Question 1

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is correct regarding a foreign corporation?

Accepted Answer

A)  A foreign corporation is incorporated in a foreign country. 
B)  Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C)  A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D)  All of these are correct. 
A)  A foreign corporation is incorporated in a foreign country. 
B)  Failure to obtain a certificate of authority to transact business in the state impairs the validity of a contract entered into by the corporation. 
C)  A foreign corporation transacting business within a particular state without having first qualified cannot use the state court to maintain a lawsuit until the corporation obtains a certificate of authority. 
D)  All of these are correct.

Question 3

Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the business from Jack, who believed that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a perm and the solution caused her customer severe burns. The customer sued the Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the Revised Model Act, what would be the result?

Accepted Answer

A)  Claire and Jack would not be personally liable. 
B)  Claire would not be personally liable, but Jack would. 
C)  Jack would not be personally liable, but Claire would. 
D)  Both would be personally liable since there was no corporation formed. 
A)  Claire and Jack would not be personally liable. 
B)  Claire would not be personally liable, but Jack would. 
C)  Jack would not be personally liable, but Claire would. 
D)  Both would be personally liable since there was no corporation formed.

Question 4

The Revised Act authorizes shareholders in closely held corporations to adopt shareholder agreements that depart from statutory norms by altering the governance of the corporation. These agreements:

Accepted Answer

A)  are effective if adopted by a majority of the shareholders. 
B)  are valid for the life of the corporation unless a new agreement is reached. 
C)  are binding on shareholders, the state, creditors, and other third parties. 
D)  terminate automatically if the corporation's shares are traded publicly. 
A)  are effective if adopted by a majority of the shareholders. 
B)  are valid for the life of the corporation unless a new agreement is reached. 
C)  are binding on shareholders, the state, creditors, and other third parties. 
D)  terminate automatically if the corporation's shares are traded publicly.

Question 5

Name the classifications of corporations.

Accepted Answer

Corporations may be classified

Question 6

Zeron Corporation is incorporated in the state of West Virginia. It now wants to open a retail outlet in Kentucky. Zeron must obtain a certificate qualifying it to do business in the state of Kentucky.

Accepted Answer

A) True 
 B)False

Question 7

Most states have special incorporation statutes governing nonprofit corporations.

Accepted Answer

A) True 
 B)False

Question 8

"Piercing the corporate veil" will result in personal liability of shareholders.

Accepted Answer

A) True 
 B)False

Question 9

What is a Subchapter S Corporation, and what are its requirements?

Accepted Answer

Subchapter S of the Internal Revenue Cod

Question 10

The City of Chicago would best be described as which of the following?

Accepted Answer

A)  A corporation formed pursuant to the Model Business Corporation Act. 
B)  A close corporation. 
C)  A public corporation. 
D)  A domestic corporation. 
A)  A corporation formed pursuant to the Model Business Corporation Act. 
B)  A close corporation. 
C)  A public corporation. 
D)  A domestic corporation.

Question 11

The Model Business Corporation Act is a state statute that, like the UCC, has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following may influence a promoter to choose to incorporate in a particular state?

Accepted Answer

A)  Corporate laws. 
B)  State government that is business-friendly, efficient, and accessible. 
C)  The state court system. 
D)  All of these. 
A)  Corporate laws. 
B)  State government that is business-friendly, efficient, and accessible. 
C)  The state court system. 
D)  All of these.

Question 13

Opal, a promoter of Victory Corporation, has a fiduciary duty to:

Accepted Answer

A)  any other promoters of Victory Corporation. 
B)  only Victory Corporation. 
C)  the initial shareholders of Victory Corporation. 
D)  A ny other promoters of Victory Corporation and also  the initial shareholders of Victory Corporation. 
A)  any other promoters of Victory Corporation. 
B)  only Victory Corporation. 
C)  the initial shareholders of Victory Corporation. 
D)  A ny other promoters of Victory Corporation and also  the initial shareholders of Victory Corporation.

Question 14

Under the Revised Act, the filing of the articles of incorporation by the secretary of state is conclusive proof that the incorporators have satisfied all conditions precedent to incorporation so that a shareholder or creditor would be unable to challenge the existence of the corporation.

Accepted Answer

A) True 
 B)False

Question 15

The Statutory Close Corporation Supplement to the Model and Revised Acts applies only to corporations having fewer than 100 shareholders that elect statutory close corporation status.

Accepted Answer

A) True 
 B)False

Question 16

The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable?

Accepted Answer

A)  Yes, under the doctrine of ultra vires . 
B)  Yes, since the president authorized the crime. 
C)  No, because a corporation cannot go to jail. 
D)  Yes, under the doctrine of  ultra vires and also  since the president authorized the crime. 
A)  Yes, under the doctrine of ultra vires . 
B)  Yes, since the president authorized the crime. 
C)  No, because a corporation cannot go to jail. 
D)  Yes, under the doctrine of  ultra vires and also  since the president authorized the crime.

Question 17

Bill Bonney, the sole stockholder of Kidd Corporation, wrongfully used the corporation to avoid a personal liability. A court order that disregards the corporate entity and holds Bonney personally liable is called:

Accepted Answer

A)  limited liability. 
B)  ultra vires. 
C)  diversity of interest. 
D)  piercing the corporate veil. 
A)  limited liability. 
B)  ultra vires. 
C)  diversity of interest. 
D)  piercing the corporate veil.

Question 18

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is correct regarding the characteristics of a corporation?

Accepted Answer

A)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause. 
B)  The Fifth Amendment provisions against self-incrimination protect a corporation. 
C)  A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
D)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause and  is also protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
A)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause. 
B)  The Fifth Amendment provisions against self-incrimination protect a corporation. 
C)  A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures. 
D)  A corporation is considered a person within the meaning of the Fourteenth Amendment's equal protection clause and  is also protected by the Fourth Amendment's provision against unreasonable searches and seizures.

Question 20

What are the principal attributes of a corporation?

Accepted Answer

(a) It is a legal entity. 
(b) It owes i

Exam 33: Nature and Formation of Corporations

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Which of the following is correct regarding a foreign corporation?

The Revised Act authorizes shareholders in closely held corporations to adopt shareholder agreements that depart from statutory norms by altering the governance of the corporation. These agreements:

Name the classifications of corporations.

Zeron Corporation is incorporated in the state of West Virginia. It now wants to open a retail outlet in Kentucky. Zeron must obtain a certificate qualifying it to do business in the state of Kentucky.

Most states have special incorporation statutes governing nonprofit corporations.

"Piercing the corporate veil" will result in personal liability of shareholders.

What is a Subchapter S Corporation, and what are its requirements?

The City of Chicago would best be described as which of the following?

The Model Business Corporation Act is a state statute that, like the UCC, has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

Which of the following may influence a promoter to choose to incorporate in a particular state?

Opal, a promoter of Victory Corporation, has a fiduciary duty to:

Under the Revised Act, the filing of the articles of incorporation by the secretary of state is conclusive proof that the incorporators have satisfied all conditions precedent to incorporation so that a shareholder or creditor would be unable to challenge the existence of the corporation.

The Statutory Close Corporation Supplement to the Model and Revised Acts applies only to corporations having fewer than 100 shareholders that elect statutory close corporation status.

The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable?

Bill Bonney, the sole stockholder of Kidd Corporation, wrongfully used the corporation to avoid a personal liability. A court order that disregards the corporate entity and holds Bonney personally liable is called:

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

Which of the following is correct regarding the characteristics of a corporation?

What are the principal attributes of a corporation?

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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