LA245 Exam 3

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S corporations may issue voting and non-voting stock to its shareholders with different conversion rights from common to preferred shares.

True

All of the following are characteristics of a closely held company EXCEPT:

The shares are publicly traded. (correct)

The corporation can typically operate without a board of directors.

The shareholders usually restrict share transfer.

These companies are usually family-owned businesses.

Which of the following statements IS NOT TRUE about a social enterprise?

Social enterprises pay taxes like corporations.

Social enterprise shareholders enjoy limited liability.

Social enterprises are non-profit organizations. (correct)

Social enterprises pledge to to focus on the triple bottom line: people, planet, profits.

What is a drawback of a General Partnership?

Each partner in a General Partnership is liable for the actions of other partners. Signup and view all the answers

In which of the following forms of business do the owners enjoy limited liability?

A and C. Signup and view all the answers

A sole proprietorship:

Has no formation costs. Signup and view all the answers

Marsh v. Gentry is a case about a corporation that was taxed for sale of its assets.

False Signup and view all the answers

Jean-Anne started a business of making custom masks from her apartment near Boston University called “Mask-It”. She used $500 from her savings account to purchase fabric and other supplies to make her first set of masks. She became so successful that she hired a part-time employee, her friend Max, to help her sew the masks. On his way to deliver masks in Boston, Max got into a car accident with an elderly lady named Norma. Norma sued Mask-It for $50,000. Since Jean-Anne did not have enough money in her business to pay this judgment, she had to take out money from her college fund to pay it. Mask-It is most likely what form of business?

Sole proprietorship. Signup and view all the answers

Warby Parker is a for-profit company started by two friends who believe in giving back to the environment and to society. For every pair of eye glasses that it sells, Warby Parker donates a pair to entreprenuers in developing countries to generate economic opportunity. Warby Parker also uses 100% recyclable packing for its products. What is Warby Parker's business form?

Social enterprise. Signup and view all the answers

Generally, a corporation's articles of incorporation will not contain:

The date of the annual shareholders meeting. Signup and view all the answers

A clawback provision enables a company to:

Recoup CEO pay based on his/her misbehavior. Signup and view all the answers

The duty of care:

Protects managers who make informed decisions, even if those decisions result in monetary loss to the company. Signup and view all the answers

What is true about incorporating a company in Delaware?

All of the above. Signup and view all the answers

For publicly-traded companies, the audit committee of a board of directors must be comprised of independent directors.

True Signup and view all the answers

While working for Blue Moon restaurant, a company incorporated under the laws of Maryland, Zeke signs a contract on behalf of a restaurant to purchase bread from Rising Sun Bakery. Unbeknownst to anyone at Blue Moon, he is a part owner of Rising Sun. Is Zeke liable under the business judgment rule?

Yes, he lis liable for violating a duty of loyalty. Signup and view all the answers

Which of the following cases involves the issue of whether a company's executive compensation plan violated the business judgment rule?

Raul v. Rynd Signup and view all the answers

Which of the following is FALSE regarding preferred stockholders?

Preferred stockholders typically have most of the voting rights. Signup and view all the answers

Georgia is on the board of directors of Skyzone, a California business that operates indoor trampoline parks for kids. Skyzone is looking to expand in Massachusetts and is looking for a huge warehouse space to purchase in Boston. Georgia's family happens to own a warehouse in Brighton and she suggests to Skyzone's CEO to consider her family's property. In order for Georgia to be able to sell her family's warehouse to Skyzone, what must happen?

The disinterested members of the board of directors of Skyzone must approve the transaction. Signup and view all the answers

Which of the following securities are exempt from registration under the 1933 Act?

An insurance policy issued by State Farm. Signup and view all the answers

Georgia Allen is a corporate director at Scion Pharmaceuticals. Scion was about to purchase Johnson & Johnson (J&J) to become the largest pharmaceutical company in the world. She told her partner Alexa about the purchase before it occurred. Alexa purchased 2000 shares of Scion and after the purchase of J&J happened, Alexa made 2 million dollars. Has Georgia done anything wrong?

Yes, she is liable as a tipper of insider trading. Signup and view all the answers

Larry was working at his job at the landfill when he got off his tractor to take a break. He noticed some papers on the ground and went to throw them on a pile of trash. As he held the papers, he saw a confidential report from HealthCorp stating that it would be announcing the development of a new COVID booster vaccine in two weeks. This vaccine would provide immunity from all strains of COVID for up to 18 months. Larry has no relationship with HealthCorp. Larry mortgaged his house and borrowed all the money he could to purchase $200,000 worth of HealthCorp stock. Larry bought the stock at $89 a share and when the announcement of the booster vaccine was made public, the stock of HealthCorp grew to $142 a share. Larry sold his shares for an immediate profit. Has Larry violated the law?

