1. ABC Corporation substantially complies with all conditions precedent to incorporation. ABC Corporation has

a.	corporate existence by estoppel.
b.	de facto existence.
c.	de jure existence.
d.	ultra vires existence.

2. DEF Corporation fails to hold a meeting to adopt bylaws. Under this circumstance, DEF Corporation will still be treated as a legal corporation in those states that recognize the common law doctrine of

a.	corporation by estoppel.
b.	de facto corporation.
c.	de jure corporation.
d.	ultra vires.

GHI Corporation claims to be a corporation but it is not. Rachel signs a contract with GHI Corporation that is not performed by GHI Corporation, but is fully performed by Rachel. In Rachel's suit against GHI Corporation, a court will likely recognize the firm as

a.	a corporation by estoppel.
b.	a de facto corporation.
c.	a de jure corporation.
d.	an ultra vires corporation.

JKL Corporation (the corporation) has been profitably operating a retail sales business for several years. Jake is the sole shareholder, officer, and employee of the corporation. On October 6, 2014 the corporation entered into a five-lease with Kelvin and moved its business into the new premises. On November 10, 2014 the Last Rational Bank made a $5,000 loan to the corporation. On February 1, 2015, a patron slipped and fell in the premises, seriously injuring her back. The February rent and loan payments are in default. For which will Jake be subject to personal liability?

1. The loan and rent only.

1. Damages for the slip and fall only.

1. The loan, the rent, and damages for the slip and fall.
2. None of the above.

MNO Corporation offers to purchase from the shareholders of PQR Corporation all of their shares. The board of directors of PQR Corporation sends letters to all of its shareholders advising them not to accept. This is known as

a. a purchase and sale of stock.

b. a hostile takeover.

c. a merger.

d. a consolidation.

6. Mary Contrary owns shares of stock of STU Corporation. She receives notice that that VWX Corporation and STU Corporation have agreed to merge with STU Corporation being the surviving corporation. Mary had voted against the merger and does not wish to be a shareholder of the surviving STU Corporation. Under these circumstances Mary should

a. exercise her appraisal rights.

b. sell her STU Corporation stock in a transaction supervised by the U.S. Justice Department.

c. sue to enjoin the merger.

d. seek to impeach STUs board members.

7. Piercing the corporate veil means

a. treating the corporation as a single member limited liability company for tax purposes.

b. ignoring the corporation and exposing the shareholders to personal liability.

c. ignoring the corporation and income taxing shareholders directly on corporate profits.

d. basing federal diversity jurisdiction on the domiciles of the shareholders rather than on states of incorporation.

8. Mary Contrary, a shareholder of STU Corporation, and other shareholders of STU Corporation, do what is necessary to bring a shareholders derivative suit against the members of STU Corporations board of directors. The suit alleges that the board members negligently made substantial and ultimately disastrous investments of STU Corporations cash on hand. The board members are likely to defend themselves claiming

a. they werent feeling very well at the time.

b. that this is not a proper basis for a shareholder derivative suit.

c. business judgment rule protection.

d. it was a matter within the exclusive control of STU Corporations investment committee.

9. To be a tipper or a tipee, one must be

a. a provider of services to the corporation acquires information because of the services provided.

b. an officer, director or shareholder of a corporation.

c. a corporate whistle blower.

d. someone who acquires inside corporate information as the result of a breach of fiduciary duty.

10. Large Financial Corporation (Large) merges with Small Bank Corporation (Small), with Large absorbing Small. After the merger

a. a different, new entity is the surviving corporation.

b. Large and Small are both surviving corporations.

c. Large is the surviving corporation.

d. Small is the surviving corporation.

11. A stock warrant

a. must be filed with the corporation to obtain a replacement for a lost stock certificate.

b. cannot be sold or otherwise traded.

c. evidences the right to buy stock at a stated price by a specified date.

d. can be voted like common shares provided the warrants are issued in lieu of common stock.

12. Assume that state law requires cumulative voting. Modest Corp. has 20,000 shares outstanding. Minority shareholders hold 6,000 shares and the majority hold 14,000 shares. Four shareholders have been nominated for election to three seats on the board of directors: Larry, Moe, Shemp and Curley. Can Curley be elected to one of the three seats by the minority?

a. yes.

b. no.

c. yes, provided the minority gets one vote from the majority.

d. yes, provided the minority gets four votes from the majority.

