LGS 200 Module 4

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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


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