Chapter 9a
20. Which of the following statements about corporations is true? A. A promoter files articles of incorporation with the state government to create a corporation. B. When a corporation's liabilities exceed its assets, its creditors can reach the personal assets of the shareholders. C. A corporation need not establish books of accounts. D. When an employee or director commits a tort or crime while conducting corporate business, the corporation is not liable for the consequences.
A. A promoter files articles of incorporation with the state government to create a corporation.
23. Which of the following is a feature of a corporation? A. Double taxation B. Unlimited liability C. Definite duration D. Prohibition of tax-deductible fringe benefits
A. Double Taxation
24. Although the law of partnerships originated in the common law, all states except _____ adopted the Uniform Partnership Act. A. Louisiana B. Alabama C. Nevada D. Wisconsin
A. Louisiana
21. Corporations distribute their aftertax income to their shareholders as _____. A. fringe benefits B. dividends C. exempt securities D. disgorgements
B. Dividends
22. On termination of a corporation, which of the following has the highest priority for payment? A. Dividend arrearages owed to preferred shareholders B. Claims of common shareholders C. Claims of creditors D. Claims of directors
C. Claims of Creditors
25. Which of the following statements is true of the formation of partnerships? A. Partnership accounting systems are the least expensive of all the business forms. B. The partnership form generally requires a number of annually recurring events such as state filings or statutorily mandated meetings of owners. C. The vast majority of partnership agreements are written. D. The co-owners of a partnership must intend to join in the sharing of risks and rewards via the active conduct of business.
D. The co-owners of a partnership must intend to join in the sharing of risks and rewards via the active conduct of business.
11. An S corporation pays double tax on its income.
F
13. In the context of the capital structure of corporations, equity capital has a short-term horizon.
F
14. Equity holders' claims are always satisfied before creditors' claims.
F
17. Online trading services provide professional guidance to investors
F
2. A partnership offers limited liability to its owners.
F
3. Sole proprietorships are mutual agencies.
F
4. In a limited liability company, the owners are referred to as interest holders.
F
5. In a limited partnership, the limited partners manage the business and are personally liable for all losses.
F
1. The owners of a corporation are called stockholders.
T
10. Corporations incur the disadvantage of double taxation.
T
12. Common stockholders share all three property rights associated with stock ownership in proportion to their holdings.
T
15. Although shareholders are the owners of the corporation, control rests with the board.
T
16. The Securities Act of 1933 seeks to ensure full disclosure of all material facts about the investment opportunity to offerees before they invest.
T
18. Blue sky laws are primarily applicable to solely intrastate offerings.
T
19. Where mergers or direct acquisitions fail, a takeover can be attempted.
T
6. A shareholder derivative suit is brought by a minority shareholder, but any recovery inures to the corporation.
T
7. Corporations are artificial persons created under the law of a state.
T
8. In general, the creditors of a corporation cannot reach the personal assets of the shareholders to satisfy the corporation's obligations.
T
9. Closely held corporations face the loss of limited liability through application of the doctrine known as piercing the corporate veil.
T
