46. Under the RMBCA, the articles of incorporation must include all EXCEPT which one of the following?
a. The number of authorized shares
b. The name of the registered agent
c. The names of the initial shareholders
d. The address of each incorporator
47. A corporation is considered a citizen:
a. under the Fourteenth Amendment’s “privileges or immunities” clause.
b. of the state of its incorporation or where it has its principal office.
c. of all states where it does business.
d. All of these.
48. An offer to purchase capital stock in a corporation yet to be formed is made by a(n):
a. promoter.
b. subscriber.
c. incorporator.
d. subsidiary.
49. The bylaws of the corporation:
a. are adopted as one of the first items of business at the organizational meeting held promptly after
incorporation.
b. may contain any provision for managing the business not inconsistent with law or the charter.
c. may be repealed by the board of directors.
d. All of these.
50. Which of the following is not a general corporate power typically granted by incorporation statutes, including the
RMBCA?
a. To have a corporate seal
b. To own and vote shares of other entities
c. To make donations for charitable or educational purposes
d. All of these are typical corporate powers.
51. Whether a corporation is a de facto corporation may be challenged by:
a. an individual.
b. another corporation.
c. the state.
d. Any of these.
52. A corporation formed in substantial compliance with the incorporation statute and the required organizational
procedures is a:
a. de facto corporation.
b. de jure corporation.
c. corporation by estoppel.
d. private corporation.
53. The person who signs and files the articles of incorporation is the:
a. promoter.
b. incorporator.
c. subscriber.
d. majority stockholder.
54. Charles Bonney, the sole stockholder of Kid Corporation, wrongfully used the corporation to avoid a personal
liability. A court’s disregard of the corporate entity to hold Bonney personally liable is called:
a. limited liability.
b. ultra vires.
c. diversity of interest.
d. piercing the corporate veil.
55. Which of the following may be used to redress the ultra vires acts committed by a corporation?
a. A proceeding by shareholders to enjoin furthers such acts
b. A shareholder derivative suit against the directors or officers for exceeding their authority
c. A proceeding by the Attorney General of the state to enjoin the corporation from the transaction of
unauthorized business
d. All of these may be used.
56. Which of the following is correct regarding a foreign corporation?
a. A foreign corporation is incorporated in a foreign country.
b. A foreign corporation may not do business, except for acts in interstate commerce, in any state other than the
state of its incorporation.
c. Doing or transacting business within a particular state makes a foreign corporation subject to local litigation,
regulation, and taxation.
d. All of these are correct.
57. Which of the following is correct regarding the characteristics of a corporation?
a. A corporation is considered a person within the meaning of the Eighth Amendment.
b. The Fifth Amendment provisions against self-incrimination protect a corporation.
c. A corporation is protected by the Fourth Amendment’s provision against unreasonable searches and seizures.
d. All of these.
58. Dickens Corporation, incorporated in Delaware, opens a warehouse in a western state from which it ships goods. If
Dickens does not have a certificate of authority to do business within the western state:
a. it will face no sanctions or penalties.
b. the corporation will be shut down.
c. the corporation’s officers and directors may be held personally liable on contracts made within the state.
d. Any of these may happen.
59. Claire opened Claire’s Beauty Parlor in her home. She solicited funds to begin the business from Jack, who was led
to believe that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep
while giving a customer a permanent and the solution caused her customer severe burns. The customer sued the
Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the RMBCA, what
would be the result?
a. Claire and Jack would not be personally liable.
b. Claire would not be personally liable, but Jack would.
c. Jack would not be personally liable, but Claire would.
d. Both would be personally liable since there was no corporation formed.
60. Master Ink owns all the stock of Prime Pen Co. A Prime Pen employee commits a tort for which the employer is
liable. The suit results in a judgment for $1 million against Prime Pen. Prime Pen assets total $650,000, but Master
Ink’s assets are in the millions. In which of the following situations would the judgment have to be paid by Master
Ink?
a. The Master Ink board of directors is exactly the same as Prime Pen’s.
b. The president of Master Ink is also the vice president of Prime Pen.
c. Prime Pen‘s income and Master Ink‘s income is held in one account.
d. None of these.
