ON-LINE TEST BANK FOR MILLER & JENTZ



Interactive Quiz for ALT-12e, Chapter 39

Chapter 39 – Corporate Formation and Financing

1. The responsibility for the overall management of a corporation belongs to:

a. the chief financial officer.

b. the employees.

c. the board of directors.

d. the shareholders.

Answers:

a. Incorrect. The chief financial officer may be a member of the board of directors, but he or she does not have responsibility for overall corporate management.

b. Incorrect. Employees do not have this responsibility.

c. Correct. The board of directors has responsibility for the overall management of a corporation.

d. Incorrect. Shareholders do not have this responsibility.

2. Corporations are taxed by:

a. state and federal governments.

b. the state government where they are incorporated only.

c. the state government where they do business only.

d. the federal government only.

Answers:

a. Correct. Corporations may be taxed by both state governments and by the federal government.

b. Incorrect. Corporations may be taxed by the federal government also.

c. Incorrect. Corporations may be taxed by the federal government also.

d. Incorrect. Corporations may be taxed by state governments also.

3. With respect to constitutional rights, corporations:

a. enjoy many of the rights held by natural persons.

b. enjoy more rights than those held by natural persons.

c. do not exist. Only individuals working for corporations have constitutional rights.

d. are identical to those held by natural persons.

Answers:

a. Correct. A corporation is legally recognized as a “person” and enjoys many of the constitutional rights held by natural persons.

b. Incorrect. Corporations do not enjoy more constitutional rights than those held by natural persons.

c. Incorrect. Corporations do have constitutional rights.

d. Incorrect. Corporations’ constitutional rights are not identical to those of natural persons. For example, a corporation cannot exercise the Fifth Amendment right against self-incrimination (although this right can be exercised by corporate officers and employees).

4. In corporate law, when a corporation acts beyond the scope of its authority, it is said to:

a. engage in respondeat superior.

b. pierce the corporate veil.

c. hide the corporate veil.

d. engage in ultra vires transactions.

Answers:

a. Incorrect. Respondeat superior is the doctrine that makes principals or corporations responsible for some of the harms caused by their agents or employees.

b. Incorrect. A court may pierce the corporate veil when a corporation does this, but the corporation itself does not pierce the corporate veil.

c. Incorrect. The corporation does not hide the corporate veil.

d. Correct. The corporation engages in an ultra vires transaction when it acts beyond the scope of its authority.

5. Which of the following IS NOT a remedy for an ultra vires transaction?

a. The corporation can sue the responsible corporate officers.

b. The responsible officers can sue the corporation for damages.

c. The shareholders can sue on behalf of the corporation.

d. The state attorney general may seek an injunction against the transaction or seek a dissolution order from a court.

Answers:

a. Incorrect. This is a remedy for such a transaction.

b. Correct. The responsible corporate officers may not sue the corporation for damages, although the corporation may sue the corporate officers.

c. Incorrect. This is a remedy for an ultra vires transaction.

d. Incorrect. State attorneys general may stop such actions or dissolve corporations that act beyond the scope of their authority.

6. In simple terms, an “S” corporation could be defined as:

a. a corporation regulated by the securities industry.

b. a corporation whose shareholders have limited liability but avoid corporate income taxes.

c. a corporation whose shareholders are taxed like shareholders but who face full, significant liability.

d. a corporation composed entirely of licensed professionals.

Answers:

a. Incorrect. This does not describe an “S” corporation.

b. Correct. “S” corporations do not pay corporate taxes, although the limited liability rules of a corporation apply to them.

c. Incorrect. This does not describe an “S” corporation.

d. Incorrect. This also does not describe an “S” corporation.

7. Articles of incorporation contain:

a. a set of governing rules adopted by a corporation.

b. resolutions of the board of directors.

c. information about the corporation, including its organization and functions.

d. the minutes of meetings of the board of directors.

Answers:

a. Incorrect. This describes corporate bylaws.

b. Incorrect. These resolutions are not the same thing as articles of incorporation.

c. Correct. Articles of incorporation contain this kind of information.

d. Incorrect. Board meeting minutes are not articles of incorporation.

8. Which of the following IS NOT required to prove de facto corporate status?

a. The parties made a good faith attempt to comply with a state incorporation statute.

b. Statutory corporate formalities were not followed.

c. A state statute must exist under which a valid incorporation could take place.

d. The enterprise must be doing business as a corporation.

Answers:

a. Incorrect. This is required.

b. Correct. It is not necessary to show that statutory formalities were not followed.

c. Incorrect. This is required to prove de facto corporate status.

d. Incorrect. This is required to prove de facto corporate status.

9. Stock may be described as:

a. a debt owed by the government to the shareholder.

b. a debt owed by the corporation to the shareholder.

c. an ownership interest in the corporation.

d. a document describing the ownership and management structure of the corporation.

Answers:

a. Incorrect. This would be a government bond.

b. Incorrect. This would be a corporate bond.

c. Correct. When you buy stock, you buy an ownership interest in the corporation.

d. Incorrect. This does not describe stock.

10. When a court “pierces the corporate veil,” what happens?

a. The court disregards the corporate entity and exposes the shareholders to personal liability.

b. The court rewrites the bylaws of the corporation to clarify an ambiguous procedure.

c. The court requires the board of directors to terminate all personnel involved in the corporate wrongdoing that led to the litigation.

d. The court holds the corporate entity liable for a shareholder’s misdeeds.

Answers:

a. Correct. When a court “pierces the corporate veil,” the court disregards the corporate entity and exposes the shareholders to personal liability.

b. Incorrect. This is not what happens when a court “pierces the corporate veil.”

c. Incorrect. This is not what happens when a court “pierces the corporate veil.”

d. Incorrect. This is not what happens when a court “pierces the corporate veil.”

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download