business law 5
Which of the following is correct regarding a for-profit corporation?
Its aim is usually to make a profit that may be distributed to its shareholders.
Promoters owe all but which one of the following duties to the corporations they form?
Loyalty
David is a promoter for Green Corp. Under the revised Model Business Corporations Act, what can David receive for his services?
Money, stock or property
Randy is setting up Gentle Corp. Gentle is not formally recognized as a corporation yet. Randy would like to sign a lease for the space Gentle will occupy. Which of the following is true?
Randy can sign the contract on the be half of Gentle.
The Model Business Corporation Act (MBCA) was prepared by which of the following organizations?
The American Bar Association
In the organizational meeting which of the following must happen?
The corporate bylaws are adopted
How does the rule in the majority of states differ from the rule found in the revised Model Business Corporation Act (MBCA) when corporate promoters claim to act for the corporation before all the incorporation requirements have been met?
The revised MBCA just requires filing of the articles of incorporation.
When corporations state a corporate purpose, it is usually done very ______.
broadly
If the shareholder or their estate is required to sell and the corporation is obligated to purchase at an agreed-upon price, this is known as a ______.
buy-and-sell agreement
The role of the promoter includes each of the following except ______.
buying all of the initial class of stock
The rules that govern internal affairs of the corporation are called ______.
bylaws
Each of the following commonly happens at the corporation"s first organizational meeting except ______.
compiling the annual report
If the shareholder must get permission to sell their shares to a third party other than the corporation or existing shareholders. This is a ______.
consent restraint
The corporate seal is usually kept by the ______.
corporate secretary
A corporation can be dissolved by court action when each of the following has occurred except for ______.
failure to pay a dividend for three (3) years
Corporate bylaws can do each of the following except ______.
file the certificate of incorporation
Promoters who contract for services for a corporation in the formation states are
generally liable if the corporation is never formed
Under the traditional judicial rule, in order to pierce the corporate veil, the domination must result in a(n) ______ purpose.
improper
All business corporations derive their existence from the ______.
state in which they are incorporated
Any action taken by a corporation that exceeds the corporation's powers under state law is a(n) ______ act.
ultra vires
Which of the following is similar to a non-taxing governmental corporation?
A nonprofit corporation
Traditional corporate law has changed in several ways including each of the following except which of the following?
Treating close corporations as partnerships from a legal perspective
When a corporation is given so few assets that it cannot meet its obligations, the corporate veil may be pierced for what reason?
Undercapitalization
Under the majority rule, any person or persons who presume to act as a corporation when a certificate of incorporation has not been issued will face ______.
joint and several liability
When there are multiple promoters who contract with a third party for a corporation that is yet to be formed, these promoters are
jointly and severally liable
The primary role of the incorporater is to ______.
lend his or her name and signature to the incorporation process
Corporations may elect to incorporate in a state that has the ______ taxes, annual fees and other charges.
lowest
When promoters have complied with all mandatory provisions of the state incorporation statute, the resulting corporation is called a ______ corporation.
de jure
When no stock has been issued a vote of the ______ is required to dissolve the corporation.
incorporators
A creditor may be able to convince a court to dissolve a corporation if it is ______.
insolvent and cannot pay its debts
When a corporation comes into existence, ______.
it must take some action ratifying the contracts made by the promoter
Because corporation law calls for ______ rule, a minority shareholder is particularly vulnerable to ______.
majority; oppression
Today, ______ states have enacted corporation laws that recognize the close corporation.
most
A governmental corporation is often called a ______ corporation.
municipal
Promoters will not be held liable for contracts they enter into in the
name of the yet to be created corporation only
Normally, shareholders are _______ liable for the debts of the corporation.
not
Under the Model Business Corporation Act, a corporation must have at least _______ incorporator(s).
one
Under the traditional judicial rule, in order to pierce the corporate veil, there must be domination of the corporation by ______.
one or more of its shareholders
In a close corporation, each of the following is true except ______.
only a few of the shareholders are active in the business
The Model Business Corporations Act requires that a(n) ______ be held as part of the formation process of a corporation.
organizational meeting
The most common duration articulated in the articles of incorporation is
perpetual
Click and drag on elements in order Order the steps in the incorporation process
prepare the articles of incorperation
Before state legislatures enacted general incorporation laws incorporation was a ______ that had to to be granted by the state legislature, after the enactment of general incorporation laws, incorporation became a ______.
privilege; right
Persons who bring corporations into being are called ______.
