LGS 200 Chapter 18: Corporations

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Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is:
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Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is:
limited to her investment in the stock.
Tough TVs, a corporation, makes a profit in its first year of existence. The managers of the corporation decide to reinvest the profits. The reinvested profits are called:
retained earnings.
Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered:
a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.
Micah and Jonah want to start a corporation but want to be taxed as a partnership. They should form:
an S corporation.
Acme Co. just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to:
adopt bylaws.
Keenan wants to incorporate his business. He buys business cards and labels with the name "Keenan's Kwips" on them and begins selling gag gifts. Keenan follows the rules for incorporation in his state, including a statement that he is the sole shareholder, and he is granted a certificate of incorporation. The only problem is that Keenan has an error in his address on all the paperwork. Keenan's business is probably a:
de jure corporation.
Trey owns 250 shares of common stock in a toy-store company. This means that he owns a percentage of the company based on the proportion of shares he owns out of the total shares issued by the company. With this ownership he also acquires rights to:
vote.
George owns 300 shares of preferred stock in a company. By owning preferred stock, George has:
priority over holders of common stock as to dividends.
Ariana is an officer of New Stage, a theater production company. Without telling any other officers or the board of directors, she decides that New Stage should try to sell gardening tools over the Internet. She makes contracts with suppliers and a Web-based remote-order-fulfillment company. The only action that may not be taken is:
she can file a lawsuit against the corporation for damages.
Sarah owns half of Smith Realty, Inc., and her brother, Bill, owns the other half. Sarah routinely uses the company car, which is supposed to be only used for taking clients to view property, to run her personal errands. She also routinely uses company funds for personal uses, but always pays the money back into the corporation. When Smith Realty failed to pay its lawyer for work completed on its behalf, the lawyer sued both Smith Realty as well as Sarah and Bill personally. In this situation the court likely will:
pierce the corporate veil due to Sarah's commingling of interests.
Elliot is suing Acme, Inc., for a breach of contract, but because Acme has very little in assets, he asks the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request?The corporation was undercapitalized from the beginning and never had sufficient assets to operate as a viable business.To make, sell, and distribute candy that Ethan has developed, he incorporates his business and designates his sister and brother as corporate officers. He sells them shares of stock. No shares are offered to the public. The three agree that if any one of them decides to leave the business, the others will buy that person's stock. Ethan's corporation is most likely:a close corporation.Betty, a corporate director, has engaged in a number of acts that constitute a conflict of interest between her and Global Mfg., Inc. The corporation shareholders want to remove her, and in most jurisdictions can do so:for cause.Carmen is the vice president for marketing for Nita's Web Design. She also sits on the board of directors. Carmen would be considered:an inside directorRuis Corporation, a publicly held corporation, has thirty-five members on its board of directors. In order to conduct business efficiently, the chairman of the board is proposing that five committees be created: the executive committee, the human resources committee, the marketing committee, the research and development committee, and the sales committee. Seven members of the board would serve on each committee and each board member would serve on only one committee. This is:illegal, because the Sarbanes-Oxley Act requires an audit committee.Galen and Leslie are directors, but not officers, of Tropical Travels, Inc. Tropical Travels becomes embroiled in a controversy over airline kickbacks. As directors, Galen and Leslie can be named in any lawsuit that may result from the company's actions. If they have any expenses related to the lawsuit, they may be compensated for those under their right of:indemnification.Genevieve is a member of the board of directors and the chief financial officer of The Shoe Fits. Under the duty of care that she owes the corporation, Genevieve does not need to:oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial servicesDoug is the vice president of product development for a corporation that makes flavored honey. Doug proposes to the board that they approve three new products: chili-flavored honey, seaweed-flavored honey, and black-licorice honey. Doug and his team have market tested the flavors, and they received positive reviews from focus groups. The board approves the flavors, which then fails miserably and cost the company thousands of dollars. If some shareholders sue the board for its decision to market the flavors, the board most likely will:not be held responsible because of the business judgment rule.As a director and officer of Max Transport, Inc., Max would most likely be considered to have breached his duty of loyalty if he:buys stock in Arnold's Transport, Inc., a competing trucking firm.Mark is a director of Bromley Corp. Mark also owns a printing company named BooksMark. Bromley Corp. needs a marketing brochure printed. If BooksMark is being considered as the printer for that brochure, Mark must:fully disclose his interest to the other board members and abstain from voting on the matter.Suzy signs a written agreement with Phillip, giving Phillip the right to cast Suzy's votes for a certain group of people nominated for the Syllibar Corporation board of directors. This agreement between Suzy and Phillip is known as a:proxy.Nikki and Jim own a corporation together. Nikki owns 48 shares of stock and Jim owns 52. They consider themselves investors, so they elect a board of three directors to oversee the business. To ensure that Nikki can elect at least one director, the corporation should:use cumulative voting.Lysco, Inc., gives to all 15,000 of its shareholders the right to purchase newly issued shares of Lysco stock in proportion to the percentage of shares they currently own and before anyone else is offered the shares. This right is known as:a preemptive right.The directors and officers of Sports Color, Inc., vote to refuse to declare a dividend. Believing that the refusal is unreasonable, the shareholders can:file an action to require the directors to declare a dividend.Tim is considering forming a business and wants to ensure he avoids double taxation. In order to best meet his objective, he should avoid forming a:corporation.Irene wants to start a business selling T-shirts. Irene's top priority is that she alone has complete control over management decisions at all times. Irene should most likely form a:sole proprietorship.