Corporation: Nature and Formation

Shareholders of a corporation directly elect

• A. the president of the corporation

• B. the board of directors

• C. the treasurer of the corporation

• D. all of the employees of the corporation.

Under the corporate form of business organization.

• A. A shareholder is personally liable for the debts of the corporation.

• B. Shareholders' acts can bind the corporation even though the shareholders have not been appointed as agents of the corporation.

• C. The corporation's life is stipulated in its charter.

• D. Shareholders wishing to sell their corporation shares must get the approval of other shareholders.

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a:

• A. corporation is organized for the purpose of making a profit

• B. corporation is subject to numerous government regulations

• C. corporation is an accounting economic entity

• D. corporation's temporary accounts are closed at the end of the accounting period.

Which one of the following would not be considered an advantage of the corporate form of organization?

• A. Limited liability of owners

• B. Separate legal existence

• C. Continuous life

• D. Government regulation

The concept of an "artificial being" refers to which form of business organization?

• A. Partnership

• B. Sole proprietorship

• C. Corporation

• D. Limited partnership

A corporation can be organized for the purpose of making a profit or it may be non-profit.

• True
• False

The two ways that a corporation can be classified by purpose are

• A. Stock and non-stock

• B. Domestic and foreign

• C. Parent and subsidiary

• D. Public and private

Which of the following is not true of a corporation?

• A. It may buy, own, and sell property.

• B. It may sue and be sued.

• C. The acts of its owners bind the corporation.

• D. It may enter into binding legal contracts in its own name.

. Which of the following statements reflects the transferability of ownership rights in a corporation?

• A. If a shareholder decides to transfer ownership, he must transfer all of his shares.

• B. A shareholder may dispose of part or all of his shares.

• C. A shareholder must obtain permission from the board of directors before selling shares.

• D. A shareholder must obtain permission from at least other stockholders before selling shares.

Preference shareholders generally do not have the right to vote for the board of directors.

• True
• False