Question 1

Which of the following statements is true for the dissolution of a corporation by agreement?

Accepted Answer

A)   As a corporation is not an entity created by the state, it need not have the state's consent to dissolve.
B)   A corporation can be dissolved by oral consent of all shareholders.
C)   If two corporations consolidate into a new corporation, only the old corporation with major shareholders is dissolved.
D)   Corporations with more than one class of shareholders sometimes provide for voting on dissolution and other matters by class.

Question 2

The function of bylaws is to establish rules for the conduct of the internal affairs of a corporation.

Accepted Answer

A) True 
 B)False

Question 3

_____ is a basic restriction governing the transferability of shares in a close corporation.

Accepted Answer

A)   Piercing the veil
B)   Quo warranto
C)   Right of first refusal
D)   Ultra vires

Question 4

A de facto corporation:

Accepted Answer

A)   could be challenged by a third party.
B)   was not permitted to deny its corporate existence.
C)   never involves a quo warranto action.
D)   existed when the promoters substantially complied with all mandatory provisions.

Question 5

According to the Model Business Corporation Act (MBCA) ,which of the following is an optional content that could be included in the articles of incorporation?

Accepted Answer

A)   The name of the corporation
B)   The name and address of each incorporator
C)   The number of shares of capital stock that the corporation shall have authority to issue
D)   The purpose of the corporation D

Question 6

A basic principle of corporation law is that:

Accepted Answer

A)   shareholders are not free to dispose of their shares by gift.
B)   shareholders are given the authority to manage the business.
C)   majority rule applies to both shareholder and director action.
D)   there is an established market for the stock.

Question 7

Before a corporation comes into existence,it _____.

Accepted Answer

A)   can be liable as principal
B)   cannot ratify a contract made by the promoter
C)   is illegal to pay promoters for their services
D)   is liable if the board acts to adopt the contract

Question 8

A promoter's liability on preincorporation contracts terminates when a novation is signed.

Accepted Answer

A) True 
 B)False

Question 9

Under the Model Business Corporation Act (MBCA),a corporation can issue shares in return for the promoters' preincorporation service.

Accepted Answer

A) True 
 B)False  True

Question 10

Under the revised Model Business Corporation Act (MBCA),who will be liable for the business debts if the business has been defectively incorporated?

Accepted Answer

Under the revised Model Business Corpora...

Question 11

Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

Accepted Answer

A)   Nonprofit corporations
B)   Closely held corporations
C)   Publicly held corporations
D)   Municipal corporations

Question 12

All business corporations derive their existence from the:

Accepted Answer

A)   Commerce Clause of the U.S. Constitution.
B)   common law.
C)   state in which they are incorporated.
D)   federal government.

Question 13

Failure to appoint a registered agent in the state of incorporation is grounds for an involuntary dissolution.

Accepted Answer

A) True 
 B)False

Question 14

Governmental corporations always have the power to tax.

Accepted Answer

A) True 
 B)False

Question 15

Explain the promoters' liability to third parties before a corporation is formed.

Accepted Answer

Promoters are generally held liable on c...

Question 16

Mention the matters that must be included in the articles of incorporation according to the Model Business Corporation Act (MBCA).

Accepted Answer

The MBCA lists the following matters that must be included in the articles of incorporation:
1)The name of the corporation,which must not be deceptively similar to that of any other corporation registered earlier.(It must contain the word corporation,incorporated,company,or limited,or an abbreviation.)
2)The number of shares of capital stock that the corporation shall have authority to issue.
3)The address of the initial registered office of the corporation and the name of its registered agent.
4)The name and address of each incorporator.

Question 17

Both nonprofit corporations and nontaxing governmental corporations are similar because they are formed and operated by private persons.

Accepted Answer

A) True 
 B)False

Question 18

Helen is a promoter who,prior to forming Bayne Corp.,contracted to purchase tile-manufacturing machinery from Owen Machinery Inc.The contract was negotiated and entered into in the name of Bayne Corp.Subsequently,a certificate of incorporation was issued to Bayne Corp.Which of the following statements is true of this scenario?

Accepted Answer

A)   Only Bayne Corp. is liable for the contract with Owen Machinery Inc. as it received its certificate of incorporation.
B)   Helen would be liable for the contract with Owen Machinery Inc.
C)   If the board of directors of Bayne Corp. issues a suitable resolution, Helen would be relieved from all liability for the contract with Owen Machinery Inc.
D)   Since Bayne Corp. was not in existence at the time the contract was negotiated, the contract is void.

Question 19

A de facto corporation:

Accepted Answer

A)   could not be challenged by a third party.
B)   existed when the promoters substantially complied with all mandatory provisions.
C)   did not exist when there was an honest attempt to comply with the mandatory provisions of the corporate statute.
D)   was permitted to deny its corporate existence.

