Legal Bus Ch18

Front 1

Generally, there is a uniform body of national corporate law.

Back 1

false

Front 2

A business incorporated in one state has an automatic right to do business in any other state.

Back 2

false

Front 3

Any change in shareholders affects the continued existence of a corporation.

Back 3

false

Front 4

A close corporation may restrict the right of a shareholder to transfer stock by means of a shareholder agreement.

Back 4

true

Front 5

A shareholder is not an “owner” of a corporation.

Back 5

false

Front 6

A shareholder in a professional corporation can be liable for malpractice arising from the rendering of professional services.

Back 6

true

Front 7

A shareholder in a professional corporation can avoid liability for his or her wrongful acts simply by incorporating.

Back 7

false

Front 8

A promoter is not personally liable for a preincorporation contract.

Back 8

false

Front 9

The “minimum contacts” rule determines in which state a corporation should be chartered

Back 9

false

Front 10

A corporation has perpetual existence in most states unless stated other¬wise in the ar¬ti¬cles of incorporation.

Back 10

true

Front 11

A corporation’s internal management structure is described in its articles or bylaws.

Back 11

true

Front 12

An incorporator must have an interest in a corporation to file its articles of incorporation.

Back 12

false

Front 13

A business that holds itself out as being a corporation may not be able to deny corporate status, even if it makes no attempt to incorporate.

Back 13

true

Front 14

Corporate bylaws must be approved by the appropriate state official before the corporation’s first organizational meeting.

Back 14

false

Front 15

A state constitution may restrict a corporation’s implied powers.

Back 15

true

Front 16

The law of the state of in¬corporation may restrict the implied powers of a corporation.

Back 16

true

Front 17

Express powers of a corporation can be found in the law of the state of incorporation.

Back 17

true

Front 18

“Piercing the corporate veil” means revealing to shareholders the internal rules of corporate management.

Back 18

false

Front 19

Only acts that fall within the express powers of a corporation are ultra vires.

Back 19

false

Front 20

Any power expressly set out in the bylaws of a corporation is ultra vires.

Back 20

false

Front 21

A director is elected by a majority vote of the other members of the board.

Back 21

false

Front 22

No state permits a corporate board to have fewer than three directors.

Back 22

false

Front 23

Directors are rarely compensated and cannot set their own compensation.

Back 23

false

Front 24

Incorporators can appoint a corporation’s first board of directors.

Back 24

true

Front 25

Unlike a director, an officer is not expected to be informed on corporate matters.

Back 25

false

Front 26

A director may not sit on the board of more than one corporation at a time

Back 26

true

Front 27

Directors are required to use a reasonable amount of supervision over the corporate officers

Back 27

true

Front 28

Shareholders own a corporation and the right to manage it.

Back 28

false

Front 29

Shareholders do not have legal title to corporate property but an equitable interest in the firm.

Back 29

true

Front 30

A voting trust is an illegal restraint of shareholders’ power.

Back 30

false

Front 31

To vote their shares, shareholders must attend a shareholders’ meeting and vote in person.

Back 31

false

Front 32

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders’ vote.

Back 32

false

Front 33

The article of corporation cannot exclude or limit shareholders’ voting rights.

Back 33

false

Front 34

For action to be taken during a shareholders’ meeting, a forum must be present.

Back 34

false

Front 35

Preemptive rights entitle shareholders to bring a derivative suit against the corpora¬tion.

Back 35

false

Front 36

A stock warrant is a distribution of corporate profits or income

Back 36

false

Front 37

Only certain funds are legally available for paying dividends

Back 37

true

Front 38

A dividend may be paid from undistributed net corporate profits

Back 38

true

Front 39

A share issued for more than its fair market value is watered stock

Back 39

false

Front 40

Damages awarded in a shareholder’s derivative suit go into the corporation’s treasury.

Back 40

true

Front 41

Pola and Quint want to form and do business as River Tours Corporation. A corporation can consist of

Back 41

one or more natural persons

Front 42

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen’s officers. As with other corporations, the responsibility for the overall management of Kleen rests with

Back 42

the board of directors

Front 43

Skyla and Terry want to form and do business as Unique Boutique Corporation. Most statutes governing the formation and use of corporations are guided by

Back 43

the Revised Model Business Corporation Act.

Front 44

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a legal entity created and recognized by

Back 44

state law

Front 45

Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining operation. In the course of this employment, Stefan disposes of the mine’s waste illegally. Liability for this crime most likely rests with

Back 45

Raw Resources and Stefan

Front 46

A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate for a purpose other than making a profit. SDC is

Back 46

a nonprofit corporation.

Front 47

Boutique Corporation would like to change its corporate status to avoid in-come taxes at the corporate level. To qualify, the shareholders must not be

Back 47

partnerships

Front 48

Ruby Red Corporation has six shareholders, four of whom are members of the same family. All of Ruby’s shareholders agree in writing to operate without shareholders’ meetings. Under the Revised Model Business Corporation Act, this most likely warrants

Back 48

no penalties or sanctions

Front 49

To qualify as a professional corporation, Medical Clinic, P.C.,

Back 49

must be a corporation formed by professionals.

