Question 1

Betsy is a director of ChemCo Inc. Because of this position, she becomes involved in litigation. With respect to the costs, fees, and damages involved, she has a right to

Accepted Answer

A)  access the corporation's books, records, facilities, and other property.
B)  be reimbursed, or indemnified.
C)  use confidential corporate information for personal advantage.
D)  subordinate the corporation's welfare to the director's personal interest.E) All of the above
F) A) and B)

Question 2

Limited liability business forms, such as LLCs, LPs, and LLPs, offer tax advantages that are similar to those offered by

Accepted Answer

A)  an S corporation.
B)  a benefit corporation.
C)  a close corporation.
D)  any corporation.E) A) and B)
F) B) and C)

Question 3

Metro Moving Service holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, the outfit is most likely

Accepted Answer

A)  a corporation by estoppel.
B)  a de facto corporation.
C)  a de jure corporation.
D)  ultra vires .E) None of the above
F) B) and C)

Question 4

Robotics Inc. is a corporation. Its express powers can be found in

Accepted Answer

A)  all of the choices.
B)  its articles of incorporation.
C)  the law of the state of incorporation.
D)  the state and federal constitutions.E) All of the above
F) A) and C)

Question 5

When directors do not act in the best interests of their corporations, the shareholders may sue them on the company's behalf.

Accepted Answer

A) True 
 B)False

Question 6

Gaye is Hot Java Company's majority shareholder. Gaye decides to sell her Hot Java stock. The sale will be an effective transfer of the control of the company. Does Gaye owe a duty to Hot Java or its minority shareholders in this situation?

Accepted Answer

Yes. A single shareholder-or a few share...

Question 7

A corporate officer is liable to the corporation or its shareholders for a bad business decision.

Accepted Answer

A) True 
 B)False

Question 8

A foreign corporation that has not obtained a certificate of authority to do business in a state can nevertheless maintain an action in the state's courts.

Accepted Answer

A) True 
 B)False

Question 9

Corporate officers do not act as agents of the corporation.

Accepted Answer

A) True 
 B)False

Question 10

A corporate director may not

Accepted Answer

A)  act in accord with his or her own knowledge and training.
B)  use prudent business judgment in the conduct of corporate affairs.
C)  delegate work to corporate officers.
D)  engage in self-dealing.E) B) and C)
F) A) and D)

Question 11

A benefit corporation is designed to make a profit and thereby provide long-term shareholder benefit.

Accepted Answer

A) True 
 B)False

Question 12

Corporate resolutions of the corporation's board of directors provide guidelines but cannot grant or restrict corporate powers.

Accepted Answer

A) True 
 B)False

Question 13

As a director of InstaTalk Inc., Jin has a right of inspection. This right can be restricted by

Accepted Answer

A)  the corporate articles.
B)  the bylaws.
C)  an act of the board.
D)  none of the choices.E) A) and B)
F) A) and C)

Question 14

To prevent a majority shareholder from dominating the management and operation of a close corporation, the firm should

Accepted Answer

A)  require more than a majority of directors approve any board action.
B)  restrict the transferability of shares to outside persons.
C)  reorganize into a sole proprietorship or partnership.
D)  hold special shareholders' or directors' meetings on an annual basis.E) All of the above
F) None of the above

Question 15

How many directors serve on a corporation's board can be set forth in the corporation's bylaws.

Accepted Answer

A) True 
 B)False

Question 16

Dhani, Ezra, and Finn are the first directors on the board of Global Shipping Corporation. Subsequent directors will be elected by a majority vote of Global's

Accepted Answer

A)  incorporators.
B)  board.
C)  officers.
D)  shareholders.E) A) and D)
F) C) and D)

Question 17

Rex forms Shell Company to assume debts that he does not wish to pay. The firm is not intended to make a profit, and Rex does not provide it with sufficient capital. This most likely warrants

Accepted Answer

A)  tricking Rex into disclosing Shell's true purpose to Rex's creditors.
B)  recognizing Shell as a de facto corporation.
C)  piercing Shell's corporate veil.
D)  requiring Rex to commingle his personal funds and Shell's funds.E) A) and B)
F) A) and D)

Question 18

The primary document needed to incorporate a business is

Accepted Answer

A)  the website of the secretary of state of the state of incorporation.
B)  the minutes of the first organizational meeting.
C)  the articles of incorporation.
D)  the bylaws.E) A) and C)
F) B) and C)

Question 19

Because of officers' positions within the corporation, they can be held liable for negligence if their failure to exercise due care results in harm to the firm.

Accepted Answer

A) True 
 B)False

Question 20

If a director commits a breach of fiduciary duty, the shareholders have the inherent power to remove the director from office by a majority vote.

Accepted Answer

A) True 
 B)False

Exam 37: Corporate Formation and Financing

Gaye is Hot Java Company's majority shareholder. Gaye decides to sell her Hot Java stock. The sale will be an effective transfer of the control of the company. Does Gaye owe a duty to Hot Java or its minority shareholders in this situation?

Correct AnswerverifiedYes. A single shareholder-or a few share...View AnswerShow Answer

Betsy is a director of ChemCo Inc. Because of this position, she becomes involved in litigation. With respect to the costs, fees, and damages involved, she has a right to

Correct AnswerverifiedShow Answer

Corporate officers do not act as agents of the corporation.

Correct AnswerverifiedShow Answer

Because of officers' positions within the corporation, they can be held liable for negligence if their failure to exercise due care results in harm to the firm.

Correct AnswerverifiedShow Answer

How many directors serve on a corporation's board can be set forth in the corporation's bylaws.

Correct AnswerverifiedShow Answer

If a director commits a breach of fiduciary duty, the shareholders have the inherent power to remove the director from office by a majority vote.

Correct AnswerverifiedShow Answer

To prevent a majority shareholder from dominating the management and operation of a close corporation, the firm should

Correct AnswerverifiedShow Answer

Metro Moving Service holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, the outfit is most likely

Correct AnswerverifiedShow Answer

Limited liability business forms, such as LLCs, LPs, and LLPs, offer tax advantages that are similar to those offered by

Correct AnswerverifiedShow Answer

Dhani, Ezra, and Finn are the first directors on the board of Global Shipping Corporation. Subsequent directors will be elected by a majority vote of Global's

Correct AnswerverifiedShow Answer

As a director of InstaTalk Inc., Jin has a right of inspection. This right can be restricted by

Correct AnswerverifiedShow Answer

The primary document needed to incorporate a business is

Correct AnswerverifiedShow Answer

Robotics Inc. is a corporation. Its express powers can be found in

Correct AnswerverifiedShow Answer

When directors do not act in the best interests of their corporations, the shareholders may sue them on the company's behalf.

Correct AnswerverifiedShow Answer

A corporate officer is liable to the corporation or its shareholders for a bad business decision.

Correct AnswerverifiedShow Answer

Corporate resolutions of the corporation's board of directors provide guidelines but cannot grant or restrict corporate powers.

Correct AnswerverifiedShow Answer

A foreign corporation that has not obtained a certificate of authority to do business in a state can nevertheless maintain an action in the state's courts.

Correct AnswerverifiedShow Answer

A corporate director may not

Correct AnswerverifiedShow Answer

A benefit corporation is designed to make a profit and thereby provide long-term shareholder benefit.

Correct AnswerverifiedShow Answer

Rex forms Shell Company to assume debts that he does not wish to pay. The firm is not intended to make a profit, and Rex does not provide it with sufficient capital. This most likely warrants

Correct AnswerverifiedShow Answer

Correct Answer
verified
Yes. A single shareholder-or a few share...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified