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1.Crawford, Inc., would like to own some land owned by Toxic Waste,...

1.Crawford, Inc., would like to own some land owned by Toxic Waste, Inc., to build a storage warehouse for inventory. However, Crawford doesn't want to be responsible for the liabilities of Toxic Waste. The best method of accomplishing Crawford's goals is A. stock acquisition. B. merger. C. asset acquisition. D. consolidation. 2. Steve decides to incorporate his business, but he thinks it's too expensive to hire an attorney to advise him of the requirements. Steve merely changes the name on the sign outside from Steve's to Steve, Inc. One of Steve's customers brings suit against Steve, Inc., based on an allegedly defective product sold through his business. Steve defends on the basis that Steve, Inc., doesn't exist. Which of the following statements about this set of facts is true? A. Steve is wrong; a corporation by estoppel exists. B. Steve is correct; no corporation exists. C. Steve is wrong; a de jure corporation exists. D. Steve is wrong; a de facto corporation exists. 3. Ken is the president of a large energy company. Company executives approached Ken about purchasing some smaller companies to expand the business. Ken read the reports explaining the potential risk and return of the investment, and he decided the purchase appeared to be a good investment. Unfortunately, Ken was wrong, and the purchase caused the company to lose millions of dollars. Based on these facts, Ken A. should benefit from the fairness rule. B. should benefit from the business judgment rule. C. violated his duty of due diligence to the corporation. D. violated his duty of loyalty to the corporation. 4. Which of the following types of company offers protection for personal liability? A. General partnership B. Sole proprietorship C. Term partnership D. Limited liability partnership 5. Melanie and Clay are partners in a law firm that's a general partnership. Melanie fails to respond to a lawsuit against a client in time, and the client is found liable on a $1 million verdict. The client files a lawsuit suit against Melanie and Clay. Which of the following statements about this set of facts is true? A. Only the partnership can be held liable; Melanie and Clay aren't personally liable. B. Either Melanie or Clay may be held jointly and severally liable. C. Only Melanie can be held liable because she committed the wrong. D. Only Melanie can be held liable because Clay wasn't involved with the case. 6. In a/an _______, a group of shareholders purchases a controlling portion of the stock in a corporation. A. consolidation B. leveraged buyout C. asset acquisition D. merger 7. A shareholder's preemptive rights refers to a right to A. purchase a proportionate share of every new share offering by the company. B. receive dividends out of profits before profits are used for any other purpose. C. preempt the board of director's decisions if they're not supported by a majority of shareholders. D. share in any profits insiders made from insider trading. 8. Sidney and Nikki are law partners in a general partnership. Nikki decides to take a position at another law firm. Nikki notifies Sidney that she's leaving the partnership. This set of facts constitutes a dissociation and dissolution by A. judicial decree. B. operation of law. C. consent. D. act of a partner. 9. In a general partnership, management decisions are made by A. majority vote, with partners votes weighted in proportion to the interest owned. B. unanimous vote in all business decisions. C. majority vote, with each partner having an equal vote. D. two-thirds votes of the partners. 10. Bob is the CEO of Realty, Inc., a company that purchases and develops property for shopping centers. Bob learns that certain real estate, which would be excellent for a shopping center, is about to go up for sale. Bob purchases the property himself without telling anyone at the corporation. Bob has violated the A. corporate opportunity doctrine. B. fairness rule. C. insider trading rule. D. business judgment rule. 11. Sal is a shareholder in XYZ Corporation. XYZ Corporation made defective products, and many individuals have filed lawsuits due to the defects. As a shareholder, Sal may A. be held personally liable for the defects. B. not be held personally liable for the defects. C. be held personally liable only if the plaintiffs name Sal as a defendant. D. be held personally liable only if the corporation was aware of the defects. 12. Robert owns shares in Products, Inc., and suspects that Zach, one of the directors of the company, has been stealing corporate assets. Robert complains to the corporation, but no action is taken. Robert should file a A. direct suit against Zach. B. direct suit against Products, Inc. C. derivative suit against Products, Inc., on his own behalf. D. derivative suit against Zach on behalf of Products, Inc. 13. Taylor serves on the board of directors for Cabby Company. Taylor owns a lot of vacant land, which she tried to sell unsuccessfully for two years. Taylor convinced the board of directors to purchase 1,000 acres of her land for a price well over what the land is worth. This action may violate the __________ rule. A. fairness B. business judgment C. actual authority D. insider trading 14. Sharon purchased $1,000 of ABC Company stock. In effect, Sharon A. purchased an ownership interest in the company. B. loaned money to the company. C. purchased a seat on the board for the company. D. borrowed money from the company. 15. If a regulation affecting corporations is federal, the authority for that regulation likely derives from A. executive orders. B. the Supremacy Clause. C. police power. D. the Commerce Clause. 16. The primary difference between general partnerships and limited partnerships is the limiting of the A. partners' profit. B. number of agents. C. number of partners. D. partners' liability. 17. Tom is president of Big Drug, Inc. Tom receives a phone call from a federal agency informing him that a new drug owned by Big Drug will be approved for sale to the public. Tom knows that this drug will be very popular and will cause a significant increase in the company's profits. Tom quickly purchases as much Big Drug stock as he can afford. Then, when the federal agency formally announces approval of the drug, Big Drug stock triples in value, and Tom becomes rich. Tom has violated the End of exam A. insider trading rule. B. fairness rule. C. corporate opportunity doctrine. D. business judgment rule. 18. Jennie owns shares in Superstore, Inc. A vote about whether Superstore should expand its operations to China is coming up. Jennie thinks this is a good idea, but she doesn't own enough shares to control the outcome of the vote. Jennie could increase the chance that the vote will go her way by A. filing a derivative suit. B. making a shareholder proposal. C. entering into a pooling agreement. D. offering to give someone else a proxy. 19. Stuart and Cole enter a business venture in which they both agree to contribute funds, money, and time to a sporting goods store. Furthermore, the two agree to equally split all profits. Stuart and Cole have entered into a A. partnership. B. sole proprietorship. C. corporation. D. limited liability company. 20. Brenda is on the board of directors for Money Company. Brenda rarely attends board meetings and doesn't pay attention when she does attend. Brenda usually votes like her friend Sadie, who is also on the board. Brenda voted for some proposals that harmed the company. Brenda likely violated A. the fairness rule. B. the actual authority rule. C. her duty of obedience. D. her duty of due diligence.

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