Business Law Final

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A1. Great Plains Bank provides a loan to enable Helene to buy real property. This loan is

b. a mortgage.

A2. Jaime buys a home by paying part of the purchase price up front in cash and borrowing the rest of the funds from Valley Credit Union. The part of the price paid up front in cash is

a. a down payment.

A3. Ridgeline Bank provides Stanley with a mortgage to buy a home. The rate of interest is fixed for three years and then adjusts annually. This is

b. an adjustable-rate mortgage.

A4. Consumer Mortgage Loans provides Demi with a mortgage to buy a home. Under the terms, Demi can choose to pay only the interest portion of the monthly payments and forgo paying of the principal for five years. This is

c. an interest-only mortgage.

A5. Rita borrows $30,000 from South State Credit Union. South State accepts Rita's equity in her home as collateral, which can be seized if the loan is not repaid on time. This is

a. a home equity loan.

A6. Milo borrows $125,000 from North State Bank to buy a home. To comply with the Statute of Frauds, the mortgage must be

d. in writing.

A7. Hubert borrows $100,000 from Integrity Mortgage Mart to buy a home. Soon after obtaining the mortgage, Integrity convinces Hubert to refinance. This is

c. loan flipping.

A8. Lorna borrows $175,000 from Mountainside Credit Union to buy a home. Among the terms that must be disclosed under federal law is the annual percentage rate. This is

a. the actual cost of the loan on a yearly basis.

A9. Kenton borrows $150,000 from Liberty Home Finance Corporation to buy a home. Federal law concerns primarily

d. what must be disclosed with respect to a mortgage.

A10. Main Street Lenders, Inc., attempts to coerce Nolan—who specializes in determining the value of real and personal property—into misstating the value of a property on which a loan is to be issued. This is

d. a violation of the law.

A11. Ruth owns a home on which she has two mortgages provided by Security Bank. Town Refinance Inc. tells Ruth that it can refinance the loans to reduce her payments. Town Refinance provides all of the required documents, which accurately state the payments under the new loan as higher. Ruth does not read the documents. Town Refinance is most likely liable for

d. nothing.

24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people, including Benny, who could not easily obtain credit under other loan programs. (Fact Pattern 16-1A)

...

A12. Refer to Fact Pattern 16-1A. Under federal law, if 24-Hour Credit fails to provide certain material disclosures with respect to the loan, Benny's right to rescind the loan

c. is extended for up to three years.

A13. Refer to Fact Pattern 16-1A. Under federal law, disclosures with respect to one of 24-Hour Credit's loans must be provided

b. a certain number of days before the loan is finalized.

A14. Property Financial Corporation makes loans that qualify, under a Federal Reserve Board amendment to Regulation Z, as Higher-Priced Mortgage Loans (HPMLs). Quinn applies to Property Financial for an HPML. To make the loan, the lender must

d. verify the borrower's ability to repay the loan.

A15. Money Mortgage Mart makes a short-term loan to Natalie to allow her to make a down payment on a new home before selling her current home. This is

a. a bridge loan

A16. Velma borrows $110,000 from Watershed Bank to buy a home. If she fails to make payments on the mortgage, the bank has the right to repossess and auction off the property securing the loan. This is

c. foreclosure.

A17. Harbor Bay Bank has made mortgage loans to consumers that qualify for the Home Affordable Modification Program (HAMP), which offers incentives to lenders to change the terms of certain loans. The purpose of HAMP is to

c. reduce monthly payments to levels that homeowners can pay.

A18. Darwin borrows $200,000 from Evermore Bank to buy a home. Less than six months into the term, Darwin stops making payments on the loan. To initiate the process to repossess and auction off the property securing the loan, Evermore must

c. record a notice of default with the appropriate county office.

A19. Reed borrows $150,000 from Suburban Credit Union to buy a home, which secures the loan. Three years later, Reed stops making payments on the loan. After Suburban Credit repossesses and auctions off the property to Tyler, equity remains. This amount most likely belongs to

a. Reed.

