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Exam 22: Corporations: Formation and Organization

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Question 61

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Which of the following is generally true regarding the management of a corporation?

A) Shareholders do not participate in corporate management.
B) Shareholders elect a board of directors.
C) The board of directors selects officers to manage the day-to-day business of the corporation.
D) Shareholders do not participate in corporate management,shareholders elect a board of directors,and the board of directors selects officers to manage the day-to-day business of the corporation.
E) Shareholders participate in corporate management,elect a board of directors,and select officers to manage the day-to-day business of the corporation.

F) A) and B)
G) None of the above

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Question 62

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With regard to the board of directors of a corporation,China has adopted a two-tier board structure.

A) True
B) False

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Question 63

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Partnerships may be shareholders of an S corporation.

In which of the following does a shareholder sue alleging that he or she has suffered damages caused by the corporation?

________ corporations generally do not offer stock to the public.

If the incorporator or promoters make an error or omission during the incorporation process,courts may rule that the organization is not a corporation,in which case the organization is a(n) ________ corporation.

Nails.Mona and her friends Jack and Bobby,all United States citizens,want to open a nail salon in Tennessee.They would all like to avoid personal liability for debts of the business and for wrongful acts of each other.They would also like to avoid taxation as much as possible.Mona is in favor of a corporation and asks if there is any problem with that form of business.Jack and Bobby say that they want to receive profit distributions and that they are concerned about excessive taxation with a corporation.Jack and Bobby urged the formation of a partnership even in the face of personal liability.Mona did some research and suggested an S corporation to Jack and Bobby.Would the proposed business qualify as an S corporation if it were incorporated in Delaware?

Today,most state incorporation statutes permit businesses to incorporate for only express and specific purposes; thus,most articles of incorporation limit corporate powers.

Aggressors often try to win the favor of a few institutional investors that own large block of shares.

The Revised Model Business Corporation Act (RMBCA)requires two or more incorporators to incorporate a business.

A corporation commits an ultra vires act when it ________.

________ is a term for profits kept by a corporation for reinvestment.

How much must a shareholder who signs a stock subscription pay for no-par shares?

Self-Centered President.Tina is the new president of "We Manage You," a corporation set up to manage physician practices.Tina has never been very concerned with minority shareholders because she does not believe that they have any influence over the company because they cannot even elect a director.She is told,however,that the corporation has a practice of cumulative voting.An election is coming up in which 10 directors will be elected.Minority shareholders own 2,000 shares while majority shareholders own 8,000 shares.Tina tells her vice president,George,that she wants to ignore minority shareholders and focus her interests on majority shareholders and the directors.She also tells George that she wants to be particularly conscientious toward directors because the directors appoint officers,and she does not believe that she owes any actual duties to shareholders.She further orders George to destroy some documents subpoenaed in a criminal investigation against the company for illegal tax evasion.When George protests,Tina tells him not to worry because officers cannot be held responsible for criminal actions so long as the actions are done as part of the officer's duties.She explains to him that only the corporation can be charged with liability in such cases.Is Tina correct in that officers cannot be held criminally responsible for their actions on behalf of a corporation?

Which of the following is necessary in order for a business to qualify as an S corporation?

In the United States,corporations are legal entities.

Machine Malfunction.Bruno,the president of a corporation operating workout facilities,convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits.Unfortunately,after the purchase,it was announced that "Perfect Body" was actually a very dangerous machine that should not be used.The manufacturer of "Perfect Body" went bankrupt,and the corporation lost $200,000 on the purchase of the machines.The shareholders are furious and want to sue Bruno and the directors.The board of directors agrees to allow Frances,the ringleader of the shareholders,to purchase stock of the company at below its fair market value.She purchases a considerable amount of stock on that basis,but says that the shareholders plan to continue with an action against Bruno and the board members.Which of the following is true regarding the liability of Frances,if any,for purchasing the stock at below its fair market value?

If a corporation acts beyond its express and implied powers,the act is called a(n) ________ act.

Which of the following is false regarding officers of a corporation?

Corporations have only those powers that states grant them.