A key purpose of a corporation is to protect its owners from personal liability for the acts or omissions of the corporation's owners.

TrueFalse

2.Independent contractors are usually not agents of their principals.

TrueFalse

3.Typically, an employer would be responsible for the acts or omissions of an employee while the employee is on the job.

TrueFalse

4.A corporation acts solely through its agents.

a.True.

b.False.

c.Not under the "Missouri Rule" of corporate governance.

d.It depends on how the corporation is structured.

5.The expression "observe and give due respect to the entity" refers to questions of :

a.Limited liability companies.

b.Corporate governance.

c.Piercing the corporate veil.

d.A corporation's internal structure.

6.A non-profit corporation is similar to a for-profit corporation in that it has shareholders.

TrueFalse

7.A non-profit corporation may or may not have members who elect the board of directors.

TrueFalse

8.A non-profit corporation is different from a for-profit corporation in that it does not insulate its members from personal liability.

TrueFalse

9.A non-profit corporation may own for-profit corporations.

TrueFalse

10.In all states, a for-profit (traditional) corporation must have more than one shareholder.

TrueFalse

11.Day-to-day administrative functions of for-profit (traditional) corporations are run by:

a.The shareholders.

b.The officers.

c.The directors.

d.Impartial third parties.

12.The distinction between "detour" and "frolic" applies to

a.The legal concept of "corporate distraction."

b.A corporation's bylaws.

c.Scope of employment (when the employee is--or is not--"on the job").

d.The operating agreement of an LLC, and when it becomes too complex for enforcement purposes.

13.Shareholders must approve:

a.Most corporate decisions.

b.Only major ("organic") decisions.

c.Most corporate operating policies.

d.None of the above.

14.In general, shareholders may remove directors:

a.For no particular reason (i.e. "without cause) unless the Articles of Incorporation require otherwise.

a.When approved by the officers.

b.Only if the Articles of Incorporation allow them to do so.

c.None of the above.

15.Generally, shareholders may vote to dissolve the corporation.

TrueFalse

16.A corporation may consist of a single shareholder, president/secretary/treasurer, and member of the board (all of whom are the same person).

TrueFalse

17.A shareholders' derivative suit to correct a "wrong" of the corporation, if such suit is approved, is typically paid for by the corporation itself.

TrueFalse

18.Generally, an employer may simply chose to switch the status of its existing employees to that of independent contractors if doing so will lower expenses.

TrueFalse

19.In general, a shareholder is liable for payment of the debts of the corporation.

TrueFalse

20.So-called "common shares" of a corporation have:

a.Fewer rights than any other share because they are merely common.

b.Equal rights.

c.No rights.

d.None of the above.

21.It is generally simpler to create different rights, rates of return, voting privileges, and other characteristics with shares than it is with ownership interests in a limited liability company (LLC).

TrueFalse

22.The board of directors of a corporation is generally entrusted with:

a.The management of the corporation.

b.The everyday operations of a corporation.

c.Regulatory matters, such as governmental compliance.

d.Selection of shareholders.

23.The "prudent person" standard of decision-making and behavior most often applies to corporate:

a.Shareholders.

b.Directors.

c.Officers.

d.None of the above.

24.Corporations are created by fling:

a.Bylaws.

b.The Corporate Constitution.

c.An Operating Agreement.

d.Articles of Incorporation.

25.A corporation may be formed in any state, even if there is no business conducted in that state other than the formation and maintenance (e.g. payment of annual fees) of the corporation itself.

TrueFalse

26.Bylaws provide the governing structure of a corporation:

TrueFalse

27.Limited Liability Companies are created by:

a.Filing Articles of Incorporation.

b.Filing Articles of Organization.

c.Like partnerships, no formal creation is necessary as long as the owners are operating together for a profit.

d.None of the above.

28.The "default" provisions of LLCs include equal voting and equal division of profits and losses, regardless of disproportionate capital contributions.

TrueFalse

29.Like a partnership, the owners of an LLC:

a.Are personally liable for their acts or omissions.

b.Are shielded from personal liability.

c.None of the above.

d.All of the above.

30.LLCs:

a.Are taxed like corporations.

b.Are not taxed.

c.May elect to be taxed like corporations or partnerships.

d.None of the above.

31.A sole proprietorship is the most common form of business.

TrueFalse

32.A sole proprietor has unlimited liability for his or her business.

TrueFalse

33.An association of two or more persons to carry on a business for a profit, with no other action, is:

a.Is an LLC.

b.Is a sole proprietorship.

c.Is a corporation.

d.A partnership.

34.An employer must deduct withholding taxes, social security taxes, and workers compensation taxes from the paycheck for an independent contractor just as the employer would be required to do for regular employees.

TrueFalse

35.Partnerships may be formed without filing anything with the local state government or even without having a partnership agreement between the partners themselves.

TrueFalse

36.Partnerships are taxed:

a.Like corporations.

b.Similar to Delaware entities.

c.On a "pass through" basis.

d.None of the above.

37.With traditional partnerships, there is:

a.An entity form of taxation.

b.Corporate formalities for electing directors.

c.Unlimited personal liability of each partner for all business obligations.

d.None of the above.

38.Which of the following is likely the best business entity to form if the business will likely undergo an initial public offering (IPO)?

a.Is an "S" corporation.

b.An LLC.

c.A "C" corporation.

d.A sole proprietorship.

39.The duty of "utmost faith and faith dealing" probably best defines:

a.The relationship between an independent contractor and his or her principal.

b.A fiduciary duty.

c.The relationship between corporate directors and officers.

d.The responsibility of corporate directors to shareholders.

40.The term "disassociation" best applies to:

a.The legal separation of shareholders and directors in a corporation.

b.The circumstances of a sole proprietorship.

c.A controversy between directors and officers in a corporation.

d.Changes of ownership in a partnership.

41.What is meant by "ultra vires"?

a.An act done beyond the authority of a corporation.

b.An act done automatically under the law.

c.The relationship between corporate directors and officers.

d.The responsibility of corporate directors to shareholders.

42.Typically, a so-called "foreign corporation" is one

a.That was formed in another country.

b.That was formed in another state.

c.That has taken over control of another corporation.

d.None of the above.

43.A non-profit corporation never pays income tax:

TrueFalse

44.Non-profit corporations may not compete for business with traditional, for-profit corporations; in other words, they must confine their activities to charitable or religious purposes:

TrueFalse

45.Corporate "purpose" must be stated in the Articles of Incorporation of all states.

TrueFalse

46.What best describes MBCA?

a.A "model" for corporate law.

b.A "taxation" device for corporations.

c.The general law of the State of Delaware over all business entities.

d.None of the above.

47.Most of the law affecting the formation and governance of corporations is:

a.Federal in nature.

b.State in nature.

c.An even mix of both.

d.None of the above.

48.The chair of the board of a corporation:

a.Typically supervises the corporation's employees.

b.Owns most of the shares.

c.Is always an employee of the corporation.

d.None of the above.

49.Which of the following has been called the most "flexible" form of entity for most purposes?

a.A non-profit corporation.

b.A "C: corporation.

c.A partnership.

d.A limited liability company (LLC).

50.Which form of entity may enjoy both "pass through taxation" and protection of personal assets from creditors?

a.A non-profit corporation.

b.A "C" corporation.

c.A partnership.

d.A limited liability company (LLC).