A20. Seymour borrows $350,000 from Reliable Bank to buy a home. Seymour stops making payments on the loan ten months later. After the bank repossesses the property securing the loan but before it is sold, Seymour wants to buy it. This is

d. the right of redemption.

B1. Abner borrows funds from Boomtown Credit Union (BCU) to buy real property. Abner signs a written instrument that gives BCU an interest in the property as security for the debt's payment. This instrument is

a. a mortgage.

B2. Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home. Payments on the loan remain the same for the duration of the mortgage. This is

a. a fixed-rate mortgage.

B3. Franz asks Gateway Mortgage Credit for a loan to pay for the purchase of a home. With a poor credit score and a high current debt-to-income ratio, Franz does not qualify for a standard mortgage. Gateway is most likely to provide

c. a subprime mortgage.

B4. Community Trust Bank provides Devlin with a mortgage to buy a home. The rate of interest is fixed for seven years. At the end of that period, a large payment for the entire balance of the mortgage loan is due. This is

a. a balloon mortgage.

B5. Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracy's equity in her home as collateral, which can be seized if the loan is not repaid on time. With respect to any proceeding that occurs if Tracy fails to make the payments, this loan is subordinated. This means that it

b. takes a lower priority.

B6. Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home. The financing documents require Laurel to maintain the property, obtain homeowners' insurance, and pay all property taxes and other assessments through the lender. With respect to these terms, a court is most likely to

a. enforce them.

B7. Duran applies to EZ Credit Mortgage Company for $100,000 to buy a home. EZ Credit steers Duran toward an adjustable-rate mortgage even though he qualifies for a fixed-rate mortgage. This is

d. steering and targeting.

B8. Dahlia borrows $125,000 from Clearview Credit Union to buy a home. The interest rate and other terms that are required to be disclosed under federal law must be

a. based on uniform formulas of calculation.

B9. Virgil borrows $175,000 from United Finance Bank to buy a home. Federal law regulates primarily

a. mortgage terms that must be disclosed in writing.

Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes. (Fact Pattern 16-B)

...

B10. Refer to Fact Pattern 16-1B. Under federal law, disclosures with respect to one of Northeast's loans must be provided

b. a certain number of days before the loan is finalized.\

B11. Refer to Fact Pattern 16-1B. For Mai's loan, Northeast provides all required disclosures. Mai has a right to rescind the mortgage

c. within three business days.

B12. Riverview Bank makes a mortgage loan of $95,000 to Pomeroy to buy a home. Under federal law, if Riverview fails to provide certain material disclosures with respect to the loan, Pomeroy's right to rescind the loan

c. is extended for up to three years.

B13. Shade Tree Lending Corporation advertises loans as fixed-rate loans but, in fact, their rates or payment amounts will change. This is

d. a violation of the law.

B14. Violet negotiates with Urban Credit Corporation to obtain a loan for $85,000 to buy a home. During the negotiations, Urban Credit orally misrepresents the terms, but provides the required documents, which accurately state the terms. Violet does not read the documents. The party or parties most likely liable for a violation of the law is

a. neither party.

B15. Hill & Dale Credit Corporation makes mortgage loans to consumers secured by their principal homes. For a Hill & Dale loan to qualify as a Higher-Priced Mortgage Loan (HPML), its annual percentage rate must exceed, by a certain amount,

a. the average prime offer rate for a comparable transaction.

B16. Denise borrows $90,000 from Clear Lake Credit Union to buy a home. Denise loses her job and fails to make payments on the mortgage, but assures Clear Lake Credit that she will soon secure a new job. The lender agrees to postpone the payments. This is

b. forbearance.

B17. Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to buy a home. When Erin and Dooley divorce, they are unable to make payments on the mortgage. The market value of the home has declined to less than the balance of the loan. Capital & Credit agrees to a sale of the property for this amount. This is

d. a short sale.

B18. Agnes borrows $110,000 from Bay Harbor Bank to buy a home under a mortgage with an acceleration clause. After eighteen payments, Agnes stops making payments on the mortgage. Bay Harbor

a. can foreclose once on the entire amount of the loan.