61. Which of the following names would NOT be permitted under most general incorporation statutes?
a. Acme Ltd.
b. Acme Co.
c. Acme Inc.
d. Acme
62. Under which of the following provisions of the U.S. Constitution is a corporation not a “person”?
a. The Fifth Amendment’s Due Process Clause
b. The Fourteenth Amendment’s Due Process Clause
c. The Fourteenth Amendment’s Equal Protection Clause
d. The Fifth Amendment’s clause protecting against self-incrimination
63. The president of Hi-Glow Cosmetics sends his top chemist to Hi–Glow’s competitor’s labs to steal its formula for
shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable?
a. Yes, under the theory of ultra vires
b. Yes, since the president authorized the crime
c. No, because a corporation acts through the board of directors
d. No, because a corporation can’t go to jail
64. A postincorporation subscription is:
a. like a preincorporation subscription in that the subscriber may withdraw the offer to enter into the subscription
any time before the corporation accepts it.
b. treated as a contract between the subscriber and the corporation.
c. not recognized under the RMBCA.
d. defined under the RMBCA as a contract between all subscribers.
65. Which of the following is untrue regarding closely held corporations?
a. Most corporations in the U.S. are closely held.
b. In most states, closely held corporations are subject to the general incorporation statute governing all
corporations.
c. Shareholders usually have little voice in the management and control of the business.
d. Some states have enacted special legislation to accommodate the needs of closely held corporations.
66. Which of the following is untrue regarding professional corporations?
a. State statutes permitting professional corporations all apply only to specified professions.
b. All states have statutes which permit the practice of professions by duly licensed individuals in the corporate
form.
c. There is a supplement to the MBCA which deals with professional corporations.
d. Professionals may avoid personal liability for corporate debts by incorporating.
67. Which of the following run the day-to–day operations of a corporation?
a. Shareholders
b. Board of directors
c. Officers
d. Subscribers
68. Discuss the corporate form of business organization with respect to how it is created, the liability of persons having
an ownership interest, how management is conducted, and duration of existence.
69. Matt and Ron would like to form a corporation. Discuss what is required in most states to form a corporation.
70. Explain each of the following specialized types of corporations:
a. Professional
b. Public
c. Nonprofit
Allows duly licensed individuals to practice their professions within the corporate
a. form. Used by doctors, dentists, lawyers, and accountants or other duly licensed
71. Answer the following:
a. What powers does a corporation normally possess?
b. What is the doctrine of ultra vires? What is the effect of an ultra vires contract?
72. Mark complied with all formation requirements for incorporating his taxicab business. He is the sole shareholder in
the corporation. The corporation owns two automobiles that Mark frequently uses for his own personal use. In
addition, he sometimes deposits the money he takes in during the day into his personal checking account. One day,
an employee of the company, while driving one of the company vehicles, accidentally hits Peter, a pedestrian, in a
crosswalk. Peter sues both Mark and the Taxi Company for $100,000. The corporate assets are only $32,000.
a. Is the corporation liable for the acts of its employee? Explain.
b. Will Mark be personally liable under the facts? Why? Explain.
73. Identify each of the following corporations by type.
Dr. Smith and Dr. Jones are medical doctors who practice together. They incorporate their
a. medical practice so that they can offer themselves and their employees better employment
benefits.
A group of concerned citizens obtains a corporate charter from the state to form a local Water
b. Planning and Management Corporation that is authorized to do water planning on a local level,
to grant permits for such purposes as the installation of ditches, and to encourage good water
usage practices in their jurisdictional area.
Agatha and Betty, who are sisters, form a corporation in which they are the sole shareholders.
c. They plan to operate a large retail store that sells collectibles. Agatha is the president and Betty
is the chairperson of the board of directors.
d. Shelby and Trent form a corporation to prevent spouse and child abuse. The corporation
operates a shelter for battered women and homeless children.
Zebron Corporation is incorporated in the State of West Virginia. It decides to expand its
e. business to Kentucky. What type of corporation is it in West Virginia? What type of corporation
is it in Kentucky?
74. What are the principal attributes of a corporation?
75. Name the classifications of corporations.
76. What is the definition of a Subchapter S Corporation?
77. Define “promoter” in reference to a corporation.