LGS 200 Module 4
Question content area top Part 1 The process of _____ consists of the liquidation (sale) of general partnership assets and the distribution of the proceeds to satisfy claims against the partnership.
.winding up
Which of the following statements about voluntary dissolution is NOT true?
A corporation cannot be voluntarily dissolved
Which of the following is an INCORRECT statement regarding the corporation as a legal person?
A corporation has the same identity as its shareholders.
Which of the following is a correct statement regarding a merger?
A merger occurs when one corporation is absorbed into another corporation.
What of the following is NOT true regarding state securities laws?
All states have enacted securities laws except New York.
Which of the following is an INCORRECT statement regarding a limited liability limited partnership (LLLP)?
An LLLP is a type of general partnership.
Suppose American Hover Car Company, a U.S. corporation incorporated under the laws of Delaware, forms a subsidiary corporation called Experimental Vehicle Corporation, an Indian corporation formed under the laws of India, to develop and test hover cars in India. American Hover Car Company is the parent corporation, and Experimental Vehicle Corporation is the subsidiary corporation. If an employee of Experimental Vehicle Corporation negligently injures an Indian citizen while on a test drive, what is the liability?
Only Experimental Vehicle Corporation is liable.
Which of the following is true about Section 10(b) of the Securities Exchange Act of 1934?
Section 10(b) prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.
The _____ provides an _____ offering exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).
Securities Act of 1933; intrastate
Which of the following is an INCORRECT statement regarding formation of a general partnership?
Stock of the partnership, representing ownership, must be publicly traded on a well-known stock exchange (for example, NASDAQ).
Which of the following is NOT true about corporate officers?
The same individual may NOT simultaneously hold more than one office in the corporation.
Which of the following is an INCORRECT statement regarding an international subsidiary corporation?
The subsidiary corporation is organized under the laws of the home country.
Which of the following is NOT true regarding WKSIs?
They must file a new prospectus every time they have a new public offering.
Which of the following is NOT true regarding small company offerings?
They must file a registration statement, prospectus, and a question-and-answer form.
While there may be many advantages to franchising, which of the following is NOT an advantage?
decreased cost savings
According to the UPA, the _____ of a general partnership is when the "general partnership receives notice from a general partner of their express will to withdraw as a partner."
dissolution
Which of the following is NOT a duty of the principal?
duty to perform
The Restatement (Second) of Agency defines agency as a(n) _____ relationship "which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act."
fiduciary
A limited partnership has two types of partners: _____.
general and limited
Suppose a homeowner employs a real estate broker to sell his house. A water pipe breaks and begins to leak water into the house. If the homeowner cannot be contacted, the real estate broker has _____ authority to hire a plumber to repair the pipe to stop the water leak.
implied
Principals often employee outsiders—that is, persons and businesses that are not employees—to perform certain tasks on their behalf. These persons and businesses are called _____.
independent contractors
Longhorn Corporation has its annual audit done by its outside certified public accountants (CPAs), Young & Old, CPAs. Priscilla is one of the CPAs who conduct the audit. The audit discloses that the Longhorn Corporation's profits have doubled since last year, and Priscilla rightfully discloses this fact to Martha, the chief financial officer (CFO) of Longhorn Corporation. If Priscilla and Martha purchase stock prior to the time the company announces its earning, this would be ________.
insider trading
When a company employee or company advisor uses material nonpublic information to make a profit by trading in the securities of the company, this is known as _____.
insider trading
Question content area top Part 1 A limited partnership is a(n) _____ because the _____ partner expects to make money based on the effort of the _____ partners.
investment contract; limited; general
A business or party selling securities to the public is called a(n) _____.
issuer
Which of the following is NOT a transaction approved by the board of directors that requires a shareholder vote?
issuing new shares of stock
Under the Uniform Partnership Act, general partners have _____ liability for torts and breaches of trust committed by a partner or an employee of the general partnership while acting on partnership business.
