BLAW Ch.7

Which of the following is false? - A corporation is a person because it has a separate identity. - A corporation is a person because it is a corporate person. - A corporation is a person despite not being a natural person. - A corporation is a person because it must conduct business as a natural person would. - A corporation is not a legal person.

- A corporation is not a legal person.

Which of the following is NOT an advantage of a corporation: - The corporation's promoters may seek an unlimited amount of capital. - The corporation's promoters may seek investment from an unlimited number of investors. - The corporation's promoters may offer different classes of shares. - The corporation can live forever. - All of the above are advantages.

- All of the above are advantages.

Which are not restrictions in an "S" corporation? - The S corporation cannot have more than 100 shareholders - The S corporation must include a for-profit entity shareholder. - The S corporation prohibits nonresident alien shareholders - The S corporation cannot have more than one class of stock - The S corporation mandates pass-through treatment of income

- The S corporation must include a for-profit entity shareholder.

Under which circumstances would a judge not pierce the corporate veil: - Sticky Fingers Sal occasionally funds for emergency expenses, including personal expenses. - Thin Thadeus starts a corporation with $15,000 and proceeds to buy $200,000 in equipment. - Unfair Ulysses, a founder, promises to fund the corporation in exchange for his shares, but puts in only nearly worthless inventory. - Victim Victor amply funds a corporation, but it fails anyway due to a market downturn

- Victim Victor amply funds a corporation, but it fails anyway due to a market downturn

Which of the following is not true of preferred shares: - preferred shareholders are paid dividends before common stockholders - preferred shareholders are paid dividends before bondholders - Preferred shares may be cumulative or noncumulative - Preferred shares may be convertible into common stock - Preferred shares may be include special voting rights

- preferred shareholders are paid dividends before bondholders

If an owner has limited liability, this means that: - the liability for losses is limited to three times the business income for the preceding three years - the liability for losses is limited to the extent of the investment, but only if the owner has secured liability insurance - the liability for losses is limited to the extent of the investment - the liability for losses is limited to the extent of the owner's personal assets - Limited liability applies only to corporate owners

- the liability for losses is limited to the extent of the investment

Which of the following is true regarding types of corporations: A) A domestic corporation is one chartered in a home state; a foreign corporation is chartered out-of-state; an alien corporation is chartered outside the United States. B) A domestic corporation is one chartered in any state; a foreign corporation also called an alien corporation is chartered outside the United States.

A) A domestic corporation is one chartered in a home state; a foreign corporation is chartered out-of-state; an alien corporation is chartered outside the Unites States

A foreign corporation is a corporation from outside the United States.

False

A joint venture is synonymous with a general partnership.

False

A non-profit corporation need not worry about the monies that would be profits if the non-profit were a for-profit corporation.

False

A partnership is formed out of strength.

False

If Capitalist Karl decides to offer additional shares in his corporation, but does not want to lose control of the company, he might: 1. convert the corporation to a partnership 2. offer "watered" stock to prospective investors 3. borrow the capital instead 4. create a non-voting class of shares 5. lead a revolution of the bourgeoisie

Options 3 or 4

A franchise is a means to leverage one's energies and modest capital with the intellectual property of the franchisor.

True

An LLC is among the most popular forms of business, providing numerous benefits and few disadvantages.

True

In a general partnership, each partner may be sued for and lose all personal assets, even if the harm was caused by another partner.

True