13. Shareholders of a corporation may exercise

a. unlimited inspection rights over corporate books and records.

b. inspection rights limited to shareholder voting lists.

c. inspection rights limited to the inspection of corporate books and records for a proper purpose.

d. inspection rights over corporate books and records provided the shareholder owns at least 2% of the outstanding shares.

14. The most common form of business in the U.S. is

a. partnership.

b. limited liability company.

c. S corporation.

d. sole proprietorship.

15. A limited liability company

a. is a type of partnership.

b. is a type of limited partnership.

c. combines features of a partnership and a corporation.

d. must have a written operating agreement.

16. Absent an election by the limited liability company to the contrary, the Internal Revenue Service will automatically income tax a two or more member limited liability company as

a. a corporation.

b. a C corporation.

c. an S corporation.

d. a partnership.

17. Jay is a member of Kappa, LLC, a limited liability company. As a general rule, Jay is liable for Kappa's debts

a.	in proportion to the total number of members of the limited liability company.
b.	to the extent of his investment in the limited liability company.
c.	to the extent that the other members of the limited liability company do not pay the debts.
d.	to the full extent of the debt of the limited liability company.

18. CPA Accounting, LLC, (CPA) is a limited liability company. Assuming that the law in CPA's state is like the law in most states, then unless the members have agreed otherwise, participants in the firm's management will be considered to include

a.	all members.
b.	no member.
c.	one member.
d.	two members, including at least one general partner.

19. First Business, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is

a.	the firm's corporate purpose.
b.	the minutes of the firm's first organizational meeting.
c.	the name of the firm's registered agent.
d.	the par value of the firm's shares.

20. International Sales Corporation (ISC) claims to be a corporation, but it is not. Joy signs a contract that ISC does not perform. Joy files a suit against ISC. The court will likely hold that ISC is

a.	a corporation by estoppel.
b.	a de facto corporation.
c.	a de jure corporation.
d.	an ultra vires corporation.

21. Tony is a shareholder of Urban Sales, Inc (USI). A court might hold Tony personally liable for USI's debts

a.	if Tony's personal interests are commingled with USI's interests to the extent that USI has no separate identity.
b.	if USI calls more than the required number of shareholders' meetings.
c.	if USI is overcapitalized.
d.	under no circumstances.

22. Kim is a director of Light Service Corporation (LSC). With respect to LSC, Kim's most important right is the right to

a.	compensation.
b.	indemnification.
c.	purchase LSC stock.
d.	service.

23. Eve is a director of Fine Stuff Corporation (Fine). Without informing Fine, Eve goes into business with Great Things, Inc. in competition with Fine. Eve is liable for breach of

a.	no duty or rule.
b.	the business judgment rule.
c.	the duty of care.
d.	the duty of loyalty.

24. Carol is a director of Diners Restaurants, Inc.(Diners). Carol would most likely be found to have breached her duty of loyalty in which of the following scenarios?

a.	Carol becomes a director of Fine Mattresses, Inc., a noncompeting firm.
b.	Carol buys stock in Great Foods Corporation, a competing firm.
c.	Carol votes for Diners to buy a controlling interest in Eats, Inc., which causes Diners to suffer a loss.
d.	Carol votes against Diners' purchase of a controlling interest in Eats, Inc., which causes Diners to suffer a loss.

25. Alpha Corporation (Alpha) files a suit against Beta Company, Inc. (Beta) for patent infringement. While the suit is pending, Alpha merges with Gamma, Inc. (Gamma), after which only Gamma remains. After the merger

a.	Alpha may continue the suit on behalf of Gamma.
b.	Alpha may continue the suit on behalf of its previous shareholders.
c.	Gamma may continue the suit.
d.	the suit is moot.

26. Eagle Corporation merges with First Corporation, with Eagle Corporation absorbing First Corporation. After the merger

a.	a different, new corporation is the surviving corporation.
b.	Eagle and First are both surviving corporations.
c.	Eagle is the surviving corporation.
d.	First is the surviving corporation.