Front 50

Frida and Gregor want to market a new line of fishing gear. To avoid income taxes at the corporate level, they should form

Back 50

an S corporation

Front 51

Stan incorporates his scientific products business as Tech Supply, Inc. This firm could have perpetual existence in

Back 51

most states.

Front 52

Dependable Appliances, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufactur¬ing and distributing a newly pat¬ented kitchen appliance, (2) is owned by five share¬holders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Dependable is

Back 52

a close corporation

Front 53

Hailey and Ike hold the first organizational meeting of Java Kiosk Corporation. Probably the most important function of this meeting is

Back 53

adopting Java’s bylaws.

Front 54

Caffeine Café, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of

Back 54

each of the corporation’s shareholders

Front 55

Eager Beaver Corporation fails to hold its organizational meeting to adopt bylaws. Under this circumstance, Eager Beaver is most likely

Back 55

a de facto corporation.

Front 56

Like the bylaws of other corporations, the bylaws of Retail Sales, Inc.,

Back 56

were adopted at its first organizational meeting.

Front 57

Superior Home Products, Inc., is a corporation. Superior’s implied powers are necessary to

Back 57

perform all acts reasonably appropriate and necessary to accom¬plish its corporate purposes

Front 58

Stable Hydraulics Corporation’s articles list an incorrect address for its incorporator. Under this circumstance, Stable is most likely

Back 58

a de jure corporation.

Front 59

Egan is a director of First Realty Corporation. As a director, Egan can act as an agent to bind First Realty

Back 59

in no circumstances

Front 60

Niki owns O.K. Oil Corporation. Niki uses O.K.’s funds to pay her personal expenses, creates Pure Fuel Corporation to engage in the same business as O.K., transfers O.K.’s assets to Pure Fuel, and petitions O.K. into bankruptcy. This most likely warrants

Back 60

a pierce of O.K.’s corporate veil

Front 61

Cody and Dex form Eminent Corporation. Eminent has a board of directors, a chief executive officer, a chief operating officer, and fifty-two sharehold¬ers. Eminent is governed by its

Back 61

board of directors

Front 62

Rhea is a director of Spex Corporation. As a Spex director, Rhea is

Back 62

not a trustee because Rhea does not hold title to Spex’s property

Front 63

Lon and Merry act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a majority vote of NuGame’s

Back 63

shareholders.

Front 64

Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for pol¬icy decisions necessary to the management of corporate affairs rests with Delite’s

Back 64

board of directors.

Front 65

Rosa and Sean are directors of Tech, Inc. The right of Rosa and Sam to be notified of special meetings of the board is the right to

Back 65

participation.

Front 66

Sol is chairman of the board of Tasty Foods Corporation. Uma, a con-sumer, falls sick after eating a Tasty product. Uma sues Tasty, and Sol individu¬ally. Tasty may pay Sal’s legal fees

Back 66

regardless of the outcome

Front 67

Frida, Gayla, and Hart occupy the positions of director on the board of Integral Components Corporation. With respect to these directors, a quorum is the minimum number

Back 67

who must be present to validly transact business

Front 68

Cara and Dru are officers of EZ Trucking Corporation. As cor¬porate officers, the rights of Cara and Dru are

Back 68

determined by their employment contracts

Front 69

Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most corporations, Coast-to-Coast’s employees include its

Back 69

officers

Front 70

Rafi, a director of Super Service Station Corporation, does not attend a board meet¬ing for three years. During that time, Twyla, Super’s president, makes improper loans that cost the company $100,000. Ron is most likely

Back 70

liable for negligence or mismanagement.

Front 71

Frawsty Corporation distributes beverages in the greater Northwest. Frawsty’s board of directors can delegate some of its functions to

Back 71

Frawsty’s officers

Front 72

Chip is a director of Diners Restaurants, Inc. Chip would breach his duty of loyalty if he

Back 72

buys stock in Gulpin’ Foods Corporation, a competing firm.

Front 73

Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what Luke believes is the firm’s best interest, and without violating any duties owed to it. If, despite these circumstances, Luke exercises poor business judgment, under the business judgment rule Luke is

Back 73

immune from liability.

Front 74

Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not

Back 74

support businesses that directly compete with Gallery

Front 75

Thor Power Products Corporation permits the election of its directors by cumulative voting. This

Back 75

allows minority shareholders to be represented on the board

Front 76

Brad is a shareholder of Concert Promotion Corporation. As a shareholder, Brad can

Back 76

vote to amend the articles of incorporation or bylaws

Front 77

Lovey is a shareholder of Matchless Corporation with preemptive rights. With these rights, Lovey can

Back 77

buy a prorated share of a new issue of stock before other buyers

Front 78

Odell, Prince, and Quinn are shareholders of Rite Corporation. Before a shareholders’ meeting, they agree in writing to vote their shares together in a certain manner. Usually, such agreements are held to be

Back 78

valid and enforceable.

Front 79

In all states, Sports Club Company and other corporations can pay dividends from

Back 79

retained earnings

Front 80

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

Back 80

if withholding a dividend is an abuse of the directors’ discretion