Business Law Chapter 5

As of 2016, companies are not allowed to use crowdfunding to offer and sell securities.

False

If a corporation cannot point to a document that articulates its express power, the corporation does not have the power.

False

The name for a new business may be the same as, or similar to, the name of another business in the state.

False

There is no difference between a public corporation and a publicly held corporation.

False

In a given state, a corporation that does business in the state without being incorporated in that state.

Foreign corporation

A corporation formed for purposes other than making a profit.

Nonprofit corporation

To become and S corporation, a corporation must meet specific criteria, such as restriction on the ____ of shareholders, as well as the types of ____ that can be issued.

Number, stock

Stock that gives the holder priority as to payment of dividends and distribution of assets on dissolution

Preferred stock

When a corporation is not operated as a separate entity, this called the ____.

alter-ego theory

Stock may be described as:

an ownership interest in the corporation

The corporation's internal rules of management are call the ____.

bylaws

The type of corporation most at risk for piercing the corporate veil is the:

close corporation

Most corporate enterprises in the United States can be considered:

close corporations

A corporation is a legal entity:

created by state statute

Cooperative activity in which people network and pool funds and other resources via the internet to assist a cause of invest in a venture

crowdfunding

One of the first steps in the incorporation process is ____.

deciding where to incorporate

One main disadvantage of the corporate form of business is ____.

double taxation of distributed income

When a business association holds itself out to others as being a corporation when it has made no attempt to ____, the firm normally will be ____ from denying corporates status. When this occurs, courts will treat the entity as a corporation, but only for the purposes of resolving ____ dispute.

incorporate, estopped, a single

One of the key advantages of the corporate form of business is ____.

limited liability of ownership

Under modern criminal law, a corporation ____ be held liable for the criminal acts of its employees. The punishment for guilt of a crime by a corporation consists of ____. Corporations also may be liable for the ____ of agents if committed ____ the scope of the agency.

may, fines, torts, within

Today most ultra vires acts involve:

nonprofit corporations

What are two other types of debt that a corporation may have in addition to debt securities?

notes payable, accounts payable

Preferred stock is often considered a more conservative, or less aggressive, investment than common stock because:

owners have priority on dividends

Preferred stock comes in many varieties. ____ preferred stock includes a requirement that past dividends not paid must be paid in future years before any common stock dividends may be paid. ____ preferred stock includes the ability to collect dividends with the common stock owners after all preferred dividends have been paid. ____ preferred stock may be turned in for common stock under certain conditions. ____ preferred stock, also known as callable preferred stock, comes with the risk that the issuing company may ____ the shares under certain conditions.

Cumulative, Participating, Convertible, Redeemable, repurchase

An entity that has substantially complied with al statutory requirements for incorporation.

De Jure corproation

An entity that has not substantially complied with all statutory requirements. These are recongnized by only a few states.

De facto corporation

A distribution of profits or income to shareholders.

Dividends

Corporations ____ enjoy many of the same rights and privileges under state and federal law that people enjoy.

Do

In a given state, a corporation that is organized under the laws of that state.

Domestic corporation

A corporation has a fifty-year existence by default.

False

The ____, or owners, of a corporation elect the ____ who then hire the ____ to run the daily operations.

shareholders, directors, officers

Acts that are beyond the express or implied powers of a corporation are called ____ acts.

ultra vires

Capital provided to new businesses by professional, outside investors.

venture capital

A corporation doing business in a state but formed in another counrty.

Alien corporation

A for-profit corporation that seeks to have a material positive impact on society and the environment.

Benefit corporation

What are the three names that close corporations are often called?

Closely held corporations, family corporations, Privately held corporation

Stock that provides an interest in the corporation with regard to control, earnings and net assets.

Common stock

An entity that has not attempted to incorporate, but holds itself out to others as a corporation.

Corporation by estoppel

Funds from wealthy investors to use and invest in existing corporations.

Private equity capital

A corporation formed by members of certain professions.

Professional corporation

The portion of the corporation's profits or income that is not paid out to shareholders.

Retained earnings

Today most state corporate statutes are at least partially based on the

Revised Model Business Corporation Act

A corporation automatically will be taxed under subchapter C unless it elects to become and S corporation.

True

Bonds normally have a fixed payment and a maturity date when the principal is returned to the bondholder.

True

Private equity firms use their private capital to invest in existing corporations.

True

The most common remedy for an ultra vires act is an injunction.

True

To pierce the corporate veil is to expose the shareholders to personal liability.

True

The express powers of a corporation come from which three sources?

U.S. and state constitutions, The articles of incorporation, The bylaws

Management of a close corporation often resembles that of a ____, but a corporation must meet the statutory requirements to remain a corporation. Often, shareholders in a close corporation ____ the transferability of shares. If a majority shareholder misappropriates company funds, the normal remedy for the other shareholders is to have their shares ____ to determine values and then ____ that value.

partnership, restrict, appraised, receive

A court will disregard the corporate form and ____ the corporate ____ in five circumstances: first, if a party is ____ into dealing with the corporation rather than the individual; second, if the corporation is set up to always be ____ or is ____ capitalized; third, if the corporation is formed to ____ an existing legal obligation; fourth, if the corporation fails to follow the statutory corporate ____; and fifth, if the personal and corporate interests are ____ so that the corporation has no separate identity.

pierce, veil, tricked, insolvent, thinly, evade, formalities, commingled

Benefit corporations differ from traditional corporations in three main ways. The main purpose is to benefit the ____ so directors must consider the impact of their decisions on society and the ____. Shareholders have an additional right of private action, called a ____, that allows them to sue the corporation for failure to pursue the purpose. Finally, benefit corporations must issue an annual ____ on its performance and include a third-party standard of assessment,

public, environment, benefit enforcement proceeding, benefit report

The articles of incorporation must include information such as the name, number of shares, and the name of it ____, or person designated to receive legal documents on its behalf.

registered agent

Corporations normally are financed by ____. One type of security consists of borrowing funds and is called a ____. The other main type of security consists of ownership in the corporation and is called a ____, or equity security.

securities, bond, stock