B19. Upton borrows $150,000 from Valley Credit Union to buy a home, which secures the loan. Three years into the term, Upton stops making payments on it. Valley Credit repossesses and auctions off the property to Wesley. The sale proceeds are not enough to cover the unpaid amount of the loan. In most states, Valley Credit can ask a court for

a. a deficiency judgment.

B20. Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the mortgage. In the seventh year of the loan, Gena stops making payments. After the bank repossesses the property but before it is sold, Gena may buy it by paying

d. the full amount of the debt, plus any interest and costs.

A1. Hermione starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Hermione is

d. a sole proprietor.

A2. Carl sells Direct Marketing Enterprises, a sole proprietorship, to Eve. This is a transfer of

d. the ownership of the business.

A3. Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

d. unlimited.

A4. Real Events Promotion Corporation licenses trademarks to Stadium Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is

a. a franchise.

A5. Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice Ice-brand ice cream and other Midwest prod¬ucts. This is

c. a manufacturing franchise.

A6. In-Home Maid Service Company uses a Web site to provide downloadable in-formation to prospective franchises. This online information is the equivalent of an offer that must comply with

c. the Federal Trade Commission's Franchise Rule.

A7. Echo enters into an agreement with Deep Pan Pies, Inc., to operate a franchise in Centre City. Later, Deep grants franchises to others within the city. Echo files a suit to close them. If the court rules in Echo's favor it will most likely be on the ground that

b. Deep violated the implied covenant of good faith and fair dealing.

A8. Dominique buys a franchise from Cheyenne Artisans, Inc. This provides Cheyenne with an outlet for the firm's goods, some of which Dominique is required to buy at an established price. In their agree¬ment, Cheyenne may also specify

b. the franchise's business organizational form.

A9. Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his

a. annual sales or volume of business

A10. Sweet Styles, Inc., a franchisor of clothing stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most pru¬dent action might be for Sweet to

b. suggest the prices at which its franchisees sell their products.

A11. Inger is a franchisee of Honey Bear Restaurants, LLC Their contract gives Honey Bear the right to control virtually all aspects of Inger's op¬eration, including the hiring of employees. One of the employees, Joris commits a tort against Kiley, one of Inger's customers. Kiley files a suit against Honey Bear. Honey Bear is most likely

a. liable because Honey Bear exercises control over Inger's operation.

A12. Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as

c. an entity.

Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites' profits, each month. The term is two years. Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50, plus a commis¬sion of 10 percent of the prof¬its. The term is also two years. (Fact Pattern 17-1A)

....

A13. Refer to Fact Pattern 17-1A. Desi and Fred are

a. not partners, because Fred does not have an ownership interest or manage¬ment rights in eSites.

A14. Refer to Fact Pattern 17-1A. Desi and Gwen are

a. not partners, because Gwen does not have an ownership interest or manage¬ment rights in eSites.

A15. Savannah and Rex agree while talking on the phone to form a partner¬ship to deal in sales of natural gas. Their partnership agreement is le¬gally binding

b. only if the agreement is reduced to writing.

A16. Corbin, a partner in Doctors Medical Clinic, applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authoriza¬tion of the other partners. Evermore knows that Corbin is not authorized to take out the loan. Corbin defaults on the loan. Liability for its unpaid amount is imposed on

b. Corbin only.

Luann and Mace are partners in Networx, a computer peripherals firm. (Fact Patter 17-2A)

...

A17. Refer to Fact Pattern 17-2A. Luann signs a contract with Oleo Chips, a retail component supplier, apparently on Networx's behalf. The contract is binding on

a. Luann, Mace, and Networx.

A18. Refer to Fact Pattern 17-2A. Mace dissociates from Networx. Luann signs a con¬tract with Physik Drives, a wholesale component supplier, apparently on Networx's behalf. Physik does not know of Mace's dissociation. The contract is binding on

a. Luann, Mace, and Networx.

A19. Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge. Under their partnership agreement, Jerry-Bilt is to dissolve when the bridge is built. Iggy signs a contract for the firm to build a second bridge. Jerry-Bilt

a. dissolves as soon as the first bridge is built.

