Business Entities

Question 1

Lori, Debbie, and Susan were partners in a successful dog-walking business.
Fifteen years after they started the business, Debbie announced that she would
be leaving the partnership. The three women agreed that Debbie’s last day with
the partnership would be that Friday. Lori then placed a prominent
advertisement in the local newspaper announcing that Debbie would be leaving
the dog-walking business and thanking her for her years of service. The ad
appeared in the newspaper on Friday. When Debbie’s neighbor Ron saw the
notice, he became quite upset, as he had just been given a dog for his birthday
and had hoped that Debbie would help him care for it. That night, Ron ran into
Debbie at the movie theater and asked her if Lori and Susan would be willing to
accept a new client. Debbie responded, “Sure, bring the dog to the shop on
Monday.” Will the partnership be bound to accept the new client?
(a) No, because Ron was aware of Debbie’s retirement.
(b) No, because Debbie had left the partnership and no longer had authority to bind
(c) Yes, because Debbie was acting with apparent authority.
(d) Yes, because Debbie failed to notify Ron that she no longer had authority to accept new clients.

Answer 1

(a) No, because Ron was aware of Debbie’s retirement.

Question 2

Elizabeth ran a successful cosmetics business out of her home. As her business
grew, she realized that she should incorporate her business in order to obtain
tax benefits and limit her personal liability. Elizabeth attempted to file articles of
incorporation, but she forgot to include the name of the corporation’s initial
registered agent. The articles of incorporation otherwise included all of the
required information, and were properly filed. Will Elizabeth be found to have
created a de facto corporation?
(a) No, because she has not carried on her business openly as a corporation.
(b) No, because she has not complied with the requirements for formation of a
corporation.
(c) Yes, because she has made a good faith effort to comply with the statutory
requirements for formation.
(d) Yes, because she has only failed to supply one of the required elements of the
articles of incorporation.

Answer 2

(a) No, because she has not carried on her business openly as a corporation.

Question 3

Steve and Bob decided to join as partners to open a gas station and
convenience store in the state of Florida. They each contributed substantial
funds to the enterprise and orally agreed that they would share equally in the
profits of the business. Steve owned a piece of commercial property and a
vacant building, and he suggested to Bob that they operate their business there.
Bob agreed, and they then launched their business at that location. However,
Steve did not execute any legal conveyance of the property to the partnership,
and Steve himself continued to pay taxes on the property. The partnership did
not pay any rent. The business operated quite successfully for over ten years,
until Steve decided to move to the west coast. He informed Bob that he was
withdrawing from the partnership, and that he intended to sell the property on
which the business was located. Bob protested that Steve did not have the right
to sell the property, as it belonged to the partnership. Steve asserted that the
property was his, and he could do with it as he wished. Which of the following is
true?
(a) Steve has the right to sell the property, because the property remained his
separate property.
(b) Steve has the right to sell the property, because his dissociation from the
partnership was not wrongful.
(c) Steve does not have the right to sell the property, because individual partners
have no transferable interest in partnership property.
(d) Steve does not have the right to sell the property, because he brought the
property to the partnership.

Answer 3

(a) Steve has the right to sell the property, because the property remained his
separate property.

Question 4

Barks Wood L.P. has three general partners and two limited partners. Each
partner had contributed a total of $10,000 to Barks Wood. Barks Wood’s
partners decide to dissolve the company. Upon dissolution, the company’s
assets consist of a bank account
worth $50,000. Barks Wood also had credit card debt totaling $10,000. The
money in the bank account should be distributed as follows:
(a) $10,000 to each partner.
(b) $10,000 to pay off the credit card debt, and $40,000 distributed equally between all the partners
(c) $10,000 to pay off the credit card debt, $10,000 to each of the general partners, and $5,000 to each of the limited partners.
(d) $10,000 to pay off the credit card debt, $40,000 distributed equally between the limited partners, with no money going to the general partners.