promoters
Dynamic Controls is a large corporation that issues stick and it's shares are available for purchase on stock markets. Dynamic Controls is a ______.
publicly held corporation
A de jure corporation is treated as a corporation in all instances except in a(n) ______.
quo warranto proceeding
A close corporation or its shareholders may have a right to purchase shares before they are offered to an outsider. This is known as a ______.
right of first refusal
Corporations must have the consent from the ______ to dissolve.
secretary of state
Once all of the requirements of a state's incorporation statute have been met, the ______.
secretary of state will issue a certificate of incorporation
When a corporation has exceeded its powers under the state corporate law, a shareholder has the right to ______.
seek a court injunction
Which of the following is not a step in the incorporation process
selling the first share of stock
A corporation has a ______ legal identity from its owners.
separate
When stock has been issued a vote of the ______ is required to dissolve the corporation.
shareholders
Governmental corporations usually have the power to ______.
tax
The earliest business corporations in the American colonies obtained charters from ______.
the King of England
Once the secretary of state issues a certificate of incorporation to a corporation, ______.
the corporation is recognized by the state
The majority rule as it relates to defective incorporation is most clearly articulated as ______.
the issuance of the certificate of incorporation is proof of incorporation against all challengers except the secretary of state
Each of the following must be included in the articles of incorporation except
the names and addresses of board members
Under the Model Business Corporation Act, a corporation must include the following in its articles of incorporation.
the number of shares authorized to be sold
Each of the following is a reason why traditional corporate law may not fit well with closely held corporations except ______.
the shareholders cannot sell or gift their shares
A de facto corporations corporate existence can be challenged by ______.
the state
The name of a corporation must include
the word corporation, incorporated, company or an abbreviation
Marcus forms a corporation. Marcus is the controlling shareholder and causes the corporation to take on significant amounts of debt but never actually funds the corporation with any money. If the veil is pierced, the reason will be ______.
under capitalization
The Model Business Corporation Act ______.
was the basis for most states corporate laws
Courts may intervene to protect minority shareholders in intracorporate conflicts in all but which of the following circumstances?
The corporation has issued a dividend to preferred shareholders
Many courts have begun to recognize that majority shareholders have ______ minority shareholders.
a fiduciary duty to
Corporations are created under the laws of ______.
a particular state
A corporation by estoppel occurs when ______.
a person representing their business as a corporation can not disclaim the existence when sued
All that is necessary to form a corporation is to prepare and file the ______.
articles of incorporation
For corporations the chartering document is called the ______.
articles of incorporation
The corporate seal is used for ______.
authenticating real estate documents
Corporations have each of the following rights except for the right to ______.
avoid federal tax compliance
Under the revised MBCA, promoters, managers, and shareholders who ______ are liable for business debts after the defective incorporation.
both participated in management and policy decisions and knew of the defective incorporation
Vanish Corp. was recently recognized by the state. What must Vanish do to assume the contracts entered into by the promoter before the corporation was created?
Accept benefits under the contract
Harold is the majority shareholder of a corporation. Harold has been paying his personal rent and other personal expenses from a corporate account. This may lead to piercing the corporate veil under what theory?
Alter ego
Under the Model Business Corporation Act, which of the following may be included in the articles of incorporation?
Each of the answers
Which of the following are the most common types of corporations?
For-profit corporations
Which of the following is correct regarding compensation to promoters?
Frequently, promoters are issued shares of the new corporation's stock for their services.
Nick is a promoter for Holifield Corp., which is not yet recognized as a corporation. Nick buys some property for Holifield and secretly profits from the purchase. Which of the following is true?
Holifield can recover the profit Nick received.
Which of the following is correct regarding a nonprofit corporation?
Its founders and members are not permitted to make a profit from its operation, although its officers and employees are paid salaries.
Corporations ______ select a state of incorporation that they do most of their business.
can
Smith Corp. is a for profit corporation. The shares of Smith Corp. are held by various members of the Smith Family. This is an example of a ______.
close corporation
Most of the Fortune 500 companies began as ______.
close corporations
The articles of incorporation are like a(n) ______ in that they are the basic document of the corporation and a ______ source of its powers.
constitution; major
When a court decides to set aside the corporate form and hold shareholders liable, the ______.
corporate veil has been pierced
When a business contracts as a corporation, when in fact there is no corporation and that business is later sued, courts will allow the business to be sued as a corporation. The corporation in this case is called a ______.
corporation by estoppel
A corporation that has some material deviation from the mandatory incorporation law is called a ______ corporation.
de facto
