chapter 39 legal

Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining operation. In the course of this employment, Stefan commits a tort. Liability for this tort most likely rests with: Raw Resources but not Stefan. Stefan but not Raw Resources. neither Raw Resources nor Stefan. Raw Resources and Stefan.

Raw Resources and Stefan.

Preferred shares normally have a fixed maturity date on which the firm must pay them off. True False

False

Albert owns Best Corporation. He completely dominates Best's operations, such that the company is not really operated as a separate legal entity. Which statement is correct? Albert may be liable for Best's debts under the alter-ego theory. Albert will be liable for Best's debts under the corporate de jure theory. Albert cannot be liable for Best's debts under any circumstances. Albert will be liable for Best's debts if Best is an S corporation.

Albert may be liable for Best's debts under the alter-ego t

A business incorporated in one state has an automatic right to do business in any other state. True False

False

Corporate bylaws must be approved by the appropriate state official before the corporation's first organizational meeting. True False

False

Corporations are obligated to return a principal amount per share to each holder of common stock. True False

False

"Piercing the corporate veil" means revealing to shareholders the internal rules of corporate management. True False

False

Buckley Corporation is considering issue preferred stock. Which statement below is correct? Preferred stock will share fully if the corporation grows over time. Preferred stockholders have priority over common stockholders as to dividends and payments on dissolution of the corporation. Preferred stock is redeemable on a fixed date. Preferred stock is paid after common stock on liquidation of the corporation.

Preferred stockholders have priority over common stockholders as to dividends and payments on dissolution of the corporation.

A close corporation may restrict the right of a shareholder to transfer stock. True False

True

Articles of incorporation can state generally that the corporation is organized to conduct "any legal business." True False

True

Common stock provides a proportionate interest in the corporation with regard to net assets. True False

True

If shareholders of a close corporation continuously use corporate property for personal use, the shareholders risk being personally liable for debts of the corporation. True False

True

The choice of a corporate name is subject to state approval. True False

True

To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability. True False

True

Venture capital is capital provided to new business ventures by professional, outside investors. True False

True

Which factor is NOT considered when a court is deciding to pierce the corporate veil? A party is tricked or misled into dealing with the corporation rather than the individual. The corporation is set up to never make a profit. The corporation is formed to evade existing legal obligations. All of these factors are considered.

all

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 de jure corporation. an ultra vires corporation. a corporation by estoppel. a de facto corporation.

a corporation by estoppel.

Rapid Pest Control holds itself out to others as being a corporation but makes no attempt to incorporate. Ponce signs a contract with Rapid Pest Control that is not performed. Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is: an S corporation. ultra vires. a corporation by estoppel. an alien corporation.

a corporation by estoppel.

Stable Foundation Construction Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Stable is most likely: a de jure corporation. ultra vires. a corporation by estoppel. a de facto corporation.

a de jure corporation

Gelato Ice, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Gelato is properly referred to as: an alien corporation. a de jure corporation. a domestic corporation. a foreign corporation.

a foreign corporation.

A holding company (parent company): is a company whose business activity consist of holding shares in another company. typically is established in a low-tax or no-tax jurisdiction. is used to reduce or defer U.S. income taxes. all of these answers are correct.

all of these answers are correct.

Stock may be described as: an ownership interest in the corporation. a document describing the ownership and management structure of the corporation. a debt owed by the government to the shareholder. a debt owed by the corporation to the shareholder.

an ownership interest in the corporation.

The responsibility for the overall management of a corporation belongs to the: board of directors. shareholders chief financial officer. chief executive officer.

board of directors.

Internal rules of management adopted by a corporation or other organization are: rules of operation. articles of management. bylaws. operating laws.

bylaws.

Piercing the corporate veil means that a court will ignore the corporate structure and: require the corporate officers to assume personal liability to creditors for corporate debts. expose the board of directors to personal liability. require the board of directors to assume personal liability to creditors for corporate debts. expose the shareholders to personal liability.

expose the shareholders to personal liability.

A public corporation is also known as a publicly held corporation. True False

false

Convenience Mart, Inc., is a close corporation. Convenience Mart is: generally allowed to restrict the transfer of its stock. taxed in the same manner as a partnership. eligible to make public offerings of securities.

generally allowed to restrict the transfer of its stock.

Common stock: has the lowest priority with respect to distribution of assets on the corporation's dissolution. can be exchanged for a specified number of shares of preferred stock under certain conditions. has priority over preferred stock shares as to payment of dividends. provides no voice in, or control over, management of the corporation.

has the lowest priority with respect to distribution of assets on the corporation's dissolution.

S Corporations are required to: be a member of an affiliated group of corporations. have no shareholder who is a nonresident alien and have shareholders who are individuals, estates, or certain trusts. have no more than fifty shareholders. have more than one class of stock.

have no shareholder who is a nonresident alien and have shareholders who are individuals, estates, or certain trusts.