Answer 4

(b) $10,000 to pay off the credit card debt, and $40,000 distributed equally between all the partners

Question 5

Roger and Maria wish to incorporate their stationery company. They submit
articles of incorporation to the Florida Department of State which state that the
name of the company is Lemon Leaflets Company, that the corporation will exist
“in perpetuity,” and that it is authorized to issue 1000 shares each with a par
value of $1. What should the Department of State do?
(a) Accept the articles of incorporation because they state the number of shares the corporation is authorized to issue.
(b) Accept the articles of incorporation because the par value of the authorized shares is greater than zero.
(c) Reject the articles of incorporation because they violate the Rule Against Perpetuities.
(d) Reject the articles of incorporation because the name of the corporation is invalid.

Answer 5

(a) Accept the articles of incorporation because they state the number of shares the corporation is authorized to issue.

Question 6

Ace, Billy, and Clark decide to form a partnership when their band starts to book
shows. The partnership operates under the name “The Ace Band,” recording
albums and going on tour. After several years, Ace decides that he wants to go
on a solo tour without the band. Billy and Clark fear that if Ace goes on tour without them, The Ace Band will not book as many shows and it will lose revenue. Ace assures them,
however, that he will continue to play shows and record new music with The Ace Band. If Ace wants to go on tour, his best option would be to:
(a) Dissolve The Ace Band partnership.
(b) Get the consent of Billy and Clark.
(c) Go on tour without consent of Billy and Clark, as their consent is not necessary.
(d) Step down as partner from The Ace Band.

Answer 6

(b) Get the consent of Billy and Clark.

Question 7

JKL, Inc., is a foreign corporation transacting business in the state of Florida. JKL
continuously maintains a registered office in one of its stores in Florida.
Which of the following is true regarding JKL’s Florida office?
(a) JKL’s registered office must be maintained by a registered agent, and this registered agent can be an individual, a corporation, or another foreign corporation.
(b) JKL’s office cannot be located in its store, because the registered office must be separate and distinct from its places of business.
(c) JKL must continuously maintain a registered office, but it is not required to continuously maintain a registered agent at said office.
(d) If an individual serves as an agent of JKL, it is not required that that individual reside in Florida, if his business office is identical with JKL’s registered office.

Answer 7

(a) JKL’s registered office must be maintained by a registered agent, and this registered agent can be an individual, a corporation, or another foreign corporation.

Question 8

Able is the sole shareholder of ABC Manufacturing Corp., which is properly
incorporated. Able knows that the corporation’s liabilities far exceed its assets,
and he is trying desperately to keep it in business. ABC Manufacturing Corp.
enters a contract to ship a large order to Baker, and collects payment up front.
The order is never shipped. Baker should be allowed to pierce the corporate veil
if:
(a) Failing to allow him to pierce the veil will result in Baker not being able to recover his damages.
(b) Able acted in bad faith and the corporation was essentially his alter ego
(c) Able acted in bad faith, whether or not the corporation was his alter ego.
(d) the corporation was Able’s alter ego, whether or not he acted in bad faith.

Answer 8

(b) Able acted in bad faith and the corporation was essentially his alter ego

Question 9

Sean was the vice president of Coffee Direct, a company that delivered coffee
beans in bulk to consumers who wished to grind their own coffee beans. One
evening at dinner, Bill approached Sean and said, “Aren’t you the vice president
of Coffee Direct? I’m looking for someone to distribute a coffeemaker I just
invented, and it would be a great product to market alongside your coffee
beans!” After hearing Bill’s description of the coffeemaker, Sean decided that he
would like to go into business with Bill individually. At the next meeting of the
board of directors of Coffee Direct, Sean asked, “We wouldn’t ever want to sell
coffeemakers, too, would we?” The other board members shook their heads
firmly and said, “No, we sell beans, not machines.” If Sean decides to enter into
business with Bill, will he have violated any duty to Coffee Direct?
(a) Yes, because Sean has usurped a business opportunity.
(b) Yes, because Sean has not made a full disclosure of the opportunity to Coffee
(c) No, because Coffee Direct is in the business of selling coffee beans, not coffeemakers.
(d) No, because Sean mentioned the opportunity at the board meeting and Coffee Direct declined to pursue the opportunity.

