Question 1

A corporation that merges into another is dissolved.

Accepted Answer

A) True 
 B)False  True

Question 2

Under the revised Model Business Corporation Act (MBCA), who will be liable for the business debts if the business has been defectively incorporated?

Accepted Answer

Under the revised Model Business Corporation Act (MBCA), if a business has been defectively incorporated, liability would be imposed on its promoters, managers, and shareholders who both (1) participated in management and policy decisions and (2) knew of the defective incorporation. All others would be released from any liability in excess of their initial investment.

Question 3

Which of the following states has traditionally been considered attractive for incorporation?

Accepted Answer

A)  Delaware 
B)  New York 
C)  California 
D)  Iowa 
A)  Delaware 
B)  New York 
C)  California 
D)  Iowa A

Question 4

Mention the requirements that are essential for a court to pierce the veil of a corporation.

Accepted Answer

Under the traditional judicial rule, a c

Question 5

Joey and his partners have started a corporation in North Dakota. They may decide to get it incorporated in Illinois if:

Accepted Answer

A)  incorporation fees are low even if incorporation taxes are very high. 
B)  shareholders can actively participate in the management. 
C)  incorporation fees and taxes are lower, and there is minimal shareholder interference. 
D)  promoters and shareholders are barred from interfering. 
A)  incorporation fees are low even if incorporation taxes are very high. 
B)  shareholders can actively participate in the management. 
C)  incorporation fees and taxes are lower, and there is minimal shareholder interference. 
D)  promoters and shareholders are barred from interfering.

Question 6

The traditional judicial rule is that the court will pierce the corporate veil when the corporation has been dominated by one or more of its shareholders and the domination has resulted in an improper purpose.

Accepted Answer

A) True 
 B)False

Question 7

Before a corporation comes into existence, it _____.

Accepted Answer

A)  can be liable as principal 
B)  cannot ratify a contract made by the promoter 
C)  is illegal to pay promoters for their services 
D)  is liable if the board acts to adopt the contract 
A)  can be liable as principal 
B)  cannot ratify a contract made by the promoter 
C)  is illegal to pay promoters for their services 
D)  is liable if the board acts to adopt the contract

Question 8

Discuss the important factors to consider in deciding where to incorporate a business.

Accepted Answer

Frequently, the corporation will be inco

Question 9

Which of the following is a common trait of close corporations?

Accepted Answer

A)  The shareholders are large in number. 
B)  Shareholders usually live in different geographic areas. 
C)  Only few of the shareholders are active in the business. 
D)  There is no established market for the stock. 
A)  The shareholders are large in number. 
B)  Shareholders usually live in different geographic areas. 
C)  Only few of the shareholders are active in the business. 
D)  There is no established market for the stock.

Question 10

The articles of incorporation serve the same function as a charter.

Accepted Answer

A) True 
 B)False

Question 11

Courts have begun to recognize a fiduciary duty in corporate officers and majority shareholders to treat minority shareholders fairly.

Accepted Answer

A) True 
 B)False

Question 12

A corporation domiciled in another country but doing business in the United States is called an alien corporation.

Accepted Answer

A) True 
 B)False

Question 13

Promoters are not agents of the corporation prior to its incorporation.

Accepted Answer

A) True 
 B)False

Question 14

A _____ existed when there was an honest attempt to comply with the mandatory provisions of the corporate statute, yet the attempt still failed in some material respect.

Accepted Answer

A)  de jure corporation 
B)  de facto corporation 
C)  corporation by estoppel 
D)  close corporation 
A)  de jure corporation 
B)  de facto corporation 
C)  corporation by estoppel 
D)  close corporation

Question 15

According to the Model Business Corporation Act (MBCA), the number of shares of capital stock the corporation is authorized to issue need not be included in the articles of incorporation.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a useful way of preventing unwanted persons from entering a corporation?

Accepted Answer

A)  Novation 
B)  Consent restraint 
C)  Piercing the corporate veil 
D)  Estoppel 
A)  Novation 
B)  Consent restraint 
C)  Piercing the corporate veil 
D)  Estoppel

Question 17

A de facto corporation:

Accepted Answer

A)  could be challenged by a third party. 
B)  was not permitted to deny its corporate existence. 
C)  never involves a quo warranto action. 
D)  existed when the promoters substantially complied with all mandatory provisions. 
A)  could be challenged by a third party. 
B)  was not permitted to deny its corporate existence. 
C)  never involves a quo warranto action. 
D)  existed when the promoters substantially complied with all mandatory provisions.

Question 18

Under the Model Business Corporation Act, a shareholder may ask a court to dissolve a corporation when:

Accepted Answer

A)  a corporation uses assets for public welfare. 
B)  directors are in conflict, their deadlock cannot be broken by shareholders, and the corporation faces ruin. 
C)  directors are maintaining registered agents without the approval of the shareholders. 
D)  creditors are acting unfairly or illegally. 
A)  a corporation uses assets for public welfare. 
B)  directors are in conflict, their deadlock cannot be broken by shareholders, and the corporation faces ruin. 
C)  directors are maintaining registered agents without the approval of the shareholders. 
D)  creditors are acting unfairly or illegally.

Question 19

A basic principle of corporation law is that:

Accepted Answer

A)  shareholders are not free to dispose of their shares by gift. 
B)  shareholders are given the authority to manage the business. 
C)  majority rule applies to both shareholder and director action. 
D)  there is an established market for the stock. 
A)  shareholders are not free to dispose of their shares by gift. 
B)  shareholders are given the authority to manage the business. 
C)  majority rule applies to both shareholder and director action. 
D)  there is an established market for the stock.

Question 20

_____ is a basic restriction governing the transferability of shares in a close corporation.

Accepted Answer

A)  Piercing the veil 
B)  Quo warranto 
C)  Right of first refusal 
D)  Ultra vires 
A)  Piercing the veil 
B)  Quo warranto 
C)  Right of first refusal 
D)  Ultra vires

Exam 28: Formation and Termination of Corporations

A corporation that merges into another is dissolved.

Under the revised Model Business Corporation Act (MBCA), who will be liable for the business debts if the business has been defectively incorporated?

Which of the following states has traditionally been considered attractive for incorporation?

Mention the requirements that are essential for a court to pierce the veil of a corporation.

Joey and his partners have started a corporation in North Dakota. They may decide to get it incorporated in Illinois if:

The traditional judicial rule is that the court will pierce the corporate veil when the corporation has been dominated by one or more of its shareholders and the domination has resulted in an improper purpose.

Before a corporation comes into existence, it _____.

Discuss the important factors to consider in deciding where to incorporate a business.

Which of the following is a common trait of close corporations?

The articles of incorporation serve the same function as a charter.

Courts have begun to recognize a fiduciary duty in corporate officers and majority shareholders to treat minority shareholders fairly.

A corporation domiciled in another country but doing business in the United States is called an alien corporation.

Promoters are not agents of the corporation prior to its incorporation.

A _____ existed when there was an honest attempt to comply with the mandatory provisions of the corporate statute, yet the attempt still failed in some material respect.

According to the Model Business Corporation Act (MBCA), the number of shares of capital stock the corporation is authorized to issue need not be included in the articles of incorporation.

Which of the following is a useful way of preventing unwanted persons from entering a corporation?

A de facto corporation:

Under the Model Business Corporation Act, a shareholder may ask a court to dissolve a corporation when:

A basic principle of corporation law is that:

_____ is a basic restriction governing the transferability of shares in a close corporation.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Which Form of Business Organization

Partnerships

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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