Question 1

Incredible eSales Corporation is a new Internet business. How can Incredible eSales obtain capital to finance its operations

Accepted Answer

Generally, to obtain capital, a corporation is sues securi ties, principally stocks and bonds. A security usually represents ei ther an ownership interest in a firm (stock) or a debt owed by the firm (bond). Some debt is also in the form of accounts payable and notes payable, which can, like bonds, be marketed to obtain capital. The two major types of stock are common stock and preferred stock. Other possibilities include venture capital financing and private equity capital. Venture capital is provided by professional, outside investors, who often also offer managerial and technical expertise. In return for their capital and advice, these investors expect to be given some control over the financed firm's decisions. Private equity capital can come from a pool of investors who combine their funds. These investors often expect to buy an entire corporation, however, and reorganize it, selling off parts of the firm to pay debts. Incredible E-Sales, or any business firm, can also obtain capital by borrowing against or selling some of its assets.

Question 2

Bylaws can conflict with the incorporation statute or the articles of incorporation.

Accepted Answer

A) True 
 B)False  False

Question 3

Venture capital is capital provided to new business ventures by professional, outside investors.

Accepted Answer

A) True 
 B)False  True

Question 4

A corporation is a legal entity created and recognized by federal law.

Accepted Answer

A) True 
 B)False

Question 5

Firms are obligated to return a principal amount per share to each holder of common stock.

Accepted Answer

A) True 
 B)False

Question 6

To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability.

Accepted Answer

A) True 
 B)False

Question 7

Jim and Kiley are architects and members of J&K, P.C., a professional corporation. Jim supervises Luc, an employee of the firm. As a member, Jim

Accepted Answer

A)  is personally liable for any tort committed by Kiley. 
B)  has limited liability for any of Kiley's acts of malpractice. 
C)  has no liability for any torts committed by Kiley or Luc. 
D)  may be personally liable for malpractice committed by Luc. 
A)  is personally liable for any tort committed by Kiley. 
B)  has limited liability for any of Kiley's acts of malpractice. 
C)  has no liability for any torts committed by Kiley or Luc. 
D)  may be personally liable for malpractice committed by Luc.

Question 8

A promoter is personally liable for a preincorporation contract until the corporation assumes liability.

Accepted Answer

A) True 
 B)False

Question 9

A corporation generally can engage in any act and enter into any contract available to a natural person.

Accepted Answer

A) True 
 B)False

Question 10

Courts in some states will treat an alleged corporation as if it were an actual corporation for the purpose of determining the rights and liabilities in particular circumstances.

Accepted Answer

A) True 
 B)False

Question 11

A court will not pierce the corporate veil of a corporation that is merely too "thinly" capitalized.

Accepted Answer

A) True 
 B)False

Question 12

Agents and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes If so, how can they be punished

Accepted Answer

Yes, the corporations can be held liable

Question 13

To qualify as a professional corporation, Medical Clinic, P.C.,

Accepted Answer

A)  must be a corporation formed by professionals. 
B)  must grant all shareholders voting rights. 
C)  must have at least thirty-five shareholders. 
D)  all of the choices. 
A)  must be a corporation formed by professionals. 
B)  must grant all shareholders voting rights. 
C)  must have at least thirty-five shareholders. 
D)  all of the choices.

Question 14

The articles of incorporation serve as a primary source of authority for a corporation.

Accepted Answer

A) True 
 B)False

Question 15

Fact Pattern 39-1A
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation’s waste illegally. Orson is a Mountaintop shareholder.
-Refer to Fact Pattern 39-1A. Liability for Niles's act most likely rests with Orson to

Accepted Answer

A)  no extent. 
B)  the proportionate extent of the number of shares Orson owns. 
C)  the amount of Orson's investment in the firm. 
D)  the full extent. 
A)  no extent. 
B)  the proportionate extent of the number of shares Orson owns. 
C)  the amount of Orson's investment in the firm. 
D)  the full extent.

Question 16

Convenience Mart, Inc., is a closely held corporation. Convenience Mart is

Accepted Answer

A)  eligible to make public offerings of securities. 
B)  exempt from filing a certificate of incorporation. 
C)  generally allowed to restrict the transfer of its stock. 
D)  taxed in the same manner as a partnership. 
A)  eligible to make public offerings of securities. 
B)  exempt from filing a certificate of incorporation. 
C)  generally allowed to restrict the transfer of its stock. 
D)  taxed in the same manner as a partnership.

Question 17

For liability purposes, some courts treat professional corporations somewhat like a partnership.

Accepted Answer

A) True 
 B)False

Question 18

A corporation formed in another country but doing business in the United States is referred to in the United States as an alien corporation.

Accepted Answer

A) True 
 B)False

Question 19

Eager Beaver Corporation fails to hold a meeting to adopt bylaws. Under this circumstance, Eager Beaver will still be treated as a legal corporation in those states that recognize the common law doctrine of

Accepted Answer

A)  corporation by estoppel. 
B)  de facto corporation. 
C)  de jure corporation. 
D)  ultra vires. 
A)  corporation by estoppel. 
B)  de facto corporation. 
C)  de jure corporation. 
D)  ultra vires.

Question 20

Omega Corporation makes and markets digital timers, clocks, and related products. Like other business corporations, Omega issues securities to

Accepted Answer

A)  increase its market share. 
B)  obtain financing. 
C)  reduce its production costs. 
D)  safeguard its facilities. 
A)  increase its market share. 
B)  obtain financing. 
C)  reduce its production costs. 
D)  safeguard its facilities.

Exam 39: Corporate Formation and Financing

Incredible eSales Corporation is a new Internet business. How can Incredible eSales obtain capital to finance its operations

Bylaws can conflict with the incorporation statute or the articles of incorporation.

Venture capital is capital provided to new business ventures by professional, outside investors.

A corporation is a legal entity created and recognized by federal law.

Firms are obligated to return a principal amount per share to each holder of common stock.

To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability.

Jim and Kiley are architects and members of J&K, P.C., a professional corporation. Jim supervises Luc, an employee of the firm. As a member, Jim

A promoter is personally liable for a preincorporation contract until the corporation assumes liability.

A corporation generally can engage in any act and enter into any contract available to a natural person.

Courts in some states will treat an alleged corporation as if it were an actual corporation for the purpose of determining the rights and liabilities in particular circumstances.

A court will not pierce the corporate veil of a corporation that is merely too "thinly" capitalized.

Agents and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes If so, how can they be punished

To qualify as a professional corporation, Medical Clinic, P.C.,

The articles of incorporation serve as a primary source of authority for a corporation.

Convenience Mart, Inc., is a closely held corporation. Convenience Mart is

For liability purposes, some courts treat professional corporations somewhat like a partnership.

A corporation formed in another country but doing business in the United States is referred to in the United States as an alien corporation.

Eager Beaver Corporation fails to hold a meeting to adopt bylaws. Under this circumstance, Eager Beaver will still be treated as a legal corporation in those states that recognize the common law doctrine of

Omega Corporation makes and markets digital timers, clocks, and related products. Like other business corporations, Omega issues securities to

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

Ethics and Business Decision Making

Intentional Torts and Privacy

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Statute of Frauds

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

International Law in a Global Economy

The Function Creation of Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks and Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Mortgages Foreclosures After the Recession

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Franchises

Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporate Directors, Officers, Shareholders

Corporate Merger, Consolidation, Termination

Securities Law Corporate Governance

Law for Small Business

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

Professional Liaility and Accountability

Personal Property and Bailments

Real Property Landlord-Tenant Relationships

Insurance

Wills and Trusts

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