Answer 9

(b) Yes, because Sean has not made a full disclosure of the opportunity to Coffee

Question 10

Nine shareholders show up to Celebrity Star In’s annual meeting of
shareholders, including Joseph, who had been granted a proxy by Marsha, a
shareholder who was not present at the meeting. Celebrity Star has a total of
twenty shareholders, each of whom holds five shares of common stock, except
for Marsha who holds six shares of common stock. Midway through the meeting, Joseph left.
Shortly after he left, the chair of the meeting called a vote on a matter on which the board of directors had sought shareholder approval. The shareholders present at the meeting:
(a) may vote on the matter, because there is a quorum.
(b) may vote on the matter, because one of the shareholders present at the meeting can vote the proxy.
(c) may not vote on the matter, because a quorum was never established.
(d) may not vote on the matter, because a quorum does not exist now that Joseph has left.

Answer 10

(a) may vote on the matter, because there is a quorum.

Question 11

Caroline, Katherine, and Lisa have had a long standing relationship as partners in
their sailboat refurbishing company. One day, Lisa is killed in a freak boating
accident. Which of the following is true?
(a) Lisa is dissociated from the partnership.
(b) The partnership dissolves.
(c) Any actions taken by Lisa prior to her death do not bind the partnership.
(d) Lisa’s estate must purchase her partnership interest.

Answer 11

(a) Lisa is dissociated from the partnership.

Question 12

Alex, Steven, and George Smith were partners in Smith Brothers Furniture. Alex
fell upon difficult financial times, and needed to borrow money to save his
house from foreclosure. He approached Steven and George and asked if he
could borrow $20,000 from the partnership to save his home. Steven and
George agreed, and Alex borrowed the funds, which he repaid in full with
interest within six months.
Has Alex violated a duty to the partnership?
(a) No, because a partner may transact business with the partnership in the same manner as a non-partner.
(b) No, because he paid interest on the loan.
(c) Yes, because a partner may not borrow money from a partnership.
(d) Yes, because he borrowed money for a non-partnership purpose.

Answer 12

(a) No, because a partner may transact business with the partnership in the same manner as a non-partner.

Question 13

Lou and Tim form a partnership in order to sell jewelry made out of seashells
near the beach. Lou designs the jewelry and Tim crafts it. At first, the
partnership is profitable. However, after a few years, sales sharply decline due to
competition. Lou and Tim discuss closing down the business and going their
separate ways. A few days later, Lou is approached by Raymond, who is
interested in opening a jewelry store. Raymond asks Lou to design some
seashell jewelry for the new store. Raymond has offered to pay Lou $80,000 for
his designs, which is three times what Lou makes from the partnership.
Should Lou agree to design jewelry for Raymond?
(a) No, because the partnership has not been dissolved.
(b) No, because a partner may never compete with the partnership in the conduct of the partnership business.
(c) Yes, because Lou and Tim have already agreed to wind up business with their own partnership.
(d) Yes, because the partners are not bound to the same strict duties of loyalty and care that applies to a corporation.

Answer 13

(a) No, because the partnership has not been dissolved.

Question 14

Will is preparing the articles of incorporation for a new corporation. In the
articles, Will provides the following information: the name of the corporation is
Sugar Ranch, Corp.; the corporation’s address is 1234 Main Street, Anytown,
Florida; the corporation is authorized to issue 1,000 shares of stock; the
shareholders have no preemptive rights, and the corporation’s registered agent
is Roger Jones, whose address is 5678 First Avenue, Anytown, Florida.
Which required piece of information is missing from Will’s articles of
incorporation?
(a) The name and address of each incorporator.
(b) The names and addresses of the initial directors.
(c) The corporation’s purpose.
(d) Par value for shares or classes of shares.

Answer 14

(a) The name and address of each incorporator.

