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Exam 19: Forms of business organizations

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Question 1

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Which of the following is true regarding incorporation?

A) A corporation must be incorporated in the state in which it has its principal place of business.
B) Laws regarding incorporation and the rights and duties of corporations are uniform from state to state.
C) Since the mid-1930's, Delaware has been considered the preeminent state for incorporation.
D) Incorporation may be done pursuant to common law as well as statute.

E) B) and C)
F) A) and D)

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Question 2

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A shareholder's right of appraisal only applies to transactions that were initially subject to shareholder approval.

A) True
B) False

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Question 3

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C corporations are taxed as a pass-through entity.

In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.

An outside director is a director who lives outside the state of incorporation.

A partnership may acquire property in its own name.

Fact Pattern 19-1 Joan decides to enter into a franchise agreement with XYZ Burgers to sell their burgers in her town. The franchise agreement did not prohibit XYZ Burgers from granting other franchises in the area, but that did not concern Joan because she thought XYZ Burgers would treat her fairly. She did not bother to read the franchise papers, contracts, and disclosures she was provided. Joan's business went very well for the six months. Then, however, another XYZ Burgers franchise opened just down the street from Joan's restaurant. She was very upset and called XYZ Burgers to complain. The CEO brushed off her concerns and told her that there was enough business for everyone. Joan, however, is interested in suing XYZ Burgers. -Refer to fact pattern 19-1. What is the position of the Federal Trade Commission regarding a franchisor selling a franchise very near to an existing franchise?

A shareholder who cannot be present at a meeting can vote by _______,that is,by a written authorization for another person to vote on his or her behalf.

Which of the following requirements is not required by a corporation to qualify for S corporation status?

Fact Pattern 19-2 Maxine and Vince verbally agree to form a dog grooming partnership called "XYZ Grooming." They file nothing with the state. Maxine puts up 80% of the capital needed for the partnership, and Vince supplies 20%. Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him, but that did not occur. Maxine found herself grooming more than 90% of the animals on her own. Maxine told Vince that he was only entitled to 10% of the profits because he was only doing 10% of the work. Vince disagreed, and a heated argument occurred. Not surprisingly, Maxine and Vince decided to end the partnership. While winding up affairs, Maxine discovered that Vince paid an excessive amount for some dog shampoo. She thought he bought it from a certain supplier just so he could flirt with the receptionist there. She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase. Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased, and that the owner lost money because the dog could not be entered into shows. Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff. -Refer to fact pattern 19-2. Is Maxine,XYZ Grooming,or Vince responsible for payment of the shampoo purchased by Vince?

Corporations must incorporate in the state where their headquarters are located.

Set forth four of the shareholder proposals that must be included in proxy materials according to the Securities and Exchange Commission.

When directors on a board serve for a fixed term but are not elected all at once it is known as a ________ board.

What does the term "reverse piercing" reference in regard to a corporation and its shareholders?

In a[n] ________ a stock purchase is financed by debt.

An S corporation would likely be used as the corporate form for a business intending to raise money from venture capitalists.

________ of a general partnership occurs when all the affairs are wound up and the partners' authority to act for the partnership is completely extinguished.

Which of the following is generally true regarding the liability of members of a limited liability partnership for malpractice?

In a ________ merger,the shares in the disappearing corporation are automatically converted into shares in the surviving corporation.

A partnership requires a minimum amount of capital in order to be formed.