joint and several
Under the Uniform Partnership Act, general partners are _____ liable for the business of the limited partnership even if the partner did not join in the commission of the act.
jointly and severally
The term respondeat superior literally means "_____," and is based on the legal theory of vicarious liability, which is liability _____
let the master answer; without fault
Because of their size and presence in the market, well-known seasoned investors (WKSIs) are granted substantial flexibility of communication not provided to other issuers. In addition to a____________________, a WKSI can release factual-information, __________________ information, electronic communications, and free-writing prospectuses ___________________ significant restrictions during the entire offering period.
statutory prospectus; forward-looking; without
Each of the following securities would be exempt from registration with the SEC EXCEPT?
technology firm securities issued within eight years of the company's first patent
Suppose a principal hires a lawyer to represent her in a lawsuit until the lawsuit is resolved. If the principal and the lawyer voluntarily agree to terminate the relationship prior to the resolution of the case by trial or settlement, the agency is _____.
terminated by an act of the parties
Suppose a principal employs an agent to trap alligators. If a law is passed that makes trapping alligators illegal, the agency contract _____.
terminates due to impossibility of performance
Which of the following is NOT a type of officer authority?
ultra vires
A sole proprietor has _____ personal liability.
unlimited
The process of _____ consists of the liquidation (sale) of limited partnership assets and the distribution of the proceeds to satisfy claims against the partnership.
winding up
Which of the following is NOT a major provision of the Sarbanes-Oxley Act?
"sliding-scale" cap on nominal damages
Suppose Jaime, Madara, and Jose form IT Inc., a corporation, and each contributes $1,000,000 capital. The corporation borrows $1 million from State Bank. One year later, IT Inc. goes bankrupt and defaults on the $1 million loan owed to State Bank. At that time, IT Inc.'s only asset is $50,000 cash, which State Bank recovers. What are the financial implications for Jaime, Madara, and Jose have?
Jaime, Madara, and Jose each lose their initial investment of $100,000.
Rani decides to sell her house and hires Mark, a real estate broker, to list and sell the house for a price of $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to Heather, a prospective buyer, and discloses to Heather that he is acting as an agent for Rani. Heather agrees to buy the house, and Mark signs the contract on behalf of Rani. Which of the following statements is true?
Rani, the principal, is liable on the contract, but Mark, the agent, is not.
Which of the following is an INCORRECT statement regarding corporations?
Today, most corporations are formed pursuant to general corporation laws of the federal government.
General partners do not pay federal income taxes. Instead, the income and losses of partnership have to be reported on the individual partners' personal income tax returns. This is called _____.
flow-through taxation
Suppose that Technology Incorporated wants to acquire Digital Corporation. Technology Incorporated makes a tender offer directly to the shareholders of Digital Corporation to acquire their shares of Digital Corporation. This is a _____ tender offer in which Technology Incorporated is the tender _____ and Digital Corporation is the _____ corporation.
hostile; offeror; target
Question content area top Part 1 A Small Company Offering Registration (SCOR) is a method for ________________ companies to sell up to $1 million of securities during a _____________ -month period to the public by using a question-and-answer disclosure form called Form _____________.
small; 12; U-7
Regulation A+ offerings are divided into two tiers. Tier 1 permits an issuer to raise up to $_____ in a 12-month period. Tier 2 permits an issuer to raise up to $_____ in a 12-month period.
20 million; 50 million
Which of the following is NOT true regarding initial public offerings?
A company going public does not need to submit a prospectus to the SEC.
Which of the following is an INCORRECT statement regarding an LLLP?
An LLLP requires at least two general partners and at least two limited partners.
_____ shareholders' meetings are held to elect directors, choose an independent auditor, and take other actions.
Annual
Which of the following is INCORRECT in regard to exempt securities?
If the security is transferred more than five times it loses its exemption.
Under the JOBS Act, to qualify as an emerging growth company, an existing company must satisfy all of the following requirements EXCEPT?
It must pledge due diligence in maintaining its status as a closely-held corporation.
