Exam 39: A: Corporate Formation and Financing

Dan is a promoter for the soon-to-be-incorporated firm of E-Business,Inc.Dan signs a contract with Smith & Jones,Accountants,to render their services before E-Business is incorporated and for one year after the in?corporation.E-Business is incorporated.Three months later,after Smith & Jones has continued performing under the contract,the E-Business board of directors tells the accountants that it is canceling their con?tract.Smith & Jones files a suit against Dan and E-Business,alleging breach of contract.Will Smith & Jones prevail?

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Question 1

Correct Answer:

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Yes.Smith & Jones will succeed in its suit against Dan and E-Business,both of whom are liable under the contract.Unless the parties agree to the contrary,a promoter is personally liable on con?tracts that he or she enters into on behalf of a yet-to-be-incorporated corporation.Similarly,unless the corporation agrees to a different ar?rangement,when it accepts performance under a preincorporation con?tract,it im?pliedly adopts that contract and will be liable under that con?tract for a breach.In other words,by accepting performance for three months after incorporation,E-Business impliedly ratified Dan's contract with Smith & Jones.Dan is liable because there was no agreement to the contrary be?tween the parties.

An S corporation is treated the same as a regular corporation for tax purposes

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Question 2

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False

Ruby Red Corporation has six shareholders,four of whom are members of the same family.All of Ruby's shareholders agree in writing to operate without shareholders' meetings.Under the Revised Model Business Corporation Act,this most likely warrants

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Question 3

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A firm named Scientific Discovery Corporation (SDC)makes an attempt to incorporate for a purpose other than making a profit.SDC is

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Question 4

Gelato Ice,Inc. ,is incorporated in the state of New Jersey and is doing busi?ness in the state of New York.In New York,Gelato is properly referred to as

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Question 5

A corporation is referred to as a domestic corporation by its home state.

(True/False)

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Question 6

Like the bylaws of other corporations,the bylaws of Farmland Equipment,Inc. ,

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Question 7

A new corporation's name can be deceptively similar to,but not the same,as the name of an existing corporation doing business within the state.

(True/False)

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Question 8

A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation.

(True/False)

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Question 9

Fact Pattern 39-1B Bertram,Claudia,and Dynah form Eat Local,Inc. ,a closely held corporation,and agree to restrict the transfer of its stock to anyone else.The agreement provides that if one of the shareholders dies,his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors. -Refer to Fact Pattern 39-1B.Later,Bertram dies.With respect to the stock transfer restriction agreement,Bertram's death most likely

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Question 10

Usually,a private equity firm buys an entire corporation and may later reorganize it as a publicly held corporation.

(True/False)

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Question 11

Fact Pattern 39-1B Bertram,Claudia,and Dynah form Eat Local,Inc. ,a closely held corporation,and agree to restrict the transfer of its stock to anyone else.The agreement provides that if one of the shareholders dies,his or her shares of stock in Eat Local will be divided to maintain the proportionate control of the survivors. -Refer to Fact Pattern 39-1B.A reasonable purpose for a stock transfer re?striction in a closely held corporation,like the agreement between Bertram,Claudia,and Dynah,is

(Multiple Choice)

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Question 12

Felicity and Gideon want to form and do business as Home Healthcare Corporation.A corporation is

(Multiple Choice)

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Question 13

Miracle Vacuum,Inc. ,is a private,for-profit corporation that (1)was formed for the purpose of manufactur?ing and distributing a newly pat?ented appliance, (2)is owned by five share?holders, (3)is subject to double taxation,and (4)has made no public offering of its shares.Miracle is

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Question 14

Preferred shares normally have a fixed maturity date on which the firm must pay them off.

(True/False)

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Question 15

When the corporate privilege is abused for personal benefit,the courts will require the owners to assume personal liability.

(True/False)

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Question 16

A publicly held corporation is a private corporation.

(True/False)

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Question 17

Frida and Gregor want to market a new line of fishing gear.To avoid income taxes at the corporate level,they should form

(Multiple Choice)

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Question 18

Caffeine Café,Inc. ,files its articles of incorporation with the appropriate government agency.Least likely to appear in the articles is the name of

(Multiple Choice)

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Question 19

Starr Cardio,Inc. ,is a small business.Ted,Uma,and eleven other members of the Starr family own all of its stock.Currently,Starr's income is taxed at the corporate level and,after being distributed to the family members,at the shareholder level.Can Starr retain its corporate status but oth?er?wise avoid this double taxation? If so,how?

