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Business Law
Q:
Standard Products Company would like to change its corporate status to avoid income taxes at the corporate level. To qualify, the firm must be
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a public corporation.
Q:
Fact Pattern 38-1
Standard Company (SC) and Typical Corporation (TC) form United, Inc., a close corporation, and agree to restrict the transfer of its stock to anyone else. SC sells its physical assets, but not its United stock, to Variety, Inc. TC files a suit against SC.
Refer to Fact Pattern 38-1. Under the reasoning of the court in Case 38.1, Salt Lake Tribune Publishing Co. v. AT&T Corp., SC's sale of its assets
a. did not invalidate, violate, or void the stock transfer restriction.
b. invalidated the stock transfer restriction.
c. voided the stock transfer restriction.
d. violated the stock transfer restriction.
Q:
Fact Pattern 38-1
Standard Company (SC) and Typical Corporation (TC) form United, Inc., a close corporation, and agree to restrict the transfer of its stock to anyone else. SC sells its physical assets, but not its United stock, to Variety, Inc. TC files a suit against SC.
Refer to Fact Pattern 38-1. A reasonable purpose for a stock transfer restriction in a close corporation, like the agreement between SC and TC in the previous question, according to the court in Case 38.1, Salt Lake Tribune Publishing Co. v. AT&T Corp., is
a. a desire to limit the participation of outsiders in the firm.
b. a goal to restrain insiders from taking advantage of their position.
c. an attempt to restrain the free flow of commerce among investors.
d. a wish to restrict the transfer of the shareholders' physical assets.
Q:
Solid Appliances, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufacturing and distributing a newly patented kitchen appliance, (2) is owned by five shareholders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Solid Appliances is
a. an S corporation.
b. a close corporation.
c. a nonprofit corporation.
d. a professional corporation.
Q:
The shares of Capital Corporation are publicly traded in securities markets. Capital Corporation is
a. a private corporation.
b. a privately held corporation.
c. a public corporation.
d. a publicly held corporation.
Q:
Micro Chips, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, it is properly referred to as
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a national corporation.
Q:
Standard Manufacturer, Inc. (SMI), is a corporation. Todd is an SMI officer. In a criminal case, Fifth Amendment rights belong to
a. neither SMI nor Todd.
b. SMI and Todd.
c. SMI only.
d. Todd only.
Q:
To a corporation, stocks represent debt.
Q:
Shareholders can be personally liable for corporate debts if a court "pierces the corporate veil."
Q:
An association that is not a corporation can never be treated as if it were a corporation.
Q:
An incorporator must have an interest in a corporation to obtain a corporate charter.
Q:
No state requires a minimum capital investment for ordinary business corporations.
Q:
Information concerning the financing of a corporation must be outlined in the articles of incorporation.
Q:
A corporation has perpetual existence in most states unless stated otherwise in the articles of incorporation.
Q:
A corporate name cannot be the same as, or even deceptively similar to, the name of an existing corporation doing business in the state.
Q:
Generally, a promoter is personally liable on a preincorporation contract.
Q:
The management of a close corporation resembles that of a partnership.
Q:
A close corporation may restrict the right of a shareholder to transfer stock by means of a shareholder agreement.
Q:
A foreign corporation is a corporation formed without a profit-making purpose.
Q:
Any power expressly set out in the bylaws of a corporation is ultra vires.
Q:
The law of the state of incorporation may restrict the express powers of a corporation.
Q:
Bylaws generally include the operating rules of a corporation.
Q:
The law of the state of incorporation may restrict the implied powers of a corporation.
Q:
Express powers of a corporation can be found in the resolutions of its board of directors.
Q:
Express powers of a corporation can be found in its articles of corporation.
Q:
Corporations do not enjoy any protections under the Bill of Rights.
Q:
Corporate officers select the corporate directors.
Q:
A corporation is liable for the torts of its officers committed within the course and scope of their employment.
Q:
Corporations have some of the same constitutional rights as natural persons.
Q:
An individual can become an owner of a corporation only by purchasing the minimum number of shares of stock specified in the bylaws.
Q:
A corporation cannot sue its shareholder.
Q:
There is considerable variation among state corporation laws.
Q:
ISP Corporation is an Internet service provider. How can ISP obtain capital to finance its operations?
Q:
Agents and employees of Apples Corporation and Oranges Corporation are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes? If so, how can they be punished?
