Question 1

Which of the following is false regarding a nonprofit corporation?

Accepted Answer

A)   Nonprofit corporations provide services to their members.
B)   Nonprofit corporations do not have shareholders.
C)   A nonprofit corporation may not earn profits.
D)   Nonprofit corporations do not issue stock.
E)   Churches and charitable organizations are examples of nonprofit corporations.F) A) and E)
G) B) and D)

Question 2

Yolanda is a shareholder in a corporation which is sued. Which of the following is true of Yolanda's potential liability?

Accepted Answer

A)   Yolanda is fully liable for the corporation's actions
B)   Yolanda may be liable for the corporation's actions if she was on the corporate board.
C)   Yolanda may be liable for the corporation's actions if the corporation is an S-corp but not a C-corp
D)   Yolanda may be liable for the corporations' actions if the corporation is a C-corp but not an S-corp
E)   Yolanda's liability is limited to her investment in the corporationF) None of the above
G) A) and C)

Question 3

Which of the following is not a type of bond that a corporation may issue?

Accepted Answer

A)   Unsecured
B)   Secured
C)   Equity
D)   Convertible
E)   IncomeF) A) and B)
G) B) and E)

Question 4

What were Min-ji, Marcus, and Penelope seeking by requesting a novation in regards to the lawsuit threatened by Callie?

Accepted Answer

A)   An agreement by which the corporation would be substituted as the debtor instead of Min-ji, Marcus, and Penelope so long as the corporation made a profit in its first year of existence.
B)   An agreement by which Min-ji, Marcus, and Penelope would be discharged from the debt so long as the new corporation agreed to do an agreed upon amount of business with Callie for a certain period.
C)   An agreement by which Min-ji, Marcus, Penelope, Callie, and the corporation would agree that the corporation would be liable to Callie, and that Min-ji, Marcus, and Penelope would be released.
D)   An agreement by which Min-ji, Marcus, Penelope, Callie, and the corporation would agree that the company would be liable to Callie for one half the debt and that Min-ji, Marcus, and Penelope would be liable for only one half of the debt.
E)   An agreement by which Callie agreed to delay her claim for one year in order to give the corporation a chance to make a profit.F) C) and E)
G) D) and E)

Question 5

In which situations is a court likely to pierce the corporate veil?

Accepted Answer

Courts are likely to pierce the corporat...

Question 6

Under the United States Constitution and mores specifically the Bill of Rights, corporations ________

Accepted Answer

A)   cannot be sued.
B)   cannot be foreign owned or have any foreign members.
C)   can are the only business entity allowed to sue the United States government.
D)   Corporations cannot be treated as "legal persons."
E)   claim certain rights under the U.S. Constitution.F) A) and D)
G) B) and C)

Question 7

[Nail Salon] Thea and her friends Josef and Danny, all U.S. citizens, want to open a nail salon. They would all like to avoid personal liability for debts of the business and/or wrongful acts of each other. They would also like to minimize taxation. Thea is in favor of a corporation and asks if there is any problem with that form of business. Josef and Danny say that they are concerned about double taxation with a corporation and that they are in favor of a partnership, even if personal liability is a concern. Thea said that she was concerned about the deductibility of losses if the corporate form was chosen. She did some research and suggested an S corporation to Josef and Danny which she claimed would avoid the problem of double taxation.
-Regarding the concerns of Josef and Danny about double taxation and Thea's suggestion regarding an S corporation, which of the following is true?

Accepted Answer

A)   Thea's suggestion will not solve the issue of double taxation because with both a regular corporation and with an S corporation, the corporation is taxed on income and shareholders are taxed again on dividends they receive.
B)   Josef and Danny are incorrect, and an S corporation is not needed for any double taxation issue because with both a general corporation and an S corporation, tax effects would be the same with the corporation being taxed on earnings and shareholders being taxed again on dividends.
C)   Thea is correct that S corporation shareholders report their income from the corporation only once, as personal income.
D)   Thea is correct in that double taxation may be avoided through the use of an S corporation, but this can be negated through taxation of dividends at the higher corporate rate regardless of the tax rate of the shareholder.
E)   Thea is correct that double taxation may be avoided through the use of an S corporation, but this may be negated by the fact that S corporations are taxed at a rate double that of general corporations.F) B) and E)
G) A) and E)

Question 8

Which of the following is an implied power of a corporation?

