Test Your Knowledge on Corporations
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Questions and Answers

Which of the following accurately describes a corporation?

  • A corporation is a real person
  • A corporation is a natural person
  • A corporation is a physical entity
  • A corporation is a legal entity created according to statutory requirements (correct)

    • What is the function of state corporation statutes?

  • To regulate the formation of partnerships
  • To regulate the formation of non-profit organizations
  • To regulate the formation, operation, and dissolution of corporations (correct)
  • To regulate the formation of sole proprietorships

    • Which of the following is a power that corporations have?

  • The power to sue or be sued in their own names (correct)
  • The power to practice law
  • The power to vote in elections
  • The power to regulate the stock market

    • True or false: A corporation can only be started with multiple people?

    <p>False (B)</p> Signup and view all the answers

    True or false: Courts do not play a role in resolving corporate and shareholder disputes?

    <p>False (B)</p> Signup and view all the answers

    A corporation is a ______ legal entity, that is created according to statutory requirements.

    <p>fictitious</p> Signup and view all the answers

    Courts interpret state corporation statutes to decide individual corporate and shareholder ______.

    <p>disputes</p> Signup and view all the answers

    Which of the following is NOT a favorable characteristic of corporations?

    <p>Unrestricted management (D)</p> Signup and view all the answers

    What is the role of the board of directors in a corporation?

    <p>Make policy decisions concerning the operation of the corporation (B)</p> Signup and view all the answers

    Under what circumstances can a shareholder be held personally liable for the debts of a corporation?

    <p>When the shareholder is also a corporate officer (D)</p> Signup and view all the answers

    True or false: Shareholders are personally liable for the contracts and debts of their corporation.

    <p>False (B)</p> Signup and view all the answers

    True or false: Corporate shares are not freely transferable by the shareholder.

    <p>False (B)</p> Signup and view all the answers

    True or false: There is a general federal corporations law governing the formation and operation of private corporations.

    <p>False (B)</p> Signup and view all the answers

    With limited liability of shareholders, shareholders are only liable to the extent of their capital contributions for the contracts and debts of their corporation. Shareholders are not personally liable for the contracts and debts of the corporation. Even a sole shareholder won’t be held personally ______.

    <p>liable</p> Signup and view all the answers

    Corporations exist in perpetuity, unless specific duration is stated in articles of incorporation. Corporations can be voluntarily terminated by the shareholders or involuntarily terminated by the corporation’s ______.

    <p>creditors</p> Signup and view all the answers

    In a corporation, the board of directors makes policy decisions concerning the operation of the corporation. Members of the board of directors are elected by the shareholders. Directors appoint corporate officers to run the corporation’s ______ operations.

    <p>day-to-day</p> Signup and view all the answers

    Which of the following is NOT a characteristic of corporations?

    <p>Decentralized management (C)</p> Signup and view all the answers

    What is the role of the board of directors in a corporation?

    <p>They make policy decisions concerning the operation of the corporation (D)</p> Signup and view all the answers

    Which of the following is a characteristic of a closely held corporation?

    <p>Shareholders are often involved in management (D)</p> Signup and view all the answers

    What is the main difference between a publicly held corporation and a closely held corporation?

    <p>Number of shareholders (B)</p> Signup and view all the answers

    What is a possible disadvantage of being a shareholder in a closely held corporation?

    <p>Difficulty in buying and selling shares (B)</p> Signup and view all the answers

    What is a possible advantage of being a shareholder in a closely held corporation?

    <p>Greater involvement in management (D)</p> Signup and view all the answers

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