Question 20

Joey and his partners have started a corporation in North Dakota.They could get it incorporated in Illinois if:

Accepted Answer

A)   incorporation fees are low even if incorporation taxes are very high.
B)   shareholders can actively participate in the management.
C)   incorporation fees and taxes are lower, and there is minimal shareholder interference.
D)   promoters and shareholders are barred from interfering.

Exam 28: Formation and Termination of Corporations

Which of the following statements is true for the dissolution of a corporation by agreement?

Correct Answer
verified

The function of bylaws is to establish rules for the conduct of the internal affairs of a corporation.

Correct Answer
verified

_____ is a basic restriction governing the transferability of shares in a close corporation.

Correct Answer
verified

A de facto corporation:

Correct Answer
verified

According to the Model Business Corporation Act (MBCA) ,which of the following is an optional content that could be included in the articles of incorporation?

Correct Answer
verified
D

A basic principle of corporation law is that:

Correct Answer
verified

Before a corporation comes into existence,it _____.

Correct Answer
verified

A promoter's liability on preincorporation contracts terminates when a novation is signed.

Correct Answer
verified

Under the Model Business Corporation Act (MBCA),a corporation can issue shares in return for the promoters' preincorporation service.

Correct Answer
verified
True

Under the revised Model Business Corporation Act (MBCA),who will be liable for the business debts if the business has been defectively incorporated?

Correct Answer
verified
Under the revised Model Business Corpora...
View Answer

Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

Correct Answer
verified

All business corporations derive their existence from the:

Correct Answer
verified

Failure to appoint a registered agent in the state of incorporation is grounds for an involuntary dissolution.

Correct Answer
verified

Governmental corporations always have the power to tax.

Correct Answer
verified

Explain the promoters' liability to third parties before a corporation is formed.

Correct Answer
verified
Promoters are generally held liable on c...
View Answer

Mention the matters that must be included in the articles of incorporation according to the Model Business Corporation Act (MBCA).

Both nonprofit corporations and nontaxing governmental corporations are similar because they are formed and operated by private persons.

Correct Answer
verified

Correct Answer
verified

A de facto corporation:

Correct Answer
verified

Joey and his partners have started a corporation in North Dakota.They could get it incorporated in Illinois if:

Correct Answer
verified

Exam 28: Formation and Termination of Corporations

Which of the following statements is true for the dissolution of a corporation by agreement?

Correct AnswerverifiedShow Answer

The function of bylaws is to establish rules for the conduct of the internal affairs of a corporation.

Correct AnswerverifiedShow Answer

_____ is a basic restriction governing the transferability of shares in a close corporation.

Correct AnswerverifiedShow Answer

A de facto corporation:

Correct AnswerverifiedShow Answer

According to the Model Business Corporation Act (MBCA) ,which of the following is an optional content that could be included in the articles of incorporation?

Correct AnswerverifiedD

A basic principle of corporation law is that:

Correct AnswerverifiedShow Answer

Before a corporation comes into existence,it _____.

Correct AnswerverifiedShow Answer

A promoter's liability on preincorporation contracts terminates when a novation is signed.

Correct AnswerverifiedShow Answer

Under the Model Business Corporation Act (MBCA),a corporation can issue shares in return for the promoters' preincorporation service.

Correct AnswerverifiedTrue

Under the revised Model Business Corporation Act (MBCA),who will be liable for the business debts if the business has been defectively incorporated?

Correct AnswerverifiedUnder the revised Model Business Corpora...View AnswerShow Answer

Which of the following types of corporations sells shares to people who often have little interest in it except as investors?

Correct AnswerverifiedShow Answer

All business corporations derive their existence from the:

Correct AnswerverifiedShow Answer

Failure to appoint a registered agent in the state of incorporation is grounds for an involuntary dissolution.

Correct AnswerverifiedShow Answer

Governmental corporations always have the power to tax.

Correct AnswerverifiedShow Answer

Explain the promoters' liability to third parties before a corporation is formed.

Correct AnswerverifiedPromoters are generally held liable on c...View AnswerShow Answer

Mention the matters that must be included in the articles of incorporation according to the Model Business Corporation Act (MBCA).

Both nonprofit corporations and nontaxing governmental corporations are similar because they are formed and operated by private persons.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A de facto corporation:

Correct AnswerverifiedShow Answer

Joey and his partners have started a corporation in North Dakota.They could get it incorporated in Illinois if:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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Correct Answer
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True

Correct Answer
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Under the revised Model Business Corpora...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Promoters are generally held liable on c...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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