CHAPTER 39

domestic corportaion

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

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

limited liability of ownership

The express powers of a corporation come from which four sources? a. U.S. and state constitutions b. state laws c. the Revised Model Business Corporations Act d. the Uniform Commercial Code e. the articles of incorporation f. the bylaws g. the Uniform Express Powers Act

a,b,e,f

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

a

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

a

Bridgette wants to start a corporation. She is looking for a state in which to incorporate. If she incorporates in the state with laws that favor corporate management, where many corporations have incorporated, she will select: a. Delaware. b. Colorado. c. Florida. d. Michigan

a

George owns 300 shares of preferred stock in a company. By owning preferred stock, George has: a. priority over holders of common stock as to dividends. b. the right to force the company to buy back the shares. c. a fixed maturity date for his shares. d. priority over holders of common stock as to dividends and the right to force the company to buy back the shares.

a

If one uses a business name that is the same as, or deceptively similar to, another's name, he may be liable for trade name infringement. a. True b. False

a

Keenan wants to incorporate his business. He buys business cards and labels with the name "Keenan's Kwips" on them and begins selling gag gifts. Keenan follows the rules for incorporation in his state, including a statement that he is the sole shareholder, and he is granted a certificate of incorporation. Keenan's business is probably a: a. de jure corporation. b. corporation by estoppel. c. de facto corporation. d. public corporation.

a

Micah and Jonah want to start a corporation but want to be taxed as a partnership. They should form a(n): a. S corporation. b. benefit corporation. c. public corporation d. C corporation

a

Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her baubles in Virginia. In Virginia, her company will be considered a(n): a. foreign corporation, and she will probably have to obtain a certificate of authority to do business there. b. alien corporation, because her business has been chartered in another state. c. open corporation, so she can do business in any state that allows open corporations to operate. d. public corporation, so she will probably not have to obtain a license to do business there.

a

Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is: a. limited to her investment in the stock. b. just like that of partners. c. unlimited.

a

The most common remedy for an ultra vires act is an injunction. a. True b. False

a

To pierce the corporate veil is to expose the shareholders to personal liability. a. True b. False

a

alien corporation

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

professional corporation

a corporation formed by members of certain professionals

benefit corporation

a corporation formed with concern for making money but also with concert for the public good

nonprofit corporation

a corporation formed without concern for making money

corporation by estoppel

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

de facto corporation

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

de jure corporation

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

A corporation normally has a fifty-year existence. a. True b. False

b

Elliot is suing Acme, Inc., for a breach of contract, but because Acme has very little in assets, he asks the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request? a. The officers make their decisions based on information presented to them, but they have been unaware that the information is incorrect. b. The corporation was undercapitalized from the beginning and never had sufficient assets to operate as a viable business. c. The corporation has struggled to make a profit from the beginning. d. The officers loaned money to the corporation in an attempt to delay any adverse actions.

b

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

b

there is no difference between a public corporation and a publicly held corporation. a. True b. False

b

The corporation's internal rules of management are called the

bylaws

A corporation is a legal entity: a. created by local ordinance b. created by an agency regulation c. created by state statute d. that naturally occurs when two or more people do business

c

Acme Co. just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to: a. determine the details of the stock sale. b. amend the articles of incorporation. c. adopt bylaws. d. create a hiring policy.

c

Several lawyers in Plainsville decide to start a law firm together. They use their names as the name of the firm. The law firm of Adams, Bell, and Clyde has the letters "P.C." at the end of its name. The letters stand for: a. Publicly held Corporation. b. Public Company. c. Professional Corporation. d. Public Corporation

c

The type of corporation most at risk for piercing the corporate veil is the: a. publicly traded corporation. b. public corporation. c. close corporation.

c

Tough TVs, a corporation, makes a profit in its first year of existence. The managers of the corporation decide to reinvest the profits. The reinvested profits are called: a. shareholder profits. b. public earnings. c. retained earnings. d. dividends.

