ch. 39

Question 1

If the procedures for incorporation are not followed precisely, others may be able to challenge the existence of the corporation.

Answer 1

True

Question 2

To bring a corporation into existence requires securing a corporate name that is

Answer 2

available as a domain name, subject to state approval.

Question 3

Local Oil Inc. is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Mace, the majority shareholder, misappropriates company funds. The shareholders whose interests are injured by Mace’s misconduct should

Answer 3

have their shares appraised and be paid the fair market value for them.

Question 4

Most likely to appear in the articles of incorporation are the names of the company’s initial

Answer 4

registered office and agent.

Question 5

Corporate bonds

Answer 5

have priority over holders of common stock as to payment of dividends.

Question 6

With the exception of malpractice, liability for torts committed by others in a firm cannot be imposed on the shareholders of

Answer 6

a professional corporation.

Question 7

A shareholder in a professional corporation generally cannot be held liable for malpractice by other professionals at the firm.

Answer 7

False

Question 8

Robotics Inc. is a corporation. Its express powers can be found in

Answer 8

all of the choices.

Question 9

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.

Answer 9

False

Question 10

Any corporation whose shares are publicly traded in securities markets is

Answer 10

a publicly held corporation.

Question 11

Medical and investment professionals network and pool funds to invest in Medical Online Consult Inc. This is

Answer 11

crowdfunding.

Question 12

A businessperson who enters into a contract with an investor on behalf of a future corporation is not personally liable on the deal, even though the firm is not yet formed, because the nature of investment is risk.

Answer 12

False

Question 13

To pierce the corporate veil means to reveal the identity of its true owner.

Answer 13

False

Question 14

A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.

Answer 14

True

Question 15

The directors of a benefit corporation must, during the decision-making process, consider the impact of a decision on society and the environment.

Answer 15

True

Question 16

Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.

Answer 16

True

Question 17

Because it may result in a piercing of the corporate veil, shareholders’ continuous use of corporate property should most especially be avoided by

Answer 17

a close corporation.

Question 18

The day-to-day operations of a corporation are overseen by

Answer 18

the officers.

Question 19

Corporate shareholders will most likely be held personally liable for the firm’s debts if they

Answer 19

use the firm to perpetrate a fraud.

Question 20

Funds invested in an existing corporation to buy and reorganize it, and possibly sell shares in the reorganized company in an initial public offering, are known as

Answer 20

private equity capital.

Question 21

The primary document needed to incorporate a business is

Answer 21

the articles of incorporation.

Question 22

A corporation’s authority to act and its liability for those actions is, with respect to the firm’s owners,

Answer 22

separate and apart.

Question 23

Nile is a holder of preferred stock in Oasis Hotels Inc. Nile

Answer 23

has priority over holders of common stock as to payment of dividends.

Question 24

A corporation is recognized under U.S. law as a person.

Answer 24

True