Question 15

Cocoons To Go Inc. has four shareholders, each of whom owns 50 shares of
common stock in the corporation. At the annual shareholder meeting, the
shareholders are to elect a board of four directors. One shareholder, Bob, is
running for the board. Cocoons To Go’s articles of incorporation state that the
board of directors shall be elected by cumulative voting. None of the other three
shareholders votes for Bob. Bob:
(a) cannot be elected to the board of directors, because he only has 50 shares.
(b) cannot be elected to the board of directors, because the shareholders can only utilize the cumulative voting method.
(c) will be elected to the board if he allocates at least 41 of his shares to vote for himself
(d) will be elected to the board, only if he allocates all of his 50 shares to vote for himself.

Answer 15

(c) will be elected to the board if he allocates at least 41 of his shares to vote for himself

Question 16

Stephen is a minority shareholder of Blue Turtle Inc. There are four people up for
election to three positions on the board of directors of Blue Turtle: Catherine,
Diane, Eric, and Frannie. The majority shareholders are determined to elect
Catherine, Diane and Eric to the board of Blue Turtle. However, the minority
shareholders, including Stephen, would like to make sure Frannie is elected as a
director of Blue Turtle. After some calculation, Stephen determines that the only
way to guarantee Frannie’s election to the board is if the minority shareholders
are permitted to cumulate their votes for Frannie.
Which of the following is correct?
(a) Stephen and the other minority shareholders may only use cumulative voting if permitted by Blue Turtle’s articles of incorporation.
(b) Stephen and the other minority shareholders are entitled to use cumulative voting under the special rules designed to protect minority shareholders.
(c) Stephen and the other minority shareholders may not use cumulative voting because Florida does not permit the use of cumulative voting.
(d) Stephen and the other minority shareholders may use cumulative voting unless otherwise stated in the articles of incorporation.

Answer 16

(a) Stephen and the other minority shareholders may only use cumulative voting if permitted by Blue Turtle’s articles of incorporation.

Question 17

Mark is a limited partner in Sake To Me, Ltd., a Florida restaurant that specializes
in Japanese cuisine. Unbeknowst to the the other limited partners of Sake To
Me, Ltd., Mark enters into a contract for 26 pounds of rare sea urchin to serve in
the restaurant at a cost of $8,000. The chef, fearing that the sea urchin is
dangerous, refuses to pay for the order and sends it back to the supplier, who is
unable to sell the sea urchin, as it has now spoiled. The supplier then sues Sake
To Me, Ltd. for breach of contract.
Which of the following is true?
(a) Mark did not have the power to bind Sake To Me, Ltd.
(b) The supplier will recover $8,000 from Sake To Me, Ltd. because there was a valid contract.
(c) The supplier will not recover because he could have sold the sea urchin to another Japanese restaurant.
(d) Mark had the power to bind Sake To Me, Ltd. to the contract, but the supplier will not recover because there was no written contract.

Answer 17

(a) Mark did not have the power to bind Sake To Me, Ltd.

Question 18

Two lawyers, John and Patrick, decide to join forces and open a law practice
together. They sign an agreement calling their practice “River Side Law” and
agree to split any profits of the practice 55%/45%, with the larger share going to
John. They operate their practice without having filed any particular form or
statement with the Florida Department of State. River Side Law is:
(a) a partnership
(b) a joint venture.
(c) a professional limited liability company.
(d) a limited partnership.

Answer 18

(a) a partnership

Question 19

John and Sally filed articles of incorporation for their company, which they
named “Incorporated Smith Systems.” The articles of incorporation stated that
the company was authorized to issue shares oaf both common and preferred
stock, and that the two types of stock had identical voting rights. The articles of
incorporation:
(a) are valid, because the word “Incorporated” appears in the name of the corporation
(b) are valid, because common stock and preferred stock have identical voting rights under Florida law.
(c) are invalid, because the name of the corporation is improper.
(d) are invalid, because common stock and preferred stock do not have identical voting rights under Florida law.

