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Exam 29: Formation and Ownership of a Corporation

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Question 1

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Because bonds do not represent debt, they need never be repaid.

A) True
B) False

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Question 2

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A corporation is owned by

A) the board of directors.
B) the officers.
C) the employees.
D) the shareholders.

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

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Question 3

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Shareholders typically have one vote for each share that they own.

Gwen is a holder of preferred stock in Hearthstone Hotels, Inc. Gwen

Integrated Devices, Inc., is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Integrated most likely is

If a business says it is a corporation, and a third party deals with it as a corporation, neither party can question the validity of the business's status.

Securities fraud occurs when a material misrepresentation is made in connection with the trading of securities, even if no party relied on that misrepresentation.

A prospectus is a disclosure document that describes the securities being offered for sale and the company's financial operations.

Rob, an accountant for Space Inc., learns of a secret company discovery of a new system of rocket propulsion and buys 1,000 shares of Space stock. When the firm publicly announces the discovery, Rob sells his shares for a profit. Under the Securities Exchange Act of 1934, he is most likely liable for

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm ' s owners most likely will

A corporation is generally formed under

Implied powers of a corporation can be found in the state and federal constitutions.

Pipe Inc.'s stated purpose is to roast coffee beans and prepare coffee and tea products. Pipe contracts with Quality Contracting to pour a new building's foundation because Pipe has an employee with some skill in this area. This is most likely

To pierce the corporate veil is to disregard the corporate form and hold the directors personally liable for a corporate obligation.

Guy is Hot Java Company's majority shareholder. Guy is interested in developing a reward system for the company where dividends double for any shareholder who takes a large risk by owning more than 35 percent of the shares. Guy is the only shareholder who owns that much stock. Does Guy owe a duty to Hot Java or its minority shareholders in this situation?

An S corporation qualifies for special income tax treatment.

Track Lights Inc. is a corporation. Its express powers can be found in

Exempt from the registration requirement of the Securities Act of 1933 are offerings of securities

The doctrine of respondeat superior applies to corporations in the same way as it applies to other agency relationships.

A close corporation is one whose shares are held by a single person, members of a family, or relatively few unrelated persons.