Question 1

Like the partners in a partnership, the shareholders in a corporation cannot change without affecting the continued existence of the firm.

Accepted Answer

A) True 
 B)False

Question 2

Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.

Accepted Answer

A) True 
 B)False

Question 3

To pierce the corporate veil means to reveal the identity of its true owner.

Accepted Answer

A) True 
 B)False

Question 4

The first step in the incorporation of a business firm is to

Accepted Answer

A)   identify the appropriate market and adopt a business plan.
B)   select the state of incorporation.
C)   secure promises of financial support from potential investors.
D)   hold the first organizational meeting.E) C) and D)
F) All of the above

Question 5

Local 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) A) and B)
F) A) and C)

Question 6

Oil Industries Inc. is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Po, the majority shareholder, misappropriates company funds. The shareholders whose interests are injured by Po's misconduct should

Accepted Answer

A)   have their shares appraised and be paid the fair market value for them.
B)   promote the transferability of the company's shares to outside persons.
C)   reorganize the firm into a sole proprietorship or partnership.
D)   hold a special shareholders' meeting to elect new directors.E) None of the above
F) A) and D)

Question 7

An S corporation avoids taxes at

Accepted Answer

A)   none of the choices.
B)   the market level.
C)   the corporate level.
D)   the shareholder level.E) C) and D)
F) All of the above

Question 8

Russ owns Statewide Freight Company. He uses the firm's funds to pay his personal expenses, creates Trucking Inc. to engage in the same business, transfers the assets to Trucking, and petitions Statewide into bankruptcy. This most likely warrants

Accepted Answer

A)   a bonus to Russ for effectively eliminating the firm's debts.
B)   a discharge for Statewide in bankruptcy.
C)   a pierce of the corporate veil.
D)   the application of the doctrine of corporation by estoppel.E) A) and B)
F) All of the above

Question 9

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) B) and D)
F) B) and C)

Question 10

A close corporation need not meet all of the specific requirements set forth in state statutes for corporations because it is essentially a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 11

Don sets up Empty Vessel Inc. (EVI) , but fails to provide the firm with sufficient capital. Don formed EVI not to make a profit but to assume debts that he does not wish to pay. This most likely warrants

Accepted Answer

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

Question 12

A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.

Accepted Answer

A) True 
 B)False  True

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Stocks, or equity securities, represent the purchase of ownership in the business firm.

Accepted Answer

A) True 
 B)False

Question 15

Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.

Accepted Answer

A) True 
 B)False  True

Question 16

A shareholder in a professional corporation generally cannot be held liable for malpractice by other professionals at the firm.

Accepted Answer

A) True 
 B)False

Question 17

Most likely to appear in the articles of incorporation are the names of the company's initial

Accepted Answer

A)   officers and employees.
B)   shareholders and creditors.
C)   market and competitors.
D)   registered office and agent.E) A) and B)
F) B) and C)

Question 18

PrimarySource.com Corporation is a new online, textbook, and school supply business. How can PrimarySource.com obtain capital to finance its operations?

Accepted Answer

Generally, to obtain capital, a corporat...

Question 19

All of a certain corporation's small number of shareholders agree that the firm can operate without directors, bylaws, shareholder meetings, stock certificates, and formal records of shareholders' decisions. This firm is most likely

Accepted Answer

A)   a close corporation.
B)   a corporation by estoppel.
C)   a de facto corporation.
D)   a de jure corporation.E) A) and C)
F) B) and D)

Question 20

A corporation's authority to act and its liability for those actions is, with respect to the firm's owners,

Accepted Answer

A)   proportional.
B)   one and the same.
C)   joint and several.
D)   separate and apart.E) All of the above
F) C) and D)

Exam 33: Corporate Formation and Financing

Like the partners in a partnership, the shareholders in a corporation cannot change without affecting the continued existence of the firm.

Correct AnswerverifiedShow Answer

Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.

Correct AnswerverifiedShow Answer

To pierce the corporate veil means to reveal the identity of its true owner.

Correct AnswerverifiedShow Answer

The first step in the incorporation of a business firm is to

Correct AnswerverifiedShow Answer

Local 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

Oil Industries Inc. is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Po, the majority shareholder, misappropriates company funds. The shareholders whose interests are injured by Po's misconduct should

Correct AnswerverifiedShow Answer

An S corporation avoids taxes at

Correct AnswerverifiedShow Answer

Russ owns Statewide Freight Company. He uses the firm's funds to pay his personal expenses, creates Trucking Inc. to engage in the same business, transfers the assets to Trucking, and petitions Statewide into bankruptcy. This most likely warrants

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A close corporation need not meet all of the specific requirements set forth in state statutes for corporations because it is essentially a sole proprietorship.

Correct AnswerverifiedShow Answer

Don sets up Empty Vessel Inc. (EVI) , but fails to provide the firm with sufficient capital. Don formed EVI not to make a profit but to assume debts that he does not wish to pay. This most likely warrants

Correct AnswerverifiedC

A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

Stocks, or equity securities, represent the purchase of ownership in the business firm.

Correct AnswerverifiedShow Answer

Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.

Correct AnswerverifiedTrue

A shareholder in a professional corporation generally cannot be held liable for malpractice by other professionals at the firm.

Correct AnswerverifiedShow Answer

Most likely to appear in the articles of incorporation are the names of the company's initial

Correct AnswerverifiedShow Answer

PrimarySource.com Corporation is a new online, textbook, and school supply business. How can PrimarySource.com obtain capital to finance its operations?

Correct AnswerverifiedGenerally, to obtain capital, a corporat...View AnswerShow Answer

All of a certain corporation's small number of shareholders agree that the firm can operate without directors, bylaws, shareholder meetings, stock certificates, and formal records of shareholders' decisions. This firm is most likely

Correct AnswerverifiedShow Answer

A corporation's authority to act and its liability for those actions is, with respect to the firm's owners,

Correct AnswerverifiedShow Answer

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C

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True

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True

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Generally, to obtain capital, a corporat...
View Answer

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