Answer 19

(a) are valid, because the word “Incorporated” appears in the name of the corporation

Question 20

Martin, a shareholder in Terrace on the Sea Inc., is upset that this year Terrace
on the Sea’s board members did not declare a dividend. Convinced that the
board’s decision not to declare a dividend is improper, he decides to sue. Martin
is most likely to bring:
(a) a derivative action against Terrace on the Sea, because of the agency relationship between the board and the corporation.
(b) a derivative action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.
(c) a direct action against Terrace on the Sea, because the board members are immune from suit.
(d) a direct action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.

Answer 20

(d) a direct action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.

Question 21

Barks Wood L.P. has three general partners and two limited partners. Each partner had contributed a total of $10,000 to Barks Wood. Barks Wood’s partners decide to dissolve the company. Upon dissolution, the company’s assets consist of a bank account
worth $50,000. Barks Wood also had credit card debt totaling $10,000. The money in the bank account should be distributed as follows:
(A) $10,000 to each partner.
(B) $10,000 to pay off the credit card debt, and $40,000 distributed equally between all the partners
(C) $10,000 to pay off the credit card debt, $10,000 to each of the general partners, and $5,000 to each of the limited partners.
(D) $10,000 to pay off the credit card debt, $40,000 distributed equally between the limited partners, with no money going to the general partners.

Answer 21

(B) $10,000 to pay off the credit card debt, and $40,000 distributed equally between all the partners

Question 22

Keith and Terry agreed to form a partnership, but both agreed that only Keith will execute contracts with third parties. Terry then entered into a long-term service contract for the partnership with Carry, who did not know of the internal agreement between Keith and Terry. The contract is:
(A) enforceable, because the agreement cannot withhold statutory authority of a general partner to bind the partnership.
(B) enforceable, because Carry had no knowledge of Terry’s lack of authority
(C) unenforceable, because Terry was not authorized to execute the contract by the partner agreement.
(D) unenforceable, because Carry had a fiduciary obligation to confirm Terry’s authority.

Answer 22

(B) enforceable, because Carry had no knowledge of Terry’s lack of authority

Question 23

Ace, Billy, and Clark decide to form a partnership when their band starts to book shows. The partnership operates under the name “The Ace Band,” recording albums and going on tour. After several years, Ace decides that he wants to go on a solo tour without the
band. Billy and Clark fear that if Ace goes on tour without them, The Ace Band will not book as many shows and it will lose revenue. Ace assures them, however, that he will continue to play shows and record new music with The Ace Band. If Ace wants to go on tour, his best option would be to:
(A) dissolve The Ace Band partnership.
(B) get the consent of Billy and Clark
(C) go on tour without consent of Billy and Clark, as their consent is not necessary.
(D) step down as partner from The Ace Band.

Answer 23

(B) get the consent of Billy and Clark

Question 24

Two lawyers, John and Patrick, decide to join forces and open a law practice together. They sign an agreement calling their practice “River Side Law” and agree to split any profits of the practice 55%/45%, with the larger share going to John. They operate their practice without having filed any particular form or statement with the Florida Department of State. River Side Law is:
(A) a partnership
(B) a joint venture.
(C) a professional limited liability company.
(D) a limited partnership.

Answer 24

(A) a partnership

Question 25

Moe, Larry, and Joe agreed to form a partnership for the purpose of designing, manufacturing and selling small drones to news organizations. Moe entered into a long term contract with a toy company to purchase games for a local children’s charity. As attorney for the partnership, your best advice is:
(A) the partnership cannot be bound by Moe’s act.
(B) the partnership can be bound by Moe’s act in the ordinary course of business.
(C) the partnership can be bound by Moe’s act with majority approval of the partners.
(D) the partnership can be bound by Moe’s act with unanimous approval of the partners

Answer 25

(D) the partnership can be bound by Moe’s act with unanimous approval of the partners

Question 26

John and Sally filed articles of incorporation for their company, which they named “Incorporated Smith Systems.” The articles of incorporation stated that the company was authorized to issue shares oaf both common and preferred stock, and that the two types of stock had identical voting rights. The articles of incorporation:
(A) are valid, because the word “Incorporated” appears in the name of the corporation
(B) are valid, because common stock and preferred stock have identical voting rights under Florida law.
(C) are invalid, because the name of the corporation is improper.
(D) are invalid, because common stock and preferred stock do not have identical voting rights under Florida law.