Which of the following is NOT true regarding short-swing profits and Section 16 of the Securities Exchange Act of 1934?
Lack of intent is a defense to liability under Section 16.
Which of the following is NOT true regarding Regulation A+ offerings?
Less information is required when they file their registration statement.
Which of the following is NOT true about crowdfunding offerings?
The issuer of the crowdfunding offering must disclose five years of financial information.
Which of the following is an INCORRECT statement regarding the name of a general partnership?
The name selected by the partnership can indicate that it is a corporation.
Which of the following is NOT true about the Securities Exchange Act of 1934?
The 1934 Act applies to the original issue of securities, including initial public offerings (IPOs) by new public companies and the sales of new securities by existing companies.
Which of the following is true regarding state securities laws?
These laws require registration of certain securities.
Which of the following is NOT true regarding emerging growth companies?
They must submit a confidential draft registration statement with the SEC.
While there may be many disadvantages to franchising, which of the following is NOT a disadvantage?
decreased legal expenses
An agent enters an authorized contract with a third party on the principal's behalf, the principal fails to perform on the contract, and the third party recovers a judgment against the agent. The agent can recover this amount from the principal because of the ___________.
duty to indemnify
Which of the following is NOT a duty of the agent?
duty to indemnify
Apparent agency, or agency by _____, arises when a principal creates the appearance of an agency that in actuality does not exist.
estoppel
Which of the following is the most common form of agency?
express
Domino's Pizza is an international pizza company that focuses on pizza delivery. Domino's operates in over 60 countries internationally. Approximately 90% of its stores are franchise owned with over 1,100 ____________.
franchisees
Under the standard for the _________________, an employer—the______________—is not liable if an employee, who is motivated by jealousy, injures someone during work hours on the premises who dated the employee's boyfriend. In this standard, the employee's personal motivation is important to the standard.
motivation test; principal
Entrepreneurs should weigh the possibility of purchasing a franchise against the alternatives of buying an existing business or launching their own venture from scratch. Which of the following costs are NOT typically associated with buying a franchise?
one-time royalty payment
Which of the following is NOT a major provision of the Sarbanes-Oxley Act?
shareholder liability
The limited liability of shareholders means that ________.
they are liable only to the extent of their capital contributions
Which of the following is an accurate statement regarding the liability of a principal for an independent contractor's torts?
Generally, a principal is not liable for the torts of its independent contractors.
_____ Rule 504 exempts from registration the sale of securities not exceeding _____ during a 12-month period. This is known as the _____ exemption.
SEC; $5 million; small offering
_______________ profits are profits that are made by statutory insiders on trades involving equity securities of their corporation that occur within ____ months of each other.
Short-swing; 6
Which of the following is NOT a major legal form in which to conduct a business?
limited sole proprietorship
The duty of _____ is a duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders.
loyalty
Which of the following is NOT true regarding crowdfunding?
Crowdfunding offerings are not subject to the Securities Act of 1933.
Assume that a car salesperson is employed to sell the principal's car. The principal tells the agent that the car was repaired after it was involved in a major accident. If the agent intentionally tells the buyer that the car was never involved in an accident, the agent has made an intentional misrepresentation. Which of the following statements is true?
Both the principal and the agent are liable for this misrepresentation.
A(n) _____ corporation is a corporation that does not qualify to or does not elect to be federally taxed as an S corporati
C
Which of the following is NOT true regarding the Securities Act of 1933?
Corporate officers may not be held liable, only members of the board of directors can be sued.
_____ formation occurs when: 1) a certificate of limited partnership is not properly filed; 2) there are defects in a certificate that is filed; or 3) some other statutory requirement for the creation of a limited partnership is not met.
Defective
_____ has the most advanced corporation law in the United States.
Delaware
Which of the following is NOT an important question to answer in determining whether an agent's conduct occurred within the scope of his or her employment?
Did the agent possess the required professional licensure(s)?