Accepted Answer

A)   Power to have perpetual existence.
B)   Power to sue and be sued in the corporations' name.
C)   Power to establish rules for managing the corporation.
D)   Power given in the statement of corporate purpose in the articles of incorporation.
E)   Power to lend money.F) B) and D)
G) B) and C)

Question 9

Stock for sale to the general public is frequently offered by closely held corporations.

Accepted Answer

A) True 
 B)False

Question 10

[Shaky Bicycles] Lena is an incorporator who filed the articles of incorporation for XYZ Corporation, a corporation set up to sell bicycles. Lena incorrectly put the wrong street address in the document. Preetha, a manufacturer of bicycle parts, had sold a number of parts to XYZ Corporation. Unfortunately, the corporation was not making any profit, and Preetha was not paid in a timely manner. She checked the status of the corporation and discovered Lena's error. Preetha then claimed that the shareholders of XYZ Corporation were personally liable to her. Amy, another creditor of XYZ Corporation, also claimed that a shareholder, Rick, was personally liable to her. Amy alleged that Rick committed fraud against her when he told her that XYZ Corporation was making large amounts of money, that if she would only loan $50,000 to the corporation he would marry her, and that the corporation would make so much money that she would be wealthy in six months. She loaned the funds, but the corporation has been unable to pay her. Rick told her that he is sorry, but that her only avenue of recovery is through the corporation.
-Regarding the status of XYZ Corporation as a corporation, what would a court likely rule?

Accepted Answer

A)   That the business was a de jure corporation.
B)   That the business was a de facto corporation.
C)   That the business was a corporation by estoppel.
D)   That the business was a veiled corporation.
E)   That the business was not a corporation at all.F) All of the above
G) B) and C)

Question 11

Which of the following was the result on appeal in King v. American Family Mutual Insurance Company; American Standard Insurance Company of Wisconsin, the case in the text involving whether for an injury occurring outside the state, personal jurisdiction in Montana could be asserted over the defending insurers who had appointed an agent for service of process there but had done no business in the state?

Accepted Answer

A)   That appointment of an agent for service of process does, standing alone, subject foreign corporations to jurisdiction in Montana for acts performed outside of Montana.
B)   That Montana law regarding appointment of an agent for service of process does not, standing alone, subject foreign corporations to jurisdiction in Montana for acts performed outside of Montana, at least when the corporations transact no business in the state.
C)   That regardless of whether an agent for service of process had been appointed, as a matter of law, insurers may be sued in any state in the U.S.
D)   That regardless of whether an agent for service of process had been appointed, as a matter of law, an insurer may only be sued in its state of incorporation.
E)   That regardless of whether an agent for service of process had been appointed, as a matter of law, an insurer may only be sued in the state in which its principal place of business is located.F) A) and E)
G) B) and D)

Question 12

________ or ________ represent loans to a corporation from another party.

Accepted Answer

A)   Primary, secondary bonds
B)   Equity bonds, or secured transactions
C)   Debt securities, bonds
D)   Formal bonds, loan funds
E)   Certified securities, certified bondsF) A) and B)
G) All of the above

Question 13

A corporation must be incorporated in the state in which it has its principal place of business.

Accepted Answer

A) True 
 B)False

Question 14

Under the three tiers of corporate power in ________, the board of directors is the lowest, the board of supervisors makes up the second, and corporate officers compose the top tier.

Accepted Answer

A)   the Netherlands
B)   the United States
C)   China
D)   Japan
E)   EuropeF) B) and E)
G) A) and B)

Question 15

Only the state can challenge a de facto corporation's existence as a corporate entity in a suit called an action of ________.

Accepted Answer

A)   Quo facto
B)   Quo jure
C)   Quo warranto
D)   Sine qua non
E)   Res ipsaF) B) and C)
G) All of the above

Question 16

Valina is helping a new corporation apply to the state of Florida for purposes of incorporation. Valina would be considered a(n)  ________.

Accepted Answer

A)   promoter
B)   incorporator
C)   facilitator
D)   actuary
E)   analystF) B) and E)
G) None of the above

Question 17

The FDIC is an example of what type of corporation?

Accepted Answer

A)   Public
B)   Private
C)   Closely held
D)   Domestic
E)   Publicly heldF) A) and B)
G) A) and D)

Question 18

Shareholders may not be held personally liable for a defective corporation's actions.