Answer 26

(A) are valid, because the word “Incorporated” appears in the name of the corporation

Question 27

Jim, Kate and Devon decided to form ABC Corporation to fulfill their life long dream of opening a start up technology company. The three of them decided that Kate would be in charge of preparing and filing the articles of incorporation. Jim opened a bank account and rented some office space in ABC Corporation’s name, and Devon created an ABC Corporation website and ordered business cards. Kate prepared the articles of incorporation and left them for Jim to take to the post office, but they were accidently thrown out instead. The ABC Corporation therefore is: 
(A) 	a de jure corporation.
(B) 	a de facto corporation
(C) 	a corporation by estoppel.
(D) 	not a corporation at all.

Answer 27

(B) a de facto corporation

Question 28

Able is the sole shareholder of ABC Manufacturing Corp., which is properly incorporated. Able knows that the corporation’s liabilities far exceed its assets, and he is trying desperately to keep it in business. ABC Manufacturing Corp. enters a contract to ship a large order to Baker, and collects payment up front. The order is never shipped. Baker should be allowed to pierce the corporate veil if:
(A) failing to allow him to pierce the veil will result in Baker not being able to recover his damages.
(B) Able acted in bad faith and the corporation was essentially his alter ego
(C) Able acted in bad faith, whether or not the corporation was his alter ego.
(D) the corporation was Able’s alter ego, whether or not he acted in bad faith.

Answer 28

(B) Able acted in bad faith and the corporation was essentially his alter ego

Question 29

This year, Table Tennis Masters Inc. has net earnings of $100,000. When meeting to determine whether to declare a dividend, the corporation’s board of directors, each of whom was also a shareholder in the corporation, decided not to issue a dividend in part because declaring a dividend would subject each of them to additional taxation. The corporation’s other shareholders objected to the decision not to declare the dividend. Table Tennis Masters’s directors:
(A) have acted impermissibly by violating their duty of good faith to the corporation.
(B) have acted impermissibly because the corporation has a surplus.
(C) have acted permissibly under the business judgment rule.
(D) have acted permissibly because the decision to declare a dividend is within the board of director’s discretion.

Answer 29

(A) have acted impermissibly by violating their duty of good faith to the corporation.

Question 30

Sean was the vice president of Coffee Direct, a company that delivered coffee beans in bulk to consumers who wished to grind their own coffee beans. One evening at dinner, Bill approached Sean and said, “Aren’t you the vice president of Coffee Direct? I’m looking for someone to distribute a coffeemaker I just invented, and it would be a great product to market alongside your coffee beans!” After hearing Bill’s description of the coffeemaker, Sean decided that he would like to go into business with Bill individually. At the next meeting of the board of directors of Coffee Direct, Sean asked, “We wouldn’t ever want to sell coffeemakers, too, would we?” The other board members shook their heads firmly and said, “No, we sell beans, not machines.” If Sean decides to enter into business with Bill, will he have violated any duty to Coffee Direct?
(A) Yes, because Sean has usurped a business opportunity.
(B) Yes, because Sean has not made a full disclosure of the opportunity to Coffee Direct
(C) No, because Coffee Direct is in the business of selling coffee beans, not coffeemakers.
(D) No, because Sean mentioned the opportunity at the board meeting and Coffee Direct declined to pursue the opportunity.