Q:
Carol and Dan are preferred stockholders in Eagle Corporation. Carol and Dan have the same rights as most preferred stockholders, which means, as regards Eagle, they have
a. no right to an annual dividend and no right to vote.
b. no right to an annual dividend but do have the right to vote.
c. the right to an annual dividend and the right to vote.
d. the right to an annual dividend but not the right to vote.
Q:
Mary buys 500 shares of common stock in National Company. As a shareholder of record, Mary owns a proportionate interest with regard to
a. control, earnings, and net assets.
b. control only.
c. earnings and net assets only.
d. neither control nor earnings and net assets.
Q:
Discount Outlets, Inc., issues bonds. Bonds
a. are issued by businesses only.
b. are sometimes referred to as "stock with preferences."
c. have fixed maturity dates.
d. require periodic interest payments from their owners.
Q:
Gamma Corporation and Omega Corporation, like other business corporations, most likely issue securities to
a. increase their market share.
b. increase their visibility.
c. obtain financing.
d. reduce their production costs.
Q:
Quik Company claims to be a corporation but it is not. Pam signs a contract with Quik that is not performed. In Pam's suit against Quik, a court will likely recognize the firm as
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. an ultra vires corporation.
Q:
Start-Up Corporation substantially complies with all conditions precedent to incorporation. Start-Up has
a. corporate existence by estoppel.
b. de facto existence.
c. de jure existence.
d. ultra vires existence.
Q:
Ann and Brad hold the first organizational meeting of Coffee Café Corporation. Probably the most important function of this meeting is
a. adopting Coffee Café's bylaws.
b. agreeing on Coffee Café's purpose.
c. chartering Coffee Café.
d. drafting Coffee Café's articles of incorporation.
Q:
Stan is a registered agent for Transport, Inc., which incorporated in Utah. As a registered agent, Stan
a. agreed to buy stock in Transport before it existed.
b. applied to Utah on behalf of Transport to obtain its corporate charter.
c. does business for Transport in Utah.
d. receives legal documents on behalf of Transport.
Q:
Stan incorporates his engineering supply business as Technical Instruments, Inc. This firm could have perpetual existence in
a. a few states.
b. all states.
c. most states.
d. no states.
Q:
As explained by the Arkansas Supreme Court in Case 38.2, Bullington v. Palangio, if a corporation's charter is revoked for failure to pay its franchise taxes,
a. stockholders will be held personally liable for obligations that arose before the charter was revoked.
b. stockholders will be held personally liable only for breaches of contracts that were entered into on behalf of the corporation before the charter was revoked.
c. stockholders will not be held personally liable for obligations that arose before the charter was revoked.
d. officers will not be held personally liable for obligations that arose before the charter was revoked.
Q:
Beth and Cody want to form a corporation to market MP3 players and products. The first step in the incorporation procedure is to
a. file the articles of incorporation.
b. hold the first organizational meeting.
c. obtain a corporate charter.
d. select a state in which to incorporate.
Q:
As a promoter for New Century Corporation (NCC), Opal is personally liable for any preincorporation contract until NCC
a. assumes the preincorporation contract by novation.
b. ratifies the contracts.
c. rejects the contract.
d. releases Opal from liability.
Q:
To qualify as a professional corporation, Smith & Jones, P.C.,
a. must be a corporation formed by professionals.
b. must grant all shareholders voting rights.
c. must have at least thirty-five shareholders.
d. all of the above.
Q:
Jill and Kelly are architects and members of Jill & Kelly, P.C., a professional corporation. Jill supervises Lucy, an employee of the firm. As a member, Jill
a. is personally liable for any tort committed by Kelly.
b. has limited liability for any of Kelly's acts of malpractice.
c. has no liability for any torts committed by Kelly or Lucy.
d. may be personally liable for malpractice committed by Lucy.
Q:
Boutique Corporation would like to change its corporate status to avoid income taxes at the corporate level. To qualify, the shareholders must not be
a. corporations.
b. estates.
c. individuals.
d. partnerships.
Q:
Web Design, Inc., is a close corporation. Web Design is
a. eligible to make public offerings of securities.
b. exempt from corporate duties such as filing a certificate of incorporation.
c. generally allowed to restrict transfer of stock.
d. taxed in the same manner as a partnership.
