon hard times.It has been sued several times,and,after being executed on,two judgments remain unsatisfied.Zazu-Zazu has failed to file its last two annual reports.In these circumstances,who can have Zazu-Zazu dissolved?

The City of Maysville has formed a separate corporation to operate the water system for the city.This corporation is best described as what type of corporation?

Which of the following is true?

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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