Accepted Answer

A) True 
 B)False

Question 19

The determination of who has the power to amend the corporate bylaws after the first organizational meeting is made by the articles of incorporation.

Accepted Answer

A) True 
 B)False

Question 20

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Accepted Answer

A)   Acknowledged
B)   Preferred
C)   Simple
D)   Complex
E)   CommonF) B) and C)
G) None of the above

Exam 38: Corporations: Formation and Financing

Correct Answer
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Under the three tiers of corporate power in ________, the board of directors is the lowest, the board of supervisors makes up the second, and corporate officers compose the top tier.

Correct Answer
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Shareholders may not be held personally liable for a defective corporation's actions.

Correct Answer
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Yolanda is a shareholder in a corporation which is sued. Which of the following is true of Yolanda's potential liability?

Correct Answer
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The determination of who has the power to amend the corporate bylaws after the first organizational meeting is made by the articles of incorporation.

Correct Answer
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Correct Answer
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or represent loans to a corporation from another party.

Correct Answer
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Which of the following is an implied power of a corporation?

Correct Answer
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In which situations is a court likely to pierce the corporate veil?

Correct Answer
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Courts are likely to pierce the corporat...
View Answer

Stock for sale to the general public is frequently offered by closely held corporations.

Correct Answer
verified

The FDIC is an example of what type of corporation?

Correct Answer
verified

Which of the following is not a type of bond that a corporation may issue?

Correct Answer
verified

Under the United States Constitution and mores specifically the Bill of Rights, corporations ________

Correct Answer
verified

What were Min-ji, Marcus, and Penelope seeking by requesting a novation in regards to the lawsuit threatened by Callie?

Correct Answer
verified

Which of the following is false regarding a nonprofit corporation?

Correct Answer
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Correct Answer
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Only the state can challenge a de facto corporation's existence as a corporate entity in a suit called an action of ________.

Correct Answer
verified

Valina is helping a new corporation apply to the state of Florida for purposes of incorporation. Valina would be considered a(n) ________.

Correct Answer
verified

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Correct Answer
verified

A corporation must be incorporated in the state in which it has its principal place of business.

Correct Answer
verified

Exam 38: Corporations: Formation and Financing

Correct AnswerverifiedShow Answer

Under the three tiers of corporate power in ________, the board of directors is the lowest, the board of supervisors makes up the second, and corporate officers compose the top tier.

Correct AnswerverifiedShow Answer

Shareholders may not be held personally liable for a defective corporation's actions.

Correct AnswerverifiedShow Answer

Yolanda is a shareholder in a corporation which is sued. Which of the following is true of Yolanda's potential liability?

Correct AnswerverifiedShow Answer

The determination of who has the power to amend the corporate bylaws after the first organizational meeting is made by the articles of incorporation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

________ or ________ represent loans to a corporation from another party.

Correct AnswerverifiedShow Answer

Which of the following is an implied power of a corporation?

Correct AnswerverifiedShow Answer

In which situations is a court likely to pierce the corporate veil?

Correct AnswerverifiedCourts are likely to pierce the corporat...View AnswerShow Answer

Stock for sale to the general public is frequently offered by closely held corporations.

Correct AnswerverifiedShow Answer

The FDIC is an example of what type of corporation?

Correct AnswerverifiedShow Answer

Which of the following is not a type of bond that a corporation may issue?

Correct AnswerverifiedShow Answer

Under the United States Constitution and mores specifically the Bill of Rights, corporations ________

Correct AnswerverifiedShow Answer

What were Min-ji, Marcus, and Penelope seeking by requesting a novation in regards to the lawsuit threatened by Callie?

Correct AnswerverifiedShow Answer

Which of the following is false regarding a nonprofit corporation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Only the state can challenge a de facto corporation's existence as a corporate entity in a suit called an action of ________.

Correct AnswerverifiedShow Answer

Valina is helping a new corporation apply to the state of Florida for purposes of incorporation. Valina would be considered a(n) ________.

Correct AnswerverifiedShow Answer

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Correct AnswerverifiedShow Answer

A corporation must be incorporated in the state in which it has its principal place of business.

Correct AnswerverifiedShow Answer

Correct Answer
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or represent loans to a corporation from another party.

Correct Answer
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Correct Answer
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Correct Answer
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Courts are likely to pierce the corporat...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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