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Exam 38: Corporations: Formation and Financing

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Question 31

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Constantine received dividends on his stock from a major corporation. What must Constantine, as a shareholder, now do?

A) Pay taxes on the dividends received.
B) Send a statement to the corporation within 30 days of intent to appeal the dividend amount.
C) Declare the dividend to the state corporation commission as received.
D) Hold onto the dividend amount until the federal government reviews the dividend paid
E) do nothing, the dividend is a bonus to the shareholder that has no other liabilities attached.

F) A) and B)
G) C) and D)

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Question 32

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Which of the following references the liability of corporations for torts and crimes committed by their agents during the scope of their employment?

A) Stare decisis
B) Res ipsa loquitur
C) Respondeat superior
D) Ab initio
E) Actus reus

F) B) and E)
G) D) and E)

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Question 33

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Enterprise Inc. was incorporated with a few minor errors but has substantially met the requirements of the state incorporation statute. This is known as a(n) ________.

What are the two implied corporate powers, as set forth in the text?

Five friends decide to form a corporation together. They wish to participate in corporate management. What must they do to participate?

Fallon is a stock owner and owns shares of stock in CEX corporation. These forms of shares of stock are also known as ________

Among the shareholders of an S corporation, no shareholder may be a nonresident alien.

Because corporations are legal entities separate from their shareholders, ________

Rules and regulations that govern the corporation's internal management are known as corporate ________.

Private persons create ________ corporations for private purposes.

Which of the following is a disadvantage of the corporate form?

A(n) ________ is one where an error or an omission was made during the incorporation process causing a court to rule the organization a defective corporation.

Two sisters and their parents own an incorporated hotel chain together. No stock is sold to the general public. What type of corporation is the hotel chain most likely to be?

[Horse Tracks] Min-ji, Marcus, and Penelope decided to form a corporation called Horse Tracks to raise horses. They all began the incorporation process by arranging for necessary capital and financing. They raised capital from their friends by making deals whereby their friends would purchase stock in the new corporation. After the corporation was formed, a problem arose with a contract for feed that Min-ji, Marcus, and Penelope had entered into while organizing the corporation. Callie, the seller of the feed, claimed that she had not been fully paid and threatened to sue the corporation. The contract Min-ji, Marcus, and Penelope had with Callie did not reference liability after the new corporation came into legal existence. Min-ji, Marcus, and Penelope asked for a novation, but were uncertain as to whether that would occur. -Min-ji, Marcus, and Penelope would be identified by what term in their arranging for necessary capital and financing for the corporation?

G6A is a major corporation that has had an extremely profitable year. G6A decides to keep some of its profits to reinvest into new machinery. This is known as ________.

Valenteeno is a business incorporated in Italy. This type of a corporation is known as a(n) ________.

Regarding management of a corporation, which of the following is false?

[Shaky Bicycles] Lena is an incorporator who filed the articles of incorporation for XYZ Corporation, a corporation set up to sell bicycles. Lena incorrectly put the wrong street address in the document. Preetha, a manufacturer of bicycle parts, had sold a number of parts to XYZ Corporation. Unfortunately, the corporation was not making any profit, and Preetha was not paid in a timely manner. She checked the status of the corporation and discovered Lena's error. Preetha then claimed that the shareholders of XYZ Corporation were personally liable to her. Amy, another creditor of XYZ Corporation, also claimed that a shareholder, Rick, was personally liable to her. Amy alleged that Rick committed fraud against her when he told her that XYZ Corporation was making large amounts of money, that if she would only loan $50,000 to the corporation he would marry her, and that the corporation would make so much money that she would be wealthy in six months. She loaned the funds, but the corporation has been unable to pay her. Rick told her that he is sorry, but that her only avenue of recovery is through the corporation. -Preetha's attempt to hold the shareholders primarily liable for her debt is likely to have what result?

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

[Shaky Bicycles] Lena is an incorporator who filed the articles of incorporation for XYZ Corporation, a corporation set up to sell bicycles. Lena incorrectly put the wrong street address in the document. Preetha, a manufacturer of bicycle parts, had sold a number of parts to XYZ Corporation. Unfortunately, the corporation was not making any profit, and Preetha was not paid in a timely manner. She checked the status of the corporation and discovered Lena's error. Preetha then claimed that the shareholders of XYZ Corporation were personally liable to her. Amy, another creditor of XYZ Corporation, also claimed that a shareholder, Rick, was personally liable to her. Amy alleged that Rick committed fraud against her when he told her that XYZ Corporation was making large amounts of money, that if she would only loan $50,000 to the corporation he would marry her, and that the corporation would make so much money that she would be wealthy in six months. She loaned the funds, but the corporation has been unable to pay her. Rick told her that he is sorry, but that her only avenue of recovery is through the corporation. -What, if any, is Amy's best theory in order to hold Rick personally liable to her, assuming XYZ's corporate status is in place?