27. A merger between Able Corporation and Baker, Inc., can be expressed as Able Corporation + Baker, Inc. =

a.	Able Corporation.
b.	Charlie Company.
c.	Charlie Company + Delta Corporation.
d.	Delta Corporation.

28. Global Loans Corporation and First Bank Corporation consolidate. However, the terms of the consolidation agreement differ from First Bank Corporations articles of incorporation. The articles

a.	are replaced by Global Loans' articles of incorporation.
b.	are replaced by the consolidation agreement.
c.	effectively prevent the consolidation.
d.	prevail.

29. B2B Corporation and B2C, Inc., plan to consolidate. The plan must be approved by

a.	neither their boards of directors nor their shareholders.
b.	their boards and their shareholders.
c.	their boards only.
d.	their shareholders only.

30. Design Company and Efficient Corporation plan to consolidate. A certificate of consolidation will be issued by

a.	neither the new corporation nor the state.
b.	the new corporation and the state.
c.	the new corporation only.
d.	the state only.

31. Mona is a shareholder of National Corporation. Mona could normally exercise appraisal rights if National Corporation participated in

a.	a consolidation only.
b.	a consolidation or a merger.
c.	a merger only.
d.	neither a consolidation nor a merger.

32. Nina is a dissenting shareholder of Oil Corporation whose management is considering a tender offer by Power, Inc. Nina and Oil Corporation cannot agree on the fair value of the stock. The value will be determined by

a.	a court.
b.	Nina.
c.	Oil Corporation's directors.
d.	Oil Corporation's other shareholders.

33. Salt Corporation wants to acquire or merge with Pepper Corporation. The board and the shareholders of Pepper Corporation are resisting. Salt Corporation should

a.	File a plan of merger with the secretary of state.
b.	file articles of merger with Pepper Corporation.
c.	make a tender offer to the shareholders of Pepper Corporation.
d.	make a tender offer to the shareholders of Salt Corporation.

34. Total Business, Inc. wishes to acquire a controlling interest in United Corporation by buying United Corporations stock. A public offer by Total Business, Inc. to United Corporations shareholders is

a.	a buyout notice.
b.	a golden parachute.
c.	an acquisition call.
d.	a tender offer.

35. Great Stores, Inc. makes a public offering of securities that is subject to the Securities Act of 1933. Under the act, the securities can be sold

a.	as soon as a registration statement is filed.
b.	by an underwriter only.
c.	only if an investor is furnished with a prospectus.
d.	without a registration statement.

36. Consumer Products Corporation wants to make an offering of securities to the public. This offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with

a.	a prospectus.
b.	a registration statement.
c.	a tombstone ad.
d.	all of the above.

37. Alpha, Inc., a corporation traded on a national stock exchange, wants to offer bonds for sale to the public. Beta Insurance Company, Inc. a state-regulated insurance company, wants to offer annuity contracts for sale to the public. Before any sale, registration must be made with the SEC for

a.	Alpha Inc.'s bonds and Beta Insurance Company, Inc.s annuity contracts.
b.	Alpha Inc.'s bonds only.
c.	Beta Insurance Company Inc.'s annuity contracts only.
d.	neither Alpha Inc.'s bonds nor Beta Insurance Company Inc.s annuity contracts.

38. Delta Capital Corporation is a noninvestment company that wants to issue $3 million of stock in a twelve-month period. Delta Capital Corporation has less than $20 million in annual sales and qualifies as a small business issuer. Before Delta Capital Corporation sells the stock, it must provide investors with

a.	an offering circular.
b.	a notice of the issue.
c.	a red herring prospectus.
d.	a tombstone ad.

39. Interstate Retail Company, Inc. has assets of less than $10 million and fewer than five hundred shareholders. Jiffy Outlets, Inc., has assets of more than $10 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

a.	Interstate Retail Company, Inc. and Jiffy Outlets, Inc..
b.	Interstate Retail Company, Inc. only.
c.	Jiffy Outlets, Inc. only.
d.	neither Interstate Retail Company, Inc. nor Jiffy Outlets, Inc.