A20. Jim and Kyle are partners in J&K Sales, which exports technical equip¬ment under a three-year partnership agreement. The U.S. gov¬ernment declares that the equipment can no longer be ex¬ported. J&K

c. dissolves immediately unless the partners change its business.

B1. Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be

a. its greater organizational flexibility.

B2. Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional busi¬ness capital but to maintain control. This can best be accomplished by

a. borrowing funds.

B3. Hometown Realtors, Inc., sells a franchise to Group Sales Company. Group Sales is

a. a franchisee.

B4. Mello Coffee Shops, Inc., sells a franchise to Noah's Arch, a café. Mello is

b. a franchisor.

B5. Sylvester buys a franchise from Resistance Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by

a. contract law.

B6. Nicole is interested in buying a franchise from Oz Oysters Inc. For Nicole to make an informed decision concerning this purchase, Oz must disclose in writing or online

b. material facts such as the basis of projected earnings figures.

B7. Vim+Vigor Fitness Corporation uses a Web site to provide downloadable information to prospective franchises. This online information is the equivalent of an offer that must comply with

c. the Federal Trade Commission's Franchise Rule.

B8. Dingo Bangles Company wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which Dingo must comply, prospective franchisees must

b. be able to download or save all electronic documents.

B9. Cluckee Chick'n Corporation provides its prospective franchisees with projected earnings figures based on actual data. Cluckee Chick'n must also disclose

a. the number and percentage of franchisees that achieved the figures.

B10. A franchise agreement between Software2 Company and Games3, Inc., is silent on a time for termination of the franchise. Software2 may

c. terminate on reasonable notice.

B11. Gage buys from Fishing Guide Corporation the exclusive right to sell Fishing Guide rods and reels in a certain area. Their franchise agreement requires Gage to pay certain administrative expenses. Their agreement may also require Gage to pay a percentage of the franchisor's

a. advertising costs.

B12. Tawny buys a Super Grill franchise. Super Grill requires that its fran¬chi¬sees buy its products for every phase of their op¬erations. Be¬cause Tawny wishes to buy less expensive products, she challenges the re¬quirement. Her best argument is probably that the re¬quirement violates

c. the federal antitrust laws.

B13. Pronto Tacos LLC grants a franchise to Omar to open and operate a Pronto Tacos restaurant. Pronto will likely charge Omar

a. an initial fee or lump sum price for the franchise license.

B14. Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is

b. Ben's creditor only.

B15. Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as

a. a pass-through entity.

B16. Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration. This partnership is terminable

a. at any time by either partner.

B17. Ryder and Sergei are partners in Timberline Gear, which sells mountain- and rock-climbing equipment. Ryder manages the business. Unless the partnership agreement states otherwise, Ryder is

d. not entitled to compensation.

B18. Trina and Uri do business as Value Gems. In acting on the firm's behalf in a deal with World Diamond Exchange, Trina recklessly exceeds what Value Gems can afford to pay, causing damage to the firm. Trina is

a. liable for breach of the duty of care.

B19. Cody is a partner in Derivative Investment Service (DIS). Cody can inspect

a. all of DIS's books and records.

B20. Mead, Nero, and Olen do business as Pipe & Plumbing Services, a partnership. After Mead's relationship to the firm ends, Nero and Olen agree to discontinue the business. This is

b. dissolution.

A1. Sustainable Café LLC is a limited liability company. Like any other LLC, unless Sustainable Café chooses otherwise, the firm will be taxed as

c. a partnership.

A2. Esteban and Florian want to form a limited liability company (LLC) to manage their business, Gordian Nuts. LLC statutes have been adopted in

a. all states.

A3. Bee Hive Honey, LLC's members include Chad. For purposes of suing and being sued, Bee Hive Honey is

c. a legal entity apart from the owners.

A4. Greta is a member of Hovercraft LLC. As a member, Greta is

c. an owner.

A5. Coco is considering forms of business organization for her concessions business—Coco's Cupcakes. Most states require that a limited liability company have at least

b. at least one member.