Answer 30

(B) Yes, because Sean has not made a full disclosure of the opportunity to Coffee Direct

Question 31

ABC Corp. is incorporated in the state of Florida. According to the bylaws, ABC holds its annual shareholders meeting every year on June 1. Mateo holds 15% of the shares of ABC. On May 1, he receives a notice of the annual shareholders meeting which
contains the following information: the meeting will be held on June 1, at 4:00 pm, at 123 Main Street in Orlando Florida. The notice contains no additional information, although the board of directors plans on discussing the possibility of a merger with XYZ Corp. at the annual meeting. Notice of the annual meeting was:
(A) sufficient, because it stated the date, time, and place of the meeting.
(B) sufficient, because the notice of the annual meeting does not need to indicate matters to be voted on.
(C) insufficient, because Mateo did not receive the notice 60 days in advance.
(D) insufficient, because the merger of ABC and XYZ is an extraordinary event and it was not mentioned in the notice.

Answer 31

(D) insufficient, because the merger of ABC and XYZ is an extraordinary event and it was not mentioned in the notice.

Question 32

Nine shareholders show up to Celebrity Star Inc.’s annual meeting of shareholders, including Joseph, who had been granted a proxy by Marsha, a shareholder who was not present at the meeting. Celebrity Star has a total of twenty shareholders, each of whom holds five shares of common stock, except for Marsha who holds six shares of common stock. Midway through the meeting, Joseph left. Shortly after he left, the chair of the meeting called a vote on a matter on which the board of directors had sought shareholder approval. The shareholders present at the meeting:
(A) may vote on the matter, because there is a quorum.
(B) may vote on the matter, because one of the shareholders present at the meeting can vote the proxy.
(C) may not vote on the matter, because a quorum was never established.
(D) may not vote on the matter, because a quorum does not exist now that Joseph has left.

Answer 32

(A) may vote on the matter, because there is a quorum.

Question 33

Cocoons To Go Inc. has four shareholders, each of whom owns 25 shares of common stock in the corporation. At the annual shareholder meeting, the shareholders are to elect a board of four directors. One shareholder, Bob, is running for the board. Cocoons To Go’s articles of incorporation state that the board of directors shall be elected by cumulative voting. None of the other three shareholders votes for Bob. Bob:
(A) cannot be elected to the board of directors, because he only has 25 shares.
(B) cannot be elected to the board of directors, because the shareholders can only utilize the cumulative voting method.
(C) will be elected to the board if he allocates at least 21 of his shares to vote for himself
(D) will be elected to the board, only if he allocates all of his 25 shares to vote for himself.

Answer 33

(C) will be elected to the board if he allocates at least 21 of his shares to vote for himself

Question 34

Martin, a shareholder in Terrace on the Sea Inc., is upset that this year Terrace on the Sea’s board members did not declare a dividend. Convinced that the board’s decision not to declare a dividend is improper, he decides to sue. Martin is most likely to bring:
(A) a derivative action against Terrace on the Sea, because of the agency relationship between the board and the corporation.
(B) a derivative action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.
(C) a direct action against Terrace on the Sea, because the board members are immune from suit.
(D) a direct action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.

Answer 34

(D) a direct action against the board members of Terrace on the Sea, because the shareholders suffered the harm that he is complaining of.

Question 35

The Florida Department of State may dissolve a Florida corporation without a court order for any of the following reasons except:
(A) the corporation has failed to file its annual report.
(B) shareholders representing a majority of the corporation’s shares file a request to dissolve the corporation.
(C) the corporation’s duration as stated in its articles of incorporation has expired.
(D) the corporation does not have a registered agent in Florida for at least 30 days.

Answer 35

(B) shareholders representing a majority of the corporation’s shares file a request to dissolve the corporation.

Question 36

Meyers Bros. Inc. is incorporated in Alabama. Meyers Bros. sells products through independent contractors throughout Florida. Meyers Bros. has not taken any steps to file any paperwork with the State of Florida. Does Meyers Bros. have authority to sell products through independent contractors throughout Florida?
(A) Yes, because this is not considered “transacting business.”
(B) Yes, because a foreign corporation only needs to be incorporated or to file with the department of state in one state.
(C) No, because a foreign corporation must obtain a certificate of authority from the Florida Department of State.
(D) No, because a foreign corporation must file articles of incorporation with the Florida Department of State.

Answer 36

(A) Yes, because this is not considered “transacting business.”