66. Corporations may sue and be sued in the name of the business itself.
a. True
b. False
67. Corporations are legal entities that are due all of the same constitutional protections due to real persons.
a. True
b. False
68. A close corporation is one that has a small number of shareholders.
a. True
b. False
69. A close corporation is one with a capitalization or assets of less than $1 million.
a. True
b. False
70. A close corporation does not have shares of stock traded in stock markets.
a. True
b. False
71. A public corporation is one that trades shares on stock markets.
a. True
b. False
72. In Ironite Products v. Samuels, where a major shareholder of a company disputes changes in the bylaws, the
appeals court held that the corporation was not due Fifth Amendment protection about producing documents that
could be incriminating.
a. True
b. False
73. In Ironite Products v. Samuels, where a major shareholder of a company disputes changes in the bylaws, the
appeals court held that the bylaws of the company had been properly changed by the board of directors, so the
shareholder could not complain.
a. True
b. False
74. In Ironite Products v. Samuels, where a major shareholder of a company disputes changes in the bylaws, the
appeals court held that the bylaws of the company had been changed in violation of company bylaws, so the
shareholder must be given control of the company.
a. True
b. False
75. Shareholders are the owners of a corporation.
a. True
b. False
76. Shareholders have the right to instruct directors or top managers how to run the corporation.
a. True
b. False
77. By law, shareholders in a corporation must be given stock certificates as a sign of formal ownership.
a. True
b. False
78. Shareholders have a limited right to inspect the books and records of the corporation.
a. True
b. False
79. Shareholders may not authorize third parties to vote on their behalf at shareholder meetings.
a. True
b. False
80. Shareholders may usually grant their proxy for another party to vote on corporate matters on their behalf.
a. True
b. False
81. Shareholders liability is limited to the extent of investment in stock in the corporation.
a. True
b. False
82. The shareholders of a corporation have the right to vote to dissolve the corporation.
a. True
b. False
83. The shareholders of a corporation have the right to vote to instruct managers how to run the company.
a. True
b. False
84. A shareholder of a corporation may not also be a creditor to the company, as there would be a conflict of interest.
a. True
b. False
85. The resolutions that shareholders vote on at shareholder meetings are advisory to the board.
a. True
b. False
86. Once elected, directors of a corporation must serve their full terms, unless they choose to resign, and may not be
removed from office.
a. True
b. False
87. Directors of a corporation may be removed from office for cause, such as a breach of duty.
a. True
b. False
88. Directors of a corporation are responsible for making basic corporate policy.
a. True
b. False
89. The directors of a corporation are the principal of the corporation.
a. True
b. False
90. Directors of a corporation are held to a fiduciary duty of loyalty to the managers of the corporation.
a. True
b. False
91. Directors of a corporation are held to a duty of care to make decisions in a prudent business manner.
a. True
b. False
92. Corporate directors are protected from liability for honest mistakes in decisions made by the business judgment rule.
a. True
b. False
93. Directors of a corporation have great leeway in making decisions about the business.
a. True
b. False
94. Due to the conflict of interest, in publicly held companies, directors of a corporation may not own shares of stock in
the company.
a. True
b. False
95. Corporate directors have a legal obligation to always preserve the corporation.
a. True
b. False
96. The duties owed to shareholder by the board of directors are often affected by the circumstances in which the
business finds itself.
a. True
b. False
97. In Storetrax.com v. Gurland, where Gurland, founder and president of Storetrax, was fired, the appeals court held
that the founder of a company cannot be dismissed.
a. True
b. False
98. In Storetrax.com v. Gurland, where Gurland, founder and president of Storetrax, was fired, the appeals court held
that it was improper for a major shareholder to also serve on the board and as president, so he could be fired.
a. True
b. False
99. In Storetrax.com v. Gurland, where Gurland, founder and president of Storetrax, was fired, the appeals court held
that it was not a breach of fiduciary duty for Gurland to be paid severance pay.
a. True
b. False
100. Managers hired to run a corporation owe it a duty of care and loyalty.
a. True
b. False
101. Top management of a public corporation legally report to the shareholders.
a. True
b. False
102. The voluntary dissolution of a corporation is approved by the shareholders and board of directors.
a. True
b. False
103. Corporations may not be forced to dissolve against the wishes of the board of directors.
a. True
b. False
104. If a corporation is dissolved voluntarily, there must be a “winding up” of its affairs.
a. True
b. False
105. If a corporation is dissolved voluntarily, the creditors must be paid before the shareholders out of the assets of the
firm.
a. True
b. False
106. Professional corporations allow doctors and other professionals to be exempt from tort suits for malpractice.
a. True
b. False
107. Professional corporations are a business form often adopted by small businesses, especially in retail sales.
a. True
b. False
108. Limited liability companies are usually retained as shell operations.
a. True
b. False
109. Shell corporations are very easy to be set up in many states.
a. True
b. False
110. Limited liability companies have been popular since the late 1800s.
a. True
b. False
111. Limited liability companies are taxed like partnerships, but have the liability rules of a corporation.
a. True
b. False
112. Offshore businesses are usually involved in money laundering operations.
a. True
b. False
113. Offshore businesses are often established for tax purposes.
a. True
b. False
114. Limited liability companies need no formal document to begin operations; an oral agreement can be sufficient.
a. True
b. False
115. Most states have passed statutes that say that members of limited liability companies will be personally liable for
debts of the business.
a. True
b. False
116. Typically, members of a limited liability company will enter into an operating agreement that is similar to corporate
by-laws.
a. True
b. False
117. Limited liability companies are guided by an operating agreement.
a. True
b. False