A6. Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of

b. every state in which its members are citizens.

A7. Vijay is a member of Watchit, LLC, a limited liability company. Vijay is li-able for Watchit's debts

b. to the extent of his capital contribution.

A8. Lui is considering forms of business organization for a chain of Magic Trix novelty stores. One advantage of the limited liability company form, with respect to tax options, is its

a. flexibility.

A9. CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed other-wise, participants in the firm's management will be considered to include

a. all members.

A10. B2B, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is gov¬erned by

a. the applicable state LLC statute.

A11. Cecilia's Day Spa, LLC, is a member-managed limited liability company. If the law in Cecilia's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to

a. capital contributions.

A12. Flip is a member of Great States Trucking LLC. Flip's relationship to Great States ends, but the firm continues to do business. This is

a. dissociation.

A13. Vasili is considering forms of business organization for Vasili's Designs, an ar¬chitectural firm. An advantage of a limited liability partnership is that partners may be able to avoid personal liability for

a. any partnership obligation.

A14. Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with

a. Jack and Kyra.

A15. Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite. In most states, a limited partnership will be created when

a. a certificate of limited partnership is filed.

A16. Maury, Neil, and Ogden want to form a limited partnership to manage their Picture This photo studio. Their firm must have

a. at least one general partner and one limited partner.

A17. Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts

c. to the extent of her capital contribution.

A18. Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she

a. acts as the firm's manager.

A19. Stu is a limited partner and Tia is a general partner in S&T, a limited part-nership. Between Stu and Tia, on S&T's dissolution its assets will first be distributed to pay

a. either partner's unpaid distribution of partnership assets.

A20. Energy Unlimited, LP, is a limited partnership to which its partners, in-cluding Fink, have contributed capital. Energy's creditors include Graves Engineering, Inc. On Energy's dissolution, its assets will be distributed to pay

c. Graves first.

A1. Sustainable Café LLC is a limited liability company. Like any other LLC, unless Sustainable Café chooses otherwise, the firm will be taxed as

c. a partnership.

A2. Esteban and Florian want to form a limited liability company (LLC) to manage their business, Gordian Nuts. LLC statutes have been adopted in

a. all states.

A3. Bee Hive Honey, LLC's members include Chad. For purposes of suing and being sued, Bee Hive Honey is

c. a legal entity apart from the owners.

A4. Greta is a member of Hovercraft LLC. As a member, Greta is

c. an owner.

A5. Coco is considering forms of business organization for her concessions business—Coco's Cupcakes. Most states require that a limited liability company have at least

b. at least one member.

A6. Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of

b. every state in which its members are citizens.

A7. Vijay is a member of Watchit, LLC, a limited liability company. Vijay is li-able for Watchit's debts

b. to the extent of his capital contribution.

A8. Lui is considering forms of business organization for a chain of Magic Trix novelty stores. One advantage of the limited liability company form, with respect to tax options, is its

a. flexibility.

A9. CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed other-wise, participants in the firm's management will be considered to include

a. all members.

A10. B2B, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is gov¬erned by

a. the applicable state LLC statute.

A11. Cecilia's Day Spa, LLC, is a member-managed limited liability company. If the law in Cecilia's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to

a. capital contributions.

A12. Flip is a member of Great States Trucking LLC. Flip's relationship to Great States ends, but the firm continues to do business. This is

a. dissociation.

A13. Vasili is considering forms of business organization for Vasili's Designs, an ar¬chitectural firm. An advantage of a limited liability partnership is that partners may be able to avoid personal liability for

a. any partnership obligation.

A14. Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with

a. Jack and Kyra.

A15. Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite. In most states, a limited partnership will be created when

a. a certificate of limited partnership is filed.

A16. Maury, Neil, and Ogden want to form a limited partnership to manage their Picture This photo studio. Their firm must have

a. at least one general partner and one limited partner.

A17. Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts

c. to the extent of her capital contribution.

A18. Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she

a. acts as the firm's manager.

A19. Stu is a limited partner and Tia is a general partner in S&T, a limited part-nership. Between Stu and Tia, on S&T's dissolution its assets will first be distributed to pay

a. either partner's unpaid distribution of partnership assets.

