Question 1

The board of directors of Integral Components Corporation consists of Frida, Gayla, and Hart. A quorum is the number of these directors

Accepted Answer

A quorum is the minimum number of members required to be present to validly transact business at a meeting. In the case of Integral Components Corporation, the board of directors consists of Frida, Gayla, and Hart, so a quorum would be any two of these directors being present at a meeting.

Question 2

Niki owns O.K. Oil Corporation. Niki creates Pure Fuel Corporation to engage in the same business as O.K., transfers O.K.'s assets to Pure Fuel, and petitions O.K. into bankruptcy to defraud its creditors. This most likely warrants

Accepted Answer

Niki's actions demonstrate an intent to defraud O.K.'s creditors, which can lead to the piercing of O.K.'s corporate veil. This would hold both Niki and Pure Fuel liable for O.K.'s debts. A bonus or discharge for O.K. would not be warranted, and a review of Pure Fuel's articles of incorporation is not relevant in this scenario.

Question 3

Petra, Queenie, and Randell want to form Sales-to-Infinity, LLC (limited liability company). What should they provide in their operating agreement With respect to the management of Sales-to-Infinity, what are the their options If they fail to draft an operating agreement or do not include some important details, what determines these terms

Accepted Answer

The answer of Petra, Queenie, and Randell want to form...

Question 4

Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not

Accepted Answer

As directors, Denise, Ervin, and Flem have a fiduciary duty to act in the best interests of the corporation and its shareholders. This includes avoiding any conflicts of interest or using corporate funds for personal advantage. Therefore, option D is the correct choice as directors are prohibited from using corporate funds for their own personal advantage. Options A, B, and C are incorrect as these are typically within the scope of authority for directors to make decisions regarding major corporate policies, issuing stock and bonds, and selecting and removing corporate officers.

Question 5

Tank is a director and the majority shareholder of Unique New Investment Corporation (UNIC). Tank buys, for $1,500, an option to purchase a tract of real estate for $50,000. Tank forms Vista Property, Inc., to hold the option. As the majority shareholder, and thus controlling director, of UNIC, Tank orders the firm to authorize the purchase of the land from Vista Property for $500,000. Tank then has Vista Property buy the land, sell it to UNIC, and loan the money to UNIC for the purchase at a 10 percent interest rate. Wim, a minority shareholder in UNIC, complains to UNIC's board, which takes no action. Wim files a suit against Tank on UNIC's behalf. Will Wim prevail Explain.

Accepted Answer

The answer of Tank is a director and the majority...

Question 6

Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what he believes is the firm's best interest, and without violating any duties owed to it. If, despite these circumstances, Luke exercises poor business judgment, under the business judgment rule he is

Accepted Answer

According to the business judgment rule, as long as a director makes decisions in good faith and in the best interest of the corporation, they are immune from liability even if their decisions ultimately result in losses or harm to the corporation. Therefore, Luke would not be liable for exercising poor business judgment as long as he acted in good faith and in the best interest of the corporation.

Question 7

Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to

Accepted Answer

The board of directors has the power to delegate some of its functions to officers, who are responsible for the day-to-day management of the corporation. This is a common practice in corporations, where the board sets policies and leaves implementation to officers. The incorporators are the people who formed the corporation, and shareholders have the power to elect directors but do not have management responsibilities. Therefore, the best choice is B.

Question 8

Rusty and Sylvia are shareholders of Global Hotel Corporation. Global's directors fail to declare a dividend. Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend

Accepted Answer

The court may order the directors to declare a dividend if withholding it is an abuse of their discretion. If Global has sufficient earnings available or cash reserves, it does not automatically require the directors to declare a dividend.

Question 9

Bret and Courtney form Delite Day Care, Inc. Ultimate responsibility for policymaking decisions necessary to the management of corporate affairs rests with Delite's

Accepted Answer

The board of directors has the ultimate responsibility for policymaking decisions in a corporation, including those related to the management of corporate affairs. The incorporators are typically only involved in the initial formation of the corporation, and the officers and shareholders have specific roles and responsibilities within the corporation, but the overall decision-making power lies with the board of directors.

Question 10

Lon and Merry act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a majority vote of NuGame's

Accepted Answer

Shareholders are responsible for electing the board of directors in a corporation. Therefore, subsequent directors are elected by a majority vote of the shareholders.

Question 11

Clive sells Direct Marketing Enterprises, a sole proprietorship, to Edwina. This is a transfer of

Accepted Answer

The sale of Direct Marketing Enterprises from Clive to Edwina involves a transfer of ownership of the business, which is the entirety of the sole proprietorship. The other options, such as a license or trade name, refer to specific aspects of a business but not the entire entity itself. The formula to make a product also only applies to a specific aspect of the business and not the entire ownership.

Question 12

Cara and Dru are officers of EZ Trucking Corporation. As corporate officers, the rights of Cara and Dru are

Accepted Answer

The answer of Cara and Dru are officers of EZ...

Quiz 10: Business Organizations