No, he has not done anything legally wrong. Signup and view all the answers

You are the vice-president of Turbocharge, Inc., a publicly-traded company. You have been buying stock recently because you think the company's product-a more efficient hybrid engine--is very promising. One day, you show up at work and find your desk in the hallway. The CEO has fired you. In a huff, you sell your company's stock and make a huge profit. Have you violated the law?

Yes, you violated section 16 of the 1934 Act. Signup and view all the answers

In a firm commitment underwriting, the underwriter buys the stock from the company and resells it to the public.

True Signup and view all the answers

The SEC certifies the quality of every public offering and ensures that companies only sell securities that will rise in value.

True Signup and view all the answers

Nico and Sarah are brother and sister. Nico works at a public company and told Sarah that the company was about to go under in debt. Sarah bet against the company and made money. The law will treat Nico as though he made a personal gain from Sarah's trade.

True Signup and view all the answers

Which of the following is the document that a company files with the SEC to initiate a public offering?

Registration Statement. Signup and view all the answers

Which of the following laws allows for companies to raise money privately from accredited investors without registering with the SEC?

Regulation D. Signup and view all the answers

VitaminWater has become such a success that other companies are also now selling similar flavored water. Some companies bottle their drinks in a similar bell-shaped bottle with a two-tone label that has a horizontal color band. What is the best infringement claim for VitaminWater to make against these competitors?

Trademark. Signup and view all the answers

The vast majority of issued patents are:

Utility patents. Signup and view all the answers

Imagine a sports team sets up a company to sell its own range of clothes. What type of intellectual property can the team use to show that the clothes are made by them?

Trademark Signup and view all the answers

Generally speaking, a parody of copyrighted material infringes the copyright.

False Signup and view all the answers

You can patent an idea.

False Signup and view all the answers

If a company develops a new technology that improves its main product, what type of intellectual property can they use to stop others from copying their invention?

Utility patent. Signup and view all the answers

If you write an original story, what type of intellectual property gives you the right to decide who can make and sell copies of your work?

Copyright Signup and view all the answers

LA245 Exam 3

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Questions and Answers

S corporations may issue voting and non-voting stock to its shareholders with different conversion rights from common to preferred shares.

All of the following are characteristics of a closely held company EXCEPT:

Which of the following statements IS NOT TRUE about a social enterprise?

What is a drawback of a General Partnership?

In which of the following forms of business do the owners enjoy limited liability?

A sole proprietorship:

Marsh v. Gentry is a case about a corporation that was taxed for sale of its assets.

Generally, a corporation's articles of incorporation will not contain:

A clawback provision enables a company to:

The duty of care:

What is true about incorporating a company in Delaware?

For publicly-traded companies, the audit committee of a board of directors must be comprised of independent directors.

While working for Blue Moon restaurant, a company incorporated under the laws of Maryland, Zeke signs a contract on behalf of a restaurant to purchase bread from Rising Sun Bakery. Unbeknownst to anyone at Blue Moon, he is a part owner of Rising Sun. Is Zeke liable under the business judgment rule?

Which of the following cases involves the issue of whether a company's executive compensation plan violated the business judgment rule?

Which of the following is FALSE regarding preferred stockholders?

Which of the following securities are exempt from registration under the 1933 Act?

In a firm commitment underwriting, the underwriter buys the stock from the company and resells it to the public.

The SEC certifies the quality of every public offering and ensures that companies only sell securities that will rise in value.

Nico and Sarah are brother and sister. Nico works at a public company and told Sarah that the company was about to go under in debt. Sarah bet against the company and made money. The law will treat Nico as though he made a personal gain from Sarah's trade.

Which of the following is the document that a company files with the SEC to initiate a public offering?

Which of the following laws allows for companies to raise money privately from accredited investors without registering with the SEC?

The vast majority of issued patents are:

Imagine a sports team sets up a company to sell its own range of clothes. What type of intellectual property can the team use to show that the clothes are made by them?

Generally speaking, a parody of copyrighted material infringes the copyright.

You can patent an idea.

If a company develops a new technology that improves its main product, what type of intellectual property can they use to stop others from copying their invention?

If you write an original story, what type of intellectual property gives you the right to decide who can make and sell copies of your work?

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