Q:
Digitech is a foreign corporation, which means that Digitech
a. is an alien corporation.
b. is chartered in a country other than the U.S., such as Japan.
c. may be required to obtain a certificate of authority to do business in states where it is not chartered.
d. may transact business only in foreign nations.
Q:
Federal Home Products, Inc. (FHP), is a corporation. The implied powers of FHP are powers necessary to
a. amend the corporate charter.
b. bring a derivative suit.
c. declare dividends.
d. perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.
Q:
Quinn is a marketing executive with Regional Corporation. In a criminal case, the U.S. Constitution's rights against self-incrimination may protect
a. neither Quinn nor Regional.
b. Quinn and Regional.
c. Quinn only.
d. Regional only.
Q:
American Goods, Inc., is a corporation. Responsibility for the overall management of American Goods is entrusted to
a. the board of directors.
b. the corporate officers and managers.
c. the owners of the corporation.
d. the shareholders.
Q:
Those persons who hold preferred stock are the sole owners of that firm.
Q:
To a corporation, bonds represent ownership.
Q:
On the basis of a defect in incorporation, a third party may be able to avoid liability to the "corporation."
Q:
A certificate of incorporation represents a state's authorization for a corporation to conduct business.
Q:
Every corporation must identify a specific person as an agent to receive legal documents on behalf of a corporation.
Q:
Promoters, not incorporators, must execute the articles of incorporation.
Q:
Most states limit the duration of a corporation's existence to fifty years.
Q:
A corporate charter can state generally that the corporation is organized to conduct "any legal business."
Q:
The "minimum contacts" rule determines in which state a corporation should be chartered.
Q:
In some states, a close corporation can operate without formal directors' meetings.
Q:
A public corporation is also known as a publicly held corporation.
Q:
Only acts that fall within the express powers of a corporation are ultra vires.
Q:
A corporation cannot be formed without a profit-making purpose.
Q:
Express powers of a corporation can be found in the law of the state of incorporation.
Q:
Implied powers of a corporation may be restricted by a state's constitution.
Q:
Alpha Corporation and Beta, Inc., form a business trust. Charlie Company and Delta Corporation form a joint stock company. Eagle Corporation and Fine Goods, Inc., form an incorporated cooperative. What features do these combinations of business organization have in common?
Q:
Jane, Kyle, and Lynn organize a nonprofit businessJKL Markets, Inc.to buy groceries from wholesalers and sell them to consumers who buy a membership in JKL. Because the firm is a nonprofit entity, it is able to sell the groceries for less than a commercial grocer could. What form of business organization is JKL Markets? Is it significant that JKL is incorporated?
Q:
Consumers in Delta City form a business organization to provide, without profit, an economic service to its members. This is
a. a business trust.
b. a cooperative.
c. a corporation.
d. a joint stock company.
Q:
Fred is the owner and manager of a business trust. Gail is the beneficiary. Responsibility for the debts and obligations of the trust rest with
a. Fred only.
b. Gail only.
c. Fred and Gail.
d. neither Fred nor Gail.
Q:
Evan is the owner and manager of a business trust. Under the terms of a business trust, Evan is required to
a. distribute the profits only.
b. manage the property only.
c. distribute the profits and manage the property.
d. neither distribute the profits nor manage the property.
Q:
As the beneficiary of a business trust, Alan's liability for trust debts and obligations is
a. limited to his capital investment in the trust.
b. limited to his personal assets.
c. nothing.
d. unlimited.
Q:
Exotic Products Company and First Pier, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This business organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.
Q:
Don is a beneficiary of a business trust. As a beneficiary, Don is required to
a. distribute the profits only.
b. manage the property only.
c. distribute the profits and manage the property.
d. none of the above.
Q:
Investment Property Company is a business trust. The concept of a business trust originated in
a. California.
b. Massachusetts.
c. New York.
d. Texas.
Q:
Joan, Kyle, and other consumers form Metro Purchasing Cooperative. This form of business organization makes it possible for these individuals to
a. avoid personal liability for the acts of the cooperative.
b. obtain an exemption from state laws governing corporations.
c. pool their resources to gain an advantage in the market.
d. none of the above.
Q:
Larry, Michel, and Nancy are investors in Oceanic Exploration, a business trust. A business trust is managed by
a. directors and officers.
b. general partners.
c. managing members.
d. trustees.