_____ are personally liable for the debts and obligations of the general partnership.
General partners
Suppose Qixia hires Harold, a lawyer and an independent contractor, to represent her in a court case. While driving to the courthouse to represent Qixia at trial, Harold negligently causes an automobile accident in which Mildred is severely injured. Which of the following is an accurate statement regarding the liability of Qixia and/or Harold for Mildred's injuries?
Harold is liable for Mildred's injuries, but Qixia is not liable.
Courts apply the _____ test to determine whether an arrangement is an investment contract and therefore a security.
Howey
Nathan opens a clothing store called "The Clothing Store" and operates it as a sole proprietorship. Nathan files the proper statement and publishes the necessary notice of the use of the trade name. Nathan contributes $25,000 of his personal funds to the business and borrows $100,000 from a bank in the name of the business. After several months, Nathan closes the business because it is unsuccessful. At the time it is closed, the business has no assets, owes the bank $100,000, and owes other debts of $25,000. Which of the following is a correct statement regarding Nathan's personal risk exposure for his unsuccessful business?
Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank and the $25,000 debt owed to others.
Which of the following is NOT true about Section 10(b) of the Securities Exchange Act of 1934?
Negligent conduct is punishable under Section 10(b).
Which of the following is NOT true about Section 11 of the Securities Act of 1933?
Only the accountants and signers of the registration statements may be held liable under Section 11.
Which of the following is NOT true about the Securities Act of 1933?
Securities that are issued online are not covered by the 1933 Act.
Suppose Georgia Pacific, Inc. interviews Albert Iorio for a sales representative position. Iorio, accompanied by Jane Franklin, the national sales manager, visits retail stores located in the open sales territory. While visiting one store, Franklin tells the store manager, "I wish I had more sales reps like Albert." Nevertheless, Iorio is not hired. If Iorio later enters into contracts with the store on behalf of Georgia Pacific and Franklin has not controverted the impression of Iorio that she left with the store manager, the company will ______.
be bound to the contract, based on Iorio's apparent agency
Suppose that after conducting considerable research and investigation, the directors of a major automobile company decide to produce large and expensive sport-utility vehicles (SUVs). Three years later, when the SUVs are introduced to the public for sale, few of them are sold because of the public's interest in buying smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. Because this was an honest mistake of judgment on the part of corporate management, their judgment is shielded by the _____ rule.
business judgment
In a limited partnership, limited partners are not personally liable for partnership debts beyond their _____.
capital contributions
Delaware has a special court—the court of _____—that hears and decides business cases.
chancery
Sonia, who owns a piece of vacant real estate, hires Matthew, a licensed real estate broker, to list the property for sale. Leonard, an adjacent property owner to Sonia's property, tells Matthew that a chemical plant has polluted his property and probably Sonia's property. Sonia does not know this fact, and Matthew does not tell Sonia this information. Sonia sells the property to Macy. It is later discovered that the property Macy bought from Sonia is polluted. In this Example, the information that Matthew was told about the possible pollution of the property is imputed to Sonia. Sonia will be held liable to Macy because of the legal rule of ___________
imputed knowledge.
A principal, Nigel Jones, and an agent, Marcia McKee, agree that the agent will represent the principal to purchase a business and that the agent will disclose the existence of the agency and identity of the principal to third parties. The agent finds a suitable business and contracts to purchase the business on behalf of the principal, but the agent mistakenly signs the contract "Marcia McKee, agent." This is a(n) _____ agency that occurs because of _____.
partially disclosed; mistake
The doctrine of _____ is often used by unpaid creditors who are trying to collect from shareholders a debt owed by the corporation.
piercing the corporate veil
Owning a franchise is typically costly and labor-intensive. As a result, the purchase of a franchise should be a careful, deliberate decision. Which of the following is NOT a step in buying a franchise?
plan own training program
If someone is suing a corporation, the complaint and summons is typically served on the corporation's _____.
registered agent
The board of directors authorizes actions to be taken on behalf of the corporation by adopting _____ at board of directors' meetings.
resolutions