Ch.18 Worksheets

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

foreign corporation

If a board of directors declares a dividend to "pay back" investors but that dividend would cause them to have to miss paying several bills as they become due, the members of that board will be personally responsible for any loss to the corporation.

true

Financing provided by professional, outside investors to new business ventures

venture capital

When a company distributes a portion of its income or profits in cash, property or stock to its shareholders in proportion to their shares, it is called:

a dividend

Shareholders have a right to inspect the corporate records for ________________ purpose.

a proper

The business judgment rule states that directors and officers:

are immune from liability for bad business judgments so long as they exercised reasonable care.

When a corporation enters into a contract or engages in business with another corporation in which one of the board members has a personal interest, that board member must fully ________________ the conflict and ______________________ voting.

disclose, abstain from

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

Individual corporate directors ______________ have the ability, as agents of the corporation, to bind the corporation.

do not

Directors are hired by the shareholders through an interview process.

false

Shareholders must approve any corporate decision that would cost more than $10,000.

false

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

false

Directors and officers have a duty to act ________________ , to exercise the care that a(n) ________________ person would exercise in similar circumstances, and to do what the director or officer believes is in the ___________________ of the corporation.

in good faith, ordinarily prudent, best interest.

The directors who also are officers of the corporation

inside directors

One of the key advantages of the corporate form of business is _____________

limited liability of ownership

A shareholder __________________ have a stock certificate to prove ownership of the stock.

need not

To become an S corporation, a corporation must meet specific criteria, with restriction on the _____________ of shareholders, as well as the types of _________________ that can be issued.

number, stock

The directors who do not hold management positions at the corporation

outside directors

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 value and then _____________ that value.

partnership, restrict, appraised, receive

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

preferred stock

Funds invested by professional firms for an existing business venture

private equity capital

Select the three names that close corporations also often are called.

privately held corporations, closely held corporations, family corporations

The directors required to make a decision or take official action

quorum

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

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

shareholders, directors, officers

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

true

Corporate officers are hired by the directors

true

Directors and officers may be liable for the actions of corporate employees under their supervision as well as for their own torts and crimes.

true

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

domestic corporation

Because shareholders with a very small percentage of shares may not be able to travel to annual meetings, the law allows them to appoint someone else to vote their shares using a ________________ authorization form. Management often ____________________ these.

proxy, solicits.

For shareholders to exercise control, a __________________ must be present, either in person or through proxies.

quorum

Funds that come from a cooperative network, usually through the Internet.

crowdfunding

An entity that has substantially complied with all statutory requirements for incorporation

de jure corporation

A corporation doing business in a state but organized in another country

alien corporation

The reason that most states either permit or require cumulative voting when electing directors is to:

allow minority shareholders a chance at electing a director.

Stock that gives the owner a residual position in the financial structure of the business with the greatest risk of loss and the greatest potential for gain

common stock

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

corporation by estoppel

One main disadvantage of the corporate form of business is _____________

court order entitling a creditor to attach profits or assets of a partner on dissolution of the partnership

A corporation is a legal entity:

created by a state statute

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

de facto corporation

When a single shareholder owns sufficient shares to exercise ___________________control over the corporation, that shareholder is called a ____________________ shareholder and owes ________________ duties to the minority shareholders.

de facto, majority, fiduciary

To encourage shareholders to pay attention to the board's actions, when a shareholder's derivative suit is won, the damages:

are paid in to the corporation's treasury

Officers and directors have a special relationship with the corporation and its shareholders and are called:

fiduciaries

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