40. Lee, a salesperson for Macro Corporation (Macro), learns that Macro will increase the dividend it pays to shareholders. Lee buys 1,000 shares of Macro stock. When the price increases, Lee sells his shares at a profit. Lee would not be liable for insider trading if the information about the dividend was

a.	material when he sold the stock.
b.	public information after he bought the stock.
c.	public information before he bought the stock.
d.	too speculative when he bought the stock.

41. Pharmicon, Inc.(Pharmicon), a pharmaceutical firm, discovered a complete cure for the common cold. The medicine could be put into a pill that would be taken once a day for a week. Knowing these results, directors of Pharmicon decided to delay the press release and bought thousands of shares of Pharmicon stock. After the purchases, Pharmicon issued a press release about the pill. The price of the stock skyrocketed. When the SEC found out about the purchases and the delay in the press release, it sued Pharmicon for violating Rule 10b-5. Based on the decision in SEC v. Texas Gulf Sulphur Co., the court in this case would most likely rule in favor of

a.	the SEC, because the information about the cure was material and was not disclosed to the public prior to the directors' purchase of the stock.
b.	Pharmicon, because the information was not material.
c.	the SEC, because owning company stock is a conflict of interest for the directors.
d.	Pharmicon, because they issued a press release to the public.

42. In United States v. O'Hagan, the United States Supreme Court held that liability for insider trading under Rule 10b-5

a.	may be based on a misappropriation theory.
b.	does not require the use of a deception.
c.	may not be based on a fraud on the market theory.
d.	may extend to tippees.

43. Dave, an accountant, does not work for Eagle Oil Corporation, but wrongfully obtains inside information concerning Eagle Oil Corporation. Based on the information, Dave buys and sells Eagle Oil Corporation stock to his personal gain. The SEC prosecutes Dave, arguing that he is liable because he stole information rightfully belonging to another. The SEC's argument is

a.	the blue-sky theory.
b.	the misappropriation theory.
c.	the red-herring theory.
d.	the tipper/tippee theory.

44. Rapid Boat Corporation (Rapid) is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates

a.	the declaration of dividends by Rapid's board of directors.
b.	the later re-registration of Rapid's securities.
c.	the short-swing activities of Rapid's insiders.
d.	the solicitation of proxies from Rapid's shareholders.

45. Lara is the chief executive officer of Micro, Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Lara must personally

a.	certify that the reports are complete and accurate.
b.	designate a corporate official to assume liability for inaccuracies.
c.	do nothing.
d.	read the reports and be prepared to answer questions about them.

46. Finn and Glenda want to form and do business as Hobby Crafts Corporation. The corporation, once formed, would be a legal entity created and recognized by

a.	a central federal administrative agency.
b.	a city or county clerk's office.
c.	an artificial legal person.
d.	state law.

47. Inez and Jason are the shareholders and directors of ABC Corporation. Lily and Moe are ABC Corporation's officers. As with other corporations, the responsibility for the overall management of ABC Corporation rests with

a.	the board of directors.
b.	the officers.
c.	the owners.
d.	the shareholders.

48. The shares of Capital Corporation are publicly traded in securities markets. Capital Corporation is

a.	a private corporation.
b.	a privately held corporation.
c.	a nonprofit public corporation.
d.	a publicly held corporation.

49. Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local, Inc. will be divided to maintain the proportionate control of the survivors.

A reasonable purpose for a stock transfer restriction in a closely held corporation, like the agreement between Bertram, Claudia, and Dynah, is

a.	a desire to limit the participation of outsiders in the firm.
b.	a goal to restrain insiders from taking advantage of their position.
c.	an attempt to restrain the free flow of commerce among investors.
d.	a wish to restrict the transfer of the shareholders' physical assets.

50. Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree to restrict the transfer of its stock to anyone else. The agreement provides that if one of the shareholders dies, his or her shares of stock in Eat Local, Inc. will be divided to maintain the proportionate control of the survivors.

Later, Bertram dies. With respect to the stock transfer restriction agreement, Bertram's death most likely

a.	triggers the division provision.
b.	invalidates the entire agreement.
c.	voids the division provision only.
d.	violates the entire agreement.