1. Assume that Windsor Industries files a registration statement that contains material misleading representations regarding the financial health of the company.The parties involved in preparing the registration statement who might be found guilty of violating the securities laws could include
3. A.the persons who signed the registration statement.
4. B.the auditors of the company's financial statements.
5. C.Windsor Industries,itself.
6. D.All of the above.

2 points

QUESTION 2

1. Under which organizational structure would the death of the owner have no legal effect?
3. A.a partnership.
4. B.a corporation.
5. C.a sole proprietorship.
6. D.all of the above.

2 points

QUESTION 3

1. Peter and Phil agree to operate a lemonade stand.They purchase their supplies and split the costs equally.They agree to share profits equally, and decide that each of them will have an equal say in how the stand will operate.Nothing is put in writing.Peter and Phil have
3. A.formed a limited partnership.
4. B.formed a limited liability partnership.
5. C.formed a general partnership.
6. D.not formed any business enterprise because their agreement was not in writing.

2 points

QUESTION 4

1. The board of directors of most corporations are elected by
3. A.the officers of the corporation.
4. B.the creditors of the corporation.
5. C.the shareholders of the corporation.
6. D.none of the above.

2 points

QUESTION 5

1. The liability of a corporation's shareholders is
3. A.unlimited.
4. B.unlimited up to the amount of their persona net worth.
5. C.limited to their investment in the company.
6. D.non-existent, because shareholders can never lose money when they invest in a corporation.

2 points

QUESTION 6

1. The creation of a corporation is governed by
3. state law.
4. federal law.
5. federal administrative regulations.
6. federal executive orders.

2 points

QUESTION 7

1. Assume that a security has been offered to sixty people, some of whom are involved in the business pretty significantly and who are fairly sophisticated (fifteen of these investors ultimately bought the security) and some of whom really don't have very much financial experience or knowledge of the business at all (none of whom ended up purchasing the security.)Which of the following statements are correct?

This will qualify as a private placement offering as long as it was not advertised. 

1. This will qualify as a private placement offering, because the purchasers are sophisticated investors.
2. This will qualify as a private placement offering, because the offer was only accepted by a small group of fifteen investors.
3. This will probably not qualify as a private placement offering.

2 points

QUESTION 8

1. Assume that Patsy is the owner of a business which is organized as a sole proprietorship.The business is expanding rapidly and becoming more profitable and diversified.At the same time, expansion has brought with it a host of complications that have resulted from the business's comparative lack of any significant organizational framework.Additionally, significant capital will be needed to continue to grow the business.Under such circumstances, it would probably be most advantageous to operate this business as a
3. corporation.
4. partnership.
5. sole proprietorship.
6. limited partnership.

2 points

QUESTION 9

1. Advantages of Limited Liability Companies (LLCs) include
3. LLCs may be taxed like a partnership.
4. liabilities of members can be limited to their investments.
5. members are allowed to participate in management activities.
6. All of the above.

2 points

QUESTION 10

1. Which cannot be a correct statement concerning limited liability companies?
3. No federal income tax is due on its income as an entity.
4. It can be member managed or centrally managed.
5. No filing is necessary to form a limited liability company.
6. All members (owners) may enjoy limited liability.

2 points

QUESTION 11

1. A limited partnership must have at least
3. one general partnerand one limited partner.
4. one general partner and two limited partners.
5. two general partners and two limited partners.
6. two general partners and threelimited partners.

2 points

QUESTION 12

1. Generally, a limited partnership will be created at the time
3. A.the limited partnership agreement is executed.
4. B.the partners pay their capital contributions.
5. C.the certificate of limited partnership is filed.
6. D.the partners have their first business meeting.

2 points

QUESTION 13

1. When an individual owns a share of stock in a corporation, that individual
3. has an ownership interest in the corporation.
4. is a creditor of the corporation.
5. generally,has no voting rights.
6. is in possession of a debt security.

2 points

QUESTION 14

1. Billy is an officer of Downeaster Corporation.Billy learns that Downeaster has developed a new process for its products.Billy believes that when the process is announced, Downeaster's stock price will increase.Billy tells Christy, Billy's attorney, who tells Sonny, Christy's accountant.Christy and Sonny are aware that Billy has breached a fiduciary duty of Downeaster in disclosing this information.Billy, Christy, and Sonny each buy Downeaster stock through a national exchange without telling the sellers about the new process.When the process is announced, the price increases, and Billy, Christy, and Sonny sell their stock.Who may be liable under Rule 10b-5?
3. A.All of them.
4. B.Billy and Christy.
5. C.Billy, only.
6. D.None of them.

2 points

QUESTION 15

1. If a business would like to operate using the triple bottom line approach of people, plant, and profits, then the best entity choice available in Massachusetts would be:
3. a non-profit corporation.
4. a B-Corp.
5. an L3C.
6. a Benefit Corporation.

2 points

QUESTION 16

1. When the corporation has the right to sue for damages and refuses to do so, and the shareholders sue on behalf of the corporation:
3. A.the shareholders have a direct cause of action and are entitled to damages personally.
4. B.the action is derivative, and recovery belongs primarily to the corporation.
5. C.shareholders may sue without showing that the directors have refused to sue.
6. D.the lawsuits may not involve salaries paid to majority shareholders.

