CHAPTER 32

The Revised Model Business Corporation Act states that unless a corporation's articles or bylaws provide otherwise, the compensation for directors is set by the: directors themselves. chief executive officer. shareholders. corporate officers.

directors themselves

One of the great benefits of LLCs, which helps promote investment, is the fact that: investors must be accredited investors to participate. LLC articles of organization are privately filed, protecting the identities of investors. foreign investors are allowed to become LLC members. LLCs are registered with the SEC.

foreign investors are allowed to become LLC members.

Rusty and Sylvia are shareholders of Triad Hotel Corporation. Triad's directors fail to declare a dividend. Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend: under no circumstances. if Triad has cash reserves, even if earmarked for a different purpose. if withholding a dividend is an abuse of the directors' discretion. if Triad has sufficient earnings available to pay a dividend.

if withholding a dividend is an abuse of the directors' discretion.

Corporate officers govern every corporation. True False

false. board of directors

All directors must be present before a board can transact business. True False

false. only a quorom

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

it is less volatile and more like a bond.

A foreign LLC is an LLC formed in another state. When dealing with foreign LLCs, most states apply the law of the state where the firm was formed.

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A shareholder who owns enough stock to have actual control over a corporation owes fiduciary duties to the corporation and minority shareholders. Minority shareholders may sue to recover damages if the majority shareholder breaches a fiduciary duty.

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De facto existence occurs when a corporation is treated as a legal corporation despite defects in its formation. If a corporation has substantially complied with all requirements for incorporation, the corporation is said to have de jure existence.

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Members may participate in the management of a manager-managed LLC. Management in a manager-managed LLC may consist of only members, both members and nonmembers, or only nonmembers.

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Most states allow one-member LLCs.

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The initial directors are selected by the incorporators. Thereafter, the directors are selected by shareholders.

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Ultra vires acts are acts outside of the express or implied powers of the corporation.

yeet

Resource Development Company and Western Mining Corporation form a joint stock company. Like most joint stock companies, it is managed by: managing members. directors and officers. trustees. general partners.

directors and officers

Jonathan and Sarah are forming an LLC, and know they have a choice about how the new entity will be taxed. Which of the following represents the choice they have? Either as a partnership or as a corporation None of these choices Either as a LLC or as a sole proprietorship Either as partnership or as a LLC

Either as a partnership or as a corporation

A limited liability company is governed by the federal Limited Liability Company Act. T/F

False. No such Act exists

Honoria is a member of Abel LLC. She encounters some financial difficulties and is forced to declare bankruptcy. Which statement below is correct? Honoria's bankruptcy triggers her dissociation from the firm. Honoria's bankruptcy will cause her dissociation from the firm only if a court so orders. Honoria's bankruptcy has no impact on Abel LLC. Under the ULLCA, Abel will be required to dissolve because of Honoria's bankruptcy.

Honoria's bankruptcy triggers her dissociation from the firm.

Sam, Dusty, and Ginger formed an LLC to manufacture dog food. Sam later rightfully dissociated. Which statement is correct? Sam is entitled to receive whichever is higher: the fair value of his membership interest or the buyout price established in the operating agreement. If the operating agreement fails to establish a buyout price, under the ULLCA Sam is entitled to the fair value of his interest. Sam is entitled to receive the historical cost of his membership interest. The LLC must undergo a court-supervised appraisal which will establish the amount Sam is entitled to receive.

If the operating agreement fails to establish a buyout price, under the ULLCA Sam is entitled to the fair value of his interest.

A joint stock company has many features of a corporation. Which of the following is not one of the ways in which a joint stock company is like a corporation? Its ownership is represented by transferable shares of stock. Its shareholders have personal liability. It can have perpetual existence. It is usually managed by directors or officers of the company.

Its shareholders have personal liability

Jim and Kiley are architects and shareholders of J&K, P.C., a professional corporation. Jim supervises Luc, an employee of the firm. As a shareholder, Jim: has no liability for any torts committed by Kiley or Luc. has limited liability for any of Kiley's acts of malpractice. may be personally liable for malpractice committed by Luc. is personally liable for any tort committed by Kiley.

may be personally liable for malpractice committed by Luc.

A court can order the dissolution of an LLC: when the members have engaged in oppressive conduct. a court can order dissolution in all of these cases. when the members have engaged in illegal conduct. when it is no longer feasible to carry on the business.

all

The document filed with a designated state official by which a limited liability company is formed is known as the: state license. articles. articles of organization. articles of incorporation

articles of organization.

Errors in the incorporation procedure might become important if they become known to a third party who is attempting to: enforce a contract. bring suit for a tort injury. neither of these choices. both of these choices.

boffum

Individual corporate directors have the ability, as agents of the corporation, to bind the corporation: as long as the bylaws of the corporation allow individual directors to conduct corporate business. not at all. Individual directors do not have agency power. as long as the articles of incorporation allow it. in all situations.

not at all. Individual directors do not have agency power. The directors must act as a colec tive

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

ny person who buys common stock acquires voting rights in a corporation. True False

true