c

Trey owns 250 shares of common stock in a toy-store company. This means that he owns a percentage of the company based on the proportion of shares he owns out of the total shares issued by the company. With this ownership he also acquires rights to: a. vote and receive a fixed sum on a fixed date. b. vote and receive dividends before any other creditors. c. vote. d. determine the amount of dividends that will be paid.

c

. Select two other types of debt that a corporation may have in addition to debt securities. a. accounts uncollectible b. notes receivable c. notes payable d. accounts receivable e. accounts payable

c,e

Ariana is an officer of New Stage, a theater production company. Without telling any other officers or the board of directors, she decides that New Stage should try to sell gardening tools over the Internet. She makes contracts with suppliers and a Web-based remote-order-fulfillment company. The only action that may not be taken is: a. the shareholders can file a lawsuit on behalf of the corporation. b. the state attorney general may seek an injunction against the transactions or seek a dissolution order from a court. c. the corporation can file a lawsuit against her. d. she can file a lawsuit against the corporation for damages.

d

Marguerite starts a corporation. Her articles of incorporation specifically state that the corporation will work in the beauty products industry. Marguerite would like to take out a loan on the company's behalf. She: a. cannot, because borrowing is not an express power in the articles. b. cannot, because corporations cannot borrow money. c. can, because it is illegal to forbid the borrowing of money. d. can because of the implied powers of the corporation

d

Most corporate enterprises in the United States can be considered: a. public corporations b. S corporations c. benefit corporations d. close corporations

d

Sarah owns half of Smith Realty, Inc., and her brother, Bill, owns the other half. Sarah routinely uses the company car, which is supposed to be only used for taking clients to view property, to run her personal errands. She also routinely uses company funds for personal uses, but always pays the money back in to the corporation. When Smith Realty failed to pay its lawyer for work completed on its behalf, the lawyer sued both Smith Realty as well as Sarah and Bill personally. In this situation the court likely will: a. dismiss the case because Smith Realty is a close corporation. b. not allow Sarah and John to be sued individually because Smith Realty is a close corporation. c. not pierce the corporate veil because there was no commingling of interests. d. pierce the corporate veil due to Sarah's commingling of interests.

d

Today most ultra vires acts involve _________ a. close corporations b. publicly traded corporations c. benefit corporations d. nonprofit corporations

d

Wilson, Bart, and Susan Fields decide to set up a corporation together called Fields, Inc. They follow the correct procedures for establishing their corporation, but once it is established they do not hold regular corporation meetings. Since they are all related, they just conduct their communications and business related to Fields, Inc. at their family gatherings and over casual phone conversations. When Fields, Inc., is sued for failing to pay some outstanding debts, the court likely will: a. dismiss the case because Fields, Inc., is a close corporation. b. dismiss the case because Fields, Inc., is an open corporation. c. not pierce the corporate veil. d. pierce the corporate veil due to the failure to hold required corporation meetings.

d

One of the first steps in the incorporation process is

deciding where to incorporate

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

do

One main disadvantage of the corporate form of business is ________

double taxation of distributed income

venture capital

financing provided by professional, outside investors to new business ventures

private equity capital

funds invested by professional firms for an existing business venture

crowdfunding

funds that come from a cooperative network, usually through the internet

foreign corporation

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

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 _____ liable for the torts of their agents if committed ____ the scope of the agency.

may, fines, may be, within

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

registered agent

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 operation

shareholders, directors, officers

common stock

stock that gives the owner a residual position n the financial structure of the business, along with the greatest risk of loss and the greatest potential for gain

preferred stock

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

retained earnings

the portion of the corporations profits or income that is not paid out to shareholders

cts that are beyond the express or implied powers of a corporation are called ______ acts

ultra vires

Dividends

a distribution of profits or income to shareholders

Select the three names that close corporations are often called. a. closely held corporations b. family corporations c. unprofitable corporations d. benefit corporations e. privately held corporations f. S corporations

a,b,e