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Question 20

Showing 1 - 20 of 42

Exam 39: A: Corporate Formation and Financing

An S corporation is treated the same as a regular corporation for tax purposes

Ruby Red Corporation has six shareholders,four of whom are members of the same family.All of Ruby's shareholders agree in writing to operate without shareholders' meetings.Under the Revised Model Business Corporation Act,this most likely warrants

A firm named Scientific Discovery Corporation (SDC)makes an attempt to incorporate for a purpose other than making a profit.SDC is

Gelato Ice,Inc. ,is incorporated in the state of New Jersey and is doing busi?ness in the state of New York.In New York,Gelato is properly referred to as

A corporation is referred to as a domestic corporation by its home state.

Like the bylaws of other corporations,the bylaws of Farmland Equipment,Inc. ,

A new corporation's name can be deceptively similar to,but not the same,as the name of an existing corporation doing business within the state.

A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation.

Usually,a private equity firm buys an entire corporation and may later reorganize it as a publicly held corporation.

Felicity and Gideon want to form and do business as Home Healthcare Corporation.A corporation is

Miracle Vacuum,Inc. ,is a private,for-profit corporation that (1)was formed for the purpose of manufactur?ing and distributing a newly pat?ented appliance, (2)is owned by five share?holders, (3)is subject to double taxation,and (4)has made no public offering of its shares.Miracle is

Preferred shares normally have a fixed maturity date on which the firm must pay them off.

When the corporate privilege is abused for personal benefit,the courts will require the owners to assume personal liability.

A publicly held corporation is a private corporation.

Frida and Gregor want to market a new line of fishing gear.To avoid income taxes at the corporate level,they should form

Caffeine Café,Inc. ,files its articles of incorporation with the appropriate government agency.Least likely to appear in the articles is the name of

A: Introduction to Law and Legal Reasoning

B: Introduction to Law and Legal Reasoning

C: Introduction to Law and Legal Reasoning

D: Introduction to Law and Legal Reasoning

A: Courts and Alternative Dispute Resolution

B: Courts and Alternative Dispute Resolution

A: Court Procedures

B: Court Procedures

A: Constitutional Authority to Regulate Business

B: Constitutional Authority to Regulate Business

A: Ethics and Business Decision Making

B: Ethics and Business Decision Making

A: Intentional Torts and Privacy

B: Intentional Torts and Privacy

A: Negligence and Strict Liability

B: Negligence and Strict Liability

C: Negligence and Strict Liability

D: Negligence and Strict Liability

A: Intellectual Property and Internet Law

B: Intellectual Property and Internet Law

A: Criminal Law and Cyber Crimes

B: Criminal Law and Cyber Crime

A: Nature and Terminology

B: Nature and Terminology

C: Nature and Terminology

D: Nature and Terminology

A: Agreement in Traditional and E-Contracts

B: Agreement in Traditional and E-Contracts

A: Consideration

B: Consideration

A: Capacity and Legality

B: Capacity and Legality

A: Mistakes,fraud,and Voluntary Consent

B: Mistakes,fraud,and Voluntary Consent

A: The Statute of Frauds

B: The Statute of Frauds

A: Third Party Rights

B: Third Party Rights

A: Performance and Discharge

B: Performance and Discharge

A: Breach of Contract and Remedies

B: Breach of Contract and Remedies

A: The Formation of Sales and Lease Contracts

B: The Formation of Sales and Lease Contracts

C: The Formation of Sales and Lease Contracts

D: The Formation of Sales and Lease Contracts

A: Title,risk,and Insurable Interest

B: Title,risk,and Insurable Interest

A: Performance Breach of Sales Lease Contracts

B: Performance Breach of Sales Lease Contracts

A: Warranties and Product Liability

B: Warranties and Product Liability

A: International Law in a Global Economy

B: International Law in a Global Economy

A: The Function Creation of Negotiable Instruments

B: The Function Creation of Negotiable Instruments

C: The Function Creation of Negotiable Instruments

D: The Function Creation of Negotiable Instruments

A: Transferability and Holder in Due Course

B: Transferability and Holder in Due Course

A: Liability,defenses,and Discharge

B: Liability,defenses,and Discharge

A: Checks,the Banking System,and E-Money