2 points

QUESTION 17

1. The bylaws of a corporation
2. establish the operating name of the corporation.
3. establish the value and classes of corporate stock.
4. are filed with the Secretary of State.
5. are formally adopted by the board of directors after the corporation has been chartered.

2 points

QUESTION 18

1. The primary reason that corporations issue securities is to
3. increase their visibility.
4. reduce their production costs.
5. obtain financing.
6. increase their market share.

2 points

QUESTION 19

1. The fraud on the market theory that was adopted by the United States Supreme Court in theBasic v. Levinsoncase and upheld in theHalliburtoncase:
3. allows all shareholders to join securities class actions without restrictions.
4. defines materiality.
5. creates a rebuttablepresumption of reliance.
6. makes it harder for shareholders to form securities class actions.

2 points

QUESTION 20

1. Which of the following isnotone of the four (4) characteristics that the IRS traditionally has used to determine whether an entity should be taxed as a corporation?
3. Centralized Management.
4. Ease of Transferability.
5. Unlimited liability of shareholders.
6. Perpetual Existence.

2 points

QUESTION 21

1. Assuming there has been no breach of the duty of loyalty, if the board of directors discusses a decision and has developed reports or sought outside assistance with research of the problem, then the decision of the board:
3. will have the protection of the business judgment rule even if the decision resulted in many millions of dollars in losses to the corporation.
5. will have the protection of the business judgment rule only if the decision was considered reasonable by the court.
6. will be upheld only if the decision was considered reasonable by the court.
7. will never by upheld by the court if shareholders object to the decision.

2 points

QUESTION 22

1. If a breach of the Duty of Loyalty by a board has been established in Delaware, then
2. the shareholders will automatically win the lawsuit.
3. demand is excused and the shareholders will win.
4. demand is excused and the burden will shift to the Board of Directors to prove the essential fairness of the transaction.
5. demand must be made on the Board.

2 points

QUESTION 23

1. Registration of securities is
2. not required for exempt securities and exempt transactions.
3. not required for exempt securities, but otherwise required.
4. not required for exempt transactions, but otherwise required.
5. always required.

2 points

QUESTION 24

1. Which of the following statements is true?
2. The Securities Act of 1933 is concerned primarily with disclosure on the issuance of securities.
3. The Securities Exchange Act of 1934 is concerned primarily with regulating the resale of securities.
4. Both A and B.
5. Neither A nor B.

2 points

QUESTION 25

1. A merger between Maryanne Industries, Inc. and Wanda Enterprises, Inc. is being considered by the Boards of Directors for both companies.Earl, a shareholder in Wanda Enterprises, objects to this merger.Assume that he registered his objection to the merger and then voted against the merger at the shareholders' meeting.Assume, also, that the merger was approved by the shareholders.What legal recourse does Earl have against Wanda Enterprises?
2. He has a direct cause of action against the corporation, because his voting rights have been affected.
3. He has a derivative claim against the corporation.
4. He is entitled to appraisal rights.
5. He has no legal recourse against the corporation, because a majority of the shareholders approved the merger.

2 points

QUESTION 26

1. The net earnings of a sole proprietorship are subject to corporate income tax.
3. True
4. False

1 points

QUESTION 27

1. A sole proprietor is subject to unlimited personal liability for the debts of the business.
3. True
4. False

1 points

QUESTION 28

1. Partnership agreements must always be in written form.
3. True
4. False

1 points

QUESTION 29

1. One of the major advantages to investors in a corporation stems from the fact that their risk of loss is limited to the amount of their investment.
2. True
3. False

1 points

QUESTION 30

1. In a corporation, a large number of investors may pool their assets to finance a large business enterprise.
2. True
3. False

1 points

QUESTION 31

1. The death of a majority shareholder terminates a corporate enterprise.
2. True
3. False

1 points

QUESTION 32

1. Distributions of profits from a regular "C"corporation to its shareholders are subject to a form of double taxation.
3. True
4. False

1 points

QUESTION 33

1. A limited partnership can be created as simply as any other partnership with no filing requirements.
3. True
4. False

1 points

QUESTION 34

1. In a limited partnership, the partners who manage the day to dayoperations of the business are personally liable for the firm's debts.
2. True
3. False

1 points

QUESTION 35

1. A limited partnership must have at least one general partner.
2. True
3. False

1 points

QUESTION 36

1. Electing directors who most reflect the shareholders' interests and attitudes is the most effective form of shareholder control.
3. True
4. False

1 points

QUESTION 37

1. A majority of shareholders must agree to the election to be treated as an "S" corporation.
3. True
4. False

1 points

QUESTION 38

1. Unity of interest and ownership, usually evidenced by a failure to respect the corporate form by co-mingling funds and failure to keep corporate records, is the only requirement to pierce the corporate veil.
2. True
3. False

1 points

QUESTION 39

1. Shareholders can file direct suits against the Corporation and the Board of Directors without making demand on the Board of Directors.
2. True
3. False

1 points

QUESTION 40

1. Special litigation committees can be used to protect the board of directors' decision not to institute litigation demanded by the shareholders.
2. True
3. False