Question 1

Which of the following statements is true regarding the characteristics of a corporation?

Accepted Answer

A)  A corporation as a legal entity is not distinct from its owners. 
B)  A corporation is owned by shareholders. 
C)  The shareholders are responsible for the corporation's liabilities. 
D)  The board of directors implements the decisions of the officers. 
A)  A corporation as a legal entity is not distinct from its owners. 
B)  A corporation is owned by shareholders. 
C)  The shareholders are responsible for the corporation's liabilities. 
D)  The board of directors implements the decisions of the officers.

Question 2

The __________ set forth the steps that must be taken to establish a corporation in a state.

Accepted Answer

A)  Uniform Federal Rules 
B)  corporate statutes of each state 
C)  corporate bylaws 
D)  corporate charter requirements 
A)  Uniform Federal Rules 
B)  corporate statutes of each state 
C)  corporate bylaws 
D)  corporate charter requirements

Question 3

Which of the following is true regarding the effect of the death of a partner on a general partnership?

Accepted Answer

A)  Unless there is an agreement to the contrary,the partnership dissolves upon the death of a partner. 
B)  Unless there is an agreement to the contrary,the partnership ceases to exist 10 days after the death of any partner. 
C)  The remaining partners must by operation of law continue the partnership for at least one year. 
D)  Within 90 days the remaining partners may elect to continue the partnership. 
A)  Unless there is an agreement to the contrary,the partnership dissolves upon the death of a partner. 
B)  Unless there is an agreement to the contrary,the partnership ceases to exist 10 days after the death of any partner. 
C)  The remaining partners must by operation of law continue the partnership for at least one year. 
D)  Within 90 days the remaining partners may elect to continue the partnership.

Question 4

ANY Corporation has made a public offer to all the shareholders of Buyer,Inc.,to buy their shares at a stated price.This activity is known as a:

Accepted Answer

A)  leveraged buyout. 
B)  tender offer. 
C)  target bid. 
D)  merger. 
A)  leveraged buyout. 
B)  tender offer. 
C)  target bid. 
D)  merger.

Question 5

In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.

Accepted Answer

A) True 
 B)False

Question 6

In CASE 19.1 Gatz Properties,LLC v.Auriga Capital Corporation (2012),Gatz Properties was the managing member of Peconic Bay,LLC,controlled by the Gatz family.After failing to disclose material offers for assets of the LLC,Gatz bought out the minority members' interests in Gatz Properties LLC for $20,890.The minority members sued,winning over $800,000 based on Gatz's breach of fiduciary duties.Gatz appealed.How did the court rule on appeal,and why?

Accepted Answer

A)  Affirmed,Gatz had breached its fiduciary duties to the minority members of Gatz Properties,LLC. 
B)  Affirmed,Gatz had breached its lease with Peconic Bay LLC. 
C)  Reversed,Gatz had breached its fiduciary duties to the minority members of Gatz Properties,LLC. 
D)  Reversed,Gatz had breached its lease with Peconic Bay LLC. 
A)  Affirmed,Gatz had breached its fiduciary duties to the minority members of Gatz Properties,LLC. 
B)  Affirmed,Gatz had breached its lease with Peconic Bay LLC. 
C)  Reversed,Gatz had breached its fiduciary duties to the minority members of Gatz Properties,LLC. 
D)  Reversed,Gatz had breached its lease with Peconic Bay LLC.

Question 7

Which of the following requirements must be met by a corporation to qualify for S corporation status?

Accepted Answer

A)  The corporation must have more than one class of stock. 
B)  The corporation must file a timely election signed by all the shareholders to be treated as an S corporation. 
C)  The corporation must have no more than twenty-five shareholders. 
D)  The corporation can be a domestic or foreign corporation. 
A)  The corporation must have more than one class of stock. 
B)  The corporation must file a timely election signed by all the shareholders to be treated as an S corporation. 
C)  The corporation must have no more than twenty-five shareholders. 
D)  The corporation can be a domestic or foreign corporation.

Question 8

Which of the following is false regarding decision making in a partnership?

Accepted Answer

A)  Each partner's assets are vulnerable to the poor business decisions of the fellow partners. 
B)  A partnership is prohibited from placing managerial control of the business in one partner. 
C)  Unless the partners expressly agree otherwise,partnership law requires unanimous agreement of all partners on all but the most ordinary matters. 
D)  If the partners in an informal partnership cannot agree on a decision,they may disband the partnership,distribute its assets,and terminate it. 
A)  Each partner's assets are vulnerable to the poor business decisions of the fellow partners. 
B)  A partnership is prohibited from placing managerial control of the business in one partner. 
C)  Unless the partners expressly agree otherwise,partnership law requires unanimous agreement of all partners on all but the most ordinary matters. 
D)  If the partners in an informal partnership cannot agree on a decision,they may disband the partnership,distribute its assets,and terminate it.