Crowdfunding is allowed only to raise money for charitable purposes. is allowed only if the company using crowdfunding to raise money promises to refund all funds raised if the venture is unsuccessful. is banned by federal securities laws. is allowed under SEC rules provided certain disclosures are made and no more than $1 million per year is raised.

is allowed under SEC rules provided certain disclosures are made and no more than $1 million per year is raised.

Preferred stock is often considered a more conservative (less aggressive) investment than common stock because: its holders have voting rights, unlike common stockholders. it is not tradable, assignable, or sellable. it never pays dividends. it is less volatile and more like a bond.

it is less volatile and more like a bond.

Digitech is a foreign corporation, which means that Digitech: may be required to obtain a certificate of authority to do business. may do business only in foreign countries. is an alien corporation. is chartered in a foreign country.

may be required to obtain a certificate of authority to do business.

Preferred stock: means holders have priority over holders of common stock as to dividends. has a fixed maturity date on which it must be retired by the firm. means holders are other corporations. none of these choices are correct.

means holders have priority over holders of common stock as to dividends.

Boutique Corporation would like to change its corporate status to avoid income taxes at the corporate level. To qualify, the shareholders must not be: individuals. partnerships. corporations. estates.

partnerships

Superior Home Products, Inc., is a corporation. Superior's implied powers enable it to: declare dividends. perform all acts reasonably appropriate and necessary to accomplish its corporate purposes. file articles of incorporation. bring a derivative suit.

perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.

An action in which a court disregards the corporate entity and holds the shareholders personally liable for corporate debts and obligations is: piercing the corporate veil. piercing corporate status. unveiling the corporation. none of these choices.

piercing the corporate veil.

A financing method by which a company sells equity in an existing business to a private or institutional investor is called: cumulative preferred stock. debenture bonds. venture capital. private equity capital.

private equity capital.

Frezer Corporation is considering issuing bonds. Which statement below is correct? Bondholders have a right to vote on the election of corporate directors. Bondholders receive fixed dollar interest payments. Bond holders receive semi-annual dividend payments. Bonds are held until a corporation liquidates.

Bondholders receive fixed dollar interest payments.

A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation. True False

False

Bonds represent the purchase of ownership in a business firm. True False

False

Putting funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities is called: commingling. estoppel. de facto mixing. de jure existence.

commingling

If a corporation has substantially complied with all requirements for incorporation, the corporation is said to have: de jure existence. estoppel existence. de facto existence. de legal existence.

de jure existence.

In corporate law, when a corporation acts beyond the scope of its authority, it is said to: engage in ultra vires transactions. hide behind the corporate veil. be engaged in respondent superior. pierce the corporate veil.

engage in ultra vires transactions.

Stan is a registered agent for Transport, Inc., which incorporated in Utah. As a registered agent, Stan: does business for Transport in Utah. receives legal documents on behalf of Transport. agreed to buy stock in Transport before it existed. applied to Utah on behalf of Transport to obtain its corporate charter

receives legal documents on behalf of Transport.

Stocks: represent debt. represent the purchase of an ownership in the business. must pay dividends whether or not any profit is earned. all of these choices are correct.

represent the purchase of an ownership in the business.

Beth and Cody want to form a corporation to market MP3 players and products. The first step in the incorporation procedure is to: obtain a corporate charter. select a state in which to incorporate. file the articles of incorporation. hold the first organizational meeting.

select a state in which to incorporate.

John Provenza is President and CEO of Abalthus, Inc., but there is a limit to what he can do. For example, he does not have the authority to: lend corporate funds. enter into a contract with a government agency. extend the corporation's credit. sell substantial corporate assets.

sell substantial corporate assets.

If a court decides to pierce the corporate veil, the result is: commingling. circumventing the law. shareholders may be personally liable for corporate debts. a finding of a de facto corporation.

shareholders may be personally liable for corporate debts.

Courts will: impose personal liability on shareholders of foreign corporations. impose personal liability on shareholders of close corporations. sometimes ignore the corporate structure and expose shareholders to personal liability. always respect the existence of a properly formed corporation.

sometimes ignore the corporate structure and expose shareholders to personal liability.

Mitch owns a corporation with his family. They have a lot of money and so agree that if the company has any losses, they will cover it, so they do not buy insurance. If a court pierces the corporate veil when the company loses a lawsuit, it is most likely because: the corporation failed to have regular required meetings. the corporation was too thinly capitalized. they tricked the other party in to doing business with a corporation. the corporation was set up to not make a profit.

the corporation was too thinly capitalized.

One of the key advantages of the corporate form of business is: the "double taxation" of the corporate form. that no formalities are required to create a corporation. the limited liability of shareholders. the unlimited liability of shareholders.

the limited liability of shareholders.

The constitutional rights enjoyed by corporations are: nonexistent. Only individuals working for corporations have constitutional rights. identical to those held by natural persons. the same as many of those held by natural persons.

the same as many of those held by natural persons.

For de facto status to be obtained: there must be a state statute under which the corporation can be validly incorporated. it must be proven that the parties did not make a good faith attempt to comply with the statute. the enterprise must not yet have opened for business as a corporation. none of these choices.

there must be a state statute under which the corporation can be validly incorporated.