A20. Energy Unlimited, LP, is a limited partnership to which its partners, in-cluding Fink, have contributed capital. Energy's creditors include Graves Engineering, Inc. On Energy's dissolution, its assets will be distributed to pay

c. Graves first.

B1. Felicity and Gideon want to form and do business as Home Healthcare Corporation. A corporation is

c. an artificial person.

B2. Gelato Ice, Inc., is incorporated in the state of New Jersey and is doing busi-ness in the state of New York. In New York, Gelato is properly re¬ferred to as

b. a foreign corporation.

B3. The shares of Capital Corporation are publicly traded in securities mar¬kets. Capital Corporation is

d. a publicly held corporation.

B4. Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corpo-ration, and agree to restrict the transfer of its stock to anyone else. A reasonable purpose for a stock transfer re¬striction in a closely held cor-poration, like the agreement between Bertram, Claudia, and Dynah, is

a. a desire to limit the participation of outsiders in the firm.

B5. Frida and Gregor want to market a new line of fishing gear. To avoid in¬come taxes at the corporate level, they should form

c. an S corporation.

B6. The abbreviation "P.A." in the name "Painless Dental, P.A." means that this organization is

b. a professional association.

B7. Caffeine Café, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of

b. each of the corporation's shareholders.

B8. Like the bylaws of other corporations, the bylaws of Farmland Equipment, Inc.,

c. were adopted at its first organizational meeting.

B9. Rapid Pest Control itself out to others as being a corporation but makes no attempt to incorporate. Ponce signs a contract with Rapid Pest Control that is not performed. Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is

a. a corporation by estoppel.

B10. Niki owns O.K. Oil Corporation. Niki uses O.K.'s funds to pay her per¬sonal 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

c. a pierce of O.K.'s corporate veil.

B11. Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's

b. incorporators.

B12. Whit is a director of Vids Corporation. With respect to policymaking de-cisions necessary to the management of corporate affairs, Whit and the other Vids directors have responsibility for

a. all of the decisions.

B13. Raul is chairman of the board of Swif-Vac Corporation. Pinky, a con¬sumer, is injured while using a Swif-Vac product. Pinky sues Swif-Vac, and Raul individu¬ally. Swif-Vac may pay Raul's legal fees under

c. the director's right to indemnification.

B14. Viola is a director of Water Pure Corporation. With respect to Water Pure, Viola's most important right is the right of

c. participation.

B15. Sylvia is an officer of Triad Hotel Company. As an officer, with respect to the corporation, Sylvia is

a. a fiduciary.

B16. Rocco is a director of Spa Lids & Tubs, Inc. Under the standard of due care owed by directors of a corporation, Rocco's decisions

c.
c. informed and reasonable.

B17. Genna is a director of Fab Stuff Corporation. Without informing Fab, Genna starts up Evertrendy, Inc., to compete with Fab. Genna is li¬able for breach of

c. the duty of loyalty.

B18. Naomi and Ogden are shareholders of MediCare Residences, Inc. As shareholders, they must approve

a. conducting a merger.

B19. Zero Sum Games Corporation has forty-three shareholders. The mini¬mum number that must be present at a meeting for a shareholders' vote is

b. a quorum.

B20. Orin is a shareholder of Pinkwater Corporation. In some states, Orin might in¬cur personal liability for Pinkwater obligations if he

b. buys stock for less than its fair-market value.

A1. Ivy and Justin want to form and do business as Kayak Adventures Corporation. A corporation can be owned by

c. artificial or natural persons.

A2. Skyla and Terry want to form and do business as Unbound Games Corporation. Most statutes governing the formation and use of corporations are guided by

d. the Revised Model Business Corporation Act.

A3. Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder. Liability for this crime most likely rests with Orson to

c. the amount of Orson's investment in the firm.

A4. 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

d. partnerships.

A5. Convenience Mart, Inc., is a closely held corporation. Convenience Mart is

c. generally allowed to restrict the transfer of its stock.

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