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80 Cards in this Set

  • Front
  • Back
Generally, there is a uniform body of national corporate law.
A business incorporated in one state has an automatic right to do business in any other state.
Any change in shareholders affects the continued existence of a corporation.
A close corporation may restrict the right of a shareholder to transfer stock by means of a shareholder agreement.
A shareholder is not an “owner” of a corporation.
A shareholder in a professional corporation can be liable for malpractice arising from the rendering of professional services.
A shareholder in a professional corporation can avoid liability for his or her wrongful acts simply by incorporating.
A promoter is not personally liable for a preincorporation contract.
The “minimum contacts” rule determines in which state a corporation should be chartered
A corporation has perpetual existence in most states unless stated other¬wise in the ar¬ti¬cles of incorporation.
A corporation’s internal management structure is described in its articles or bylaws.
An incorporator must have an interest in a corporation to file its articles of incorporation.
A business that holds itself out as being a corporation may not be able to deny corporate status, even if it makes no attempt to incorporate.
Corporate bylaws must be approved by the appropriate state official before the corporation’s first organizational meeting.
A state constitution may restrict a corporation’s implied powers.
The law of the state of in¬corporation may restrict the implied powers of a corporation.
Express powers of a corporation can be found in the law of the state of incorporation.
“Piercing the corporate veil” means revealing to shareholders the internal rules of corporate management.
Only acts that fall within the express powers of a corporation are ultra vires.
Any power expressly set out in the bylaws of a corporation is ultra vires.
A director is elected by a majority vote of the other members of the board.
No state permits a corporate board to have fewer than three directors.
Directors are rarely compensated and cannot set their own compensation.
Incorporators can appoint a corporation’s first board of directors.
Unlike a director, an officer is not expected to be informed on corporate matters.
A director may not sit on the board of more than one corporation at a time
Directors are required to use a reasonable amount of supervision over the corporate officers
Shareholders own a corporation and the right to manage it.
Shareholders do not have legal title to corporate property but an equitable interest in the firm.
A voting trust is an illegal restraint of shareholders’ power.
To vote their shares, shareholders must attend a shareholders’ meeting and vote in person.
Cumulative voting refers to the accumulation of proposals presented annually for a shareholders’ vote.
The article of corporation cannot exclude or limit shareholders’ voting rights.
For action to be taken during a shareholders’ meeting, a forum must be present.
Preemptive rights entitle shareholders to bring a derivative suit against the corpora¬tion.
A stock warrant is a distribution of corporate profits or income
Only certain funds are legally available for paying dividends
A dividend may be paid from undistributed net corporate profits
A share issued for more than its fair market value is watered stock
Damages awarded in a shareholder’s derivative suit go into the corporation’s treasury.
Pola and Quint want to form and do business as River Tours Corporation. A corporation can consist of
one or more natural persons
Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily and Moe are Kleen’s officers. As with other corporations, the responsibility for the overall management of Kleen rests with
the board of directors
Skyla and Terry want to form and do business as Unique Boutique Corporation. Most statutes governing the formation and use of corporations are guided by
the Revised Model Business Corporation Act.
Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a legal entity created and recognized by
state law
Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining operation. In the course of this employment, Stefan disposes of the mine’s waste illegally. Liability for this crime most likely rests with
Raw Resources and Stefan
A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate for a purpose other than making a profit. SDC is
a nonprofit corporation.
Boutique Corporation would like to change its corporate status to avoid in-come taxes at the corporate level. To qualify, the shareholders must not be
Ruby Red Corporation has six shareholders, four of whom are members of the same family. All of Ruby’s shareholders agree in writing to operate without shareholders’ meetings. Under the Revised Model Business Corporation Act, this most likely warrants
no penalties or sanctions
To qualify as a professional corporation, Medical Clinic, P.C.,
must be a corporation formed by professionals.
Frida and Gregor want to market a new line of fishing gear. To avoid income taxes at the corporate level, they should form
an S corporation
Stan incorporates his scientific products business as Tech Supply, Inc. This firm could have perpetual existence in
most states.