Question 9

A(n)__________ is created when two or more persons agree to place their money,labor,or skills in a business and to share the profits and losses.

Accepted Answer

A)  sole proprietorship 
B)  general partnership 
C)  S partnership 
D)  C corporation 
A)  sole proprietorship 
B)  general partnership 
C)  S partnership 
D)  C corporation

Question 10

A(n)__________ is a for-profit corporation that uses the power of business to solve social and environmental problems.

Accepted Answer

A)  close corporation 
B)  S corporation 
C)  benefit corporation 
D)  closely held corporation 
A)  close corporation 
B)  S corporation 
C)  benefit corporation 
D)  closely held corporation

Question 11

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

Accepted Answer

A) True 
 B)False

Question 12

The __________ theory applies to the situation in which owners of a corporation have so mingled their own affairs with those of the corporation that the corporation does not exist as a distinct entity.

Accepted Answer

A)  undercapitalization 
B)  alter ego 
C)  per se 
D)  absolute 
A)  undercapitalization 
B)  alter ego 
C)  per se 
D)  absolute

Question 13

B corporations have no duty to maximize shareholder value even when there is a change of control.

Accepted Answer

A) True 
 B)False

Question 14

In Estate of Countryman v.Farmers Cooperative Association,the plaintiffs attempted to hold an active member of an LLC personally liable as the LLC's manager,after propane gas delivered by the LLC exploded.How did the court rule?

Accepted Answer

A)  Only the LLC could be held liable. 
B)  The manager was subject to personal liability along with the LLC regardless of whether it could be established that the manager participated in tortious conduct in performing his duties. 
C)  Only the manager,not the LLC,could be held liable. 
D)  The manager who participated in tortious conduct while performing managerial duties was not shielded from personal liability. 
A)  Only the LLC could be held liable. 
B)  The manager was subject to personal liability along with the LLC regardless of whether it could be established that the manager participated in tortious conduct in performing his duties. 
C)  Only the manager,not the LLC,could be held liable. 
D)  The manager who participated in tortious conduct while performing managerial duties was not shielded from personal liability.

Question 15

Which of the following is true regarding incorporation?

Accepted Answer

A)  A corporation must be incorporated in the state in which it has its principal place of business. 
B)  Laws regarding incorporation and the rights and duties of corporations are uniform from state to state. 
C)  Since the mid-1930s,Delaware has been considered the preeminent state for incorporation. 
D)  Incorporation may be done pursuant to common law as well as statute. 
A)  A corporation must be incorporated in the state in which it has its principal place of business. 
B)  Laws regarding incorporation and the rights and duties of corporations are uniform from state to state. 
C)  Since the mid-1930s,Delaware has been considered the preeminent state for incorporation. 
D)  Incorporation may be done pursuant to common law as well as statute.

Question 16

An outside director is also known as a dependent director.

Accepted Answer

A) True 
 B)False

Question 17

A member of the board who also serves as an officer is a(n)__________ director.

Accepted Answer

A)  inside 
B)  interested 
C)  outside 
D)  employed 
A)  inside 
B)  interested 
C)  outside 
D)  employed

Question 18

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

Accepted Answer

A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding up 
A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding up

Question 19

Appraisal rights are only available to shareholders who had a right to vote on a transaction.

Accepted Answer

A) True 
 B)False

Exam 19: Forms Of Business Organizations

Which of the following statements is true regarding the characteristics of a corporation?

The __________ set forth the steps that must be taken to establish a corporation in a state.

Which of the following is true regarding the effect of the death of a partner on a general partnership?

ANY Corporation has made a public offer to all the shareholders of Buyer,Inc.,to buy their shares at a stated price.This activity is known as a:

In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.

Which of the following requirements must be met by a corporation to qualify for S corporation status?

Which of the following is false regarding decision making in a partnership?

A(n)__________ is created when two or more persons agree to place their money,labor,or skills in a business and to share the profits and losses.

A(n)__________ is a for-profit corporation that uses the power of business to solve social and environmental problems.

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

The __________ theory applies to the situation in which owners of a corporation have so mingled their own affairs with those of the corporation that the corporation does not exist as a distinct entity.

B corporations have no duty to maximize shareholder value even when there is a change of control.

In Estate of Countryman v.Farmers Cooperative Association,the plaintiffs attempted to hold an active member of an LLC personally liable as the LLC's manager,after propane gas delivered by the LLC exploded.How did the court rule?

Which of the following is true regarding incorporation?

An outside director is also known as a dependent director.

A member of the board who also serves as an officer is a(n)__________ director.

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

Appraisal rights are only available to shareholders who had a right to vote on a transaction.

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