Dependable Appliances, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufactur¬ing and distributing a newly pat¬ented kitchen appliance, (2) is owned by five share¬holders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Dependable is
a close corporation
Hailey and Ike hold the first organizational meeting of Java Kiosk Corporation. Probably the most important function of this meeting is
adopting Java’s bylaws.
Caffeine Café, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of
each of the corporation’s shareholders
Eager Beaver Corporation fails to hold its organizational meeting to adopt bylaws. Under this circumstance, Eager Beaver is most likely
a de facto corporation.
Like the bylaws of other corporations, the bylaws of Retail Sales, Inc.,
were adopted at its first organizational meeting.
Superior Home Products, Inc., is a corporation. Superior’s implied powers are necessary to
perform all acts reasonably appropriate and necessary to accom¬plish its corporate purposes
Stable Hydraulics Corporation’s articles list an incorrect address for its incorporator. Under this circumstance, Stable is most likely
a de jure corporation.
Egan is a director of First Realty Corporation. As a director, Egan can act as an agent to bind First Realty
in no circumstances
Niki owns O.K. Oil Corporation. Niki uses O.K.’s funds to pay her personal expenses, creates Pure Fuel Corporation to engage in the same business as O.K., transfers O.K.’s assets to Pure Fuel, and petitions O.K. into bankruptcy. This most likely warrants
a pierce of O.K.’s corporate veil
Cody and Dex form Eminent Corporation. Eminent has a board of directors, a chief executive officer, a chief operating officer, and fifty-two sharehold¬ers. Eminent is governed by its
board of directors
Rhea is a director of Spex Corporation. As a Spex director, Rhea is
not a trustee because Rhea does not hold title to Spex’s property
Lon and Merry act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a majority vote of NuGame’s
Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for pol¬icy decisions necessary to the management of corporate affairs rests with Delite’s
board of directors.
Rosa and Sean are directors of Tech, Inc. The right of Rosa and Sam to be notified of special meetings of the board is the right to
Sol is chairman of the board of Tasty Foods Corporation. Uma, a con-sumer, falls sick after eating a Tasty product. Uma sues Tasty, and Sol individu¬ally. Tasty may pay Sal’s legal fees
regardless of the outcome
Frida, Gayla, and Hart occupy the positions of director on the board of Integral Components Corporation. With respect to these directors, a quorum is the minimum number
who must be present to validly transact business
Cara and Dru are officers of EZ Trucking Corporation. As cor¬porate officers, the rights of Cara and Dru are
determined by their employment contracts
Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most corporations, Coast-to-Coast’s employees include its
Rafi, a director of Super Service Station Corporation, does not attend a board meet¬ing for three years. During that time, Twyla, Super’s president, makes improper loans that cost the company $100,000. Ron is most likely
liable for negligence or mismanagement.
Frawsty Corporation distributes beverages in the greater Northwest. Frawsty’s board of directors can delegate some of its functions to
Frawsty’s officers
Chip is a director of Diners Restaurants, Inc. Chip would breach his duty of loyalty if he
buys stock in Gulpin’ Foods Corporation, a competing firm.
Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what Luke believes is the firm’s best interest, and without violating any duties owed to it. If, despite these circumstances, Luke exercises poor business judgment, under the business judgment rule Luke is
immune from liability.
Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not
support businesses that directly compete with Gallery
Thor Power Products Corporation permits the election of its directors by cumulative voting. This
allows minority shareholders to be represented on the board
Brad is a shareholder of Concert Promotion Corporation. As a shareholder, Brad can
vote to amend the articles of incorporation or bylaws
Lovey is a shareholder of Matchless Corporation with preemptive rights. With these rights, Lovey can
buy a prorated share of a new issue of stock before other buyers
Odell, Prince, and Quinn are shareholders of Rite Corporation. Before a shareholders’ meeting, they agree in writing to vote their shares together in a certain manner. Usually, such agreements are held to be
valid and enforceable.
In all states, Sports Club Company and other corporations can pay dividends from
retained earnings
Rusty and Sylvia are shareholders of Triad Hotel Corporation. Triad’s directors fail to declare a dividend. Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend
if withholding a dividend is an abuse of the directors’ discretion