Unit 4 Flashcards
AI Medical, Inc., is a private, for-profit corporation that is owned by six shareholders who are not members of the same family but are personally known to one another. They also serve as the directors and officers. To prevent a majority shareholder from dominating the firm, the corporation may
Require more than a majority of directors approve any board action.
A power of attorney can be
Special and general
Don is a shareholder of Energy Renew Inc. When the directors fail to undertake an action to redress a wrong suffered by the firm, Don files a suit on its behalf. Don’s suit is
A shareholder’s derivative suit.
Avery wants to go into business as Boom! to make and market fireworks. When deciding which form of business organization would be most appropriate, Avery would normally take into account all of the following except
The forms of competitors’ business organizations.
Contracts entered into when the business is not yet formed is called
Preincorporation contracts.
A key advantage of the LLC for members is
The members are not personally liable.
Dissolution of a partnership can be brought about by
the acts of the partners.
operation of law
judicial decree.
When the principal, by either words or actions, causes a third party to reasonably believe that an agent has authority to act, even though the agent has no express or implied authority, this is considered
Apparent authority.
The principal must indemnify the agent for the value of benefits that the agent confers on the principal, and the amount of indemnification is
Specified in the agency contract.
Diamonds & Gold LLC hires Elle to buy gems and precious metals from various sources on its behalf. In this relationship, Diamonds is
A principal.
Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in
The termination of the firm’s legal existence.
Erin, a shareholder of Finance Inc., demands the right to inspect corporate books and records to determine whether management has engaged in self-dealing that impacts the company. The firm refuses the request. On Erin’s challenge, a court is most likely to hold that her request constitutes
A proper purpose.
By definition, independent contractors are
Not employees, and employers have no control over the details of their physical performance.
Burgers & Brew Inc. prepares its articles of incorporation. The articles are likely to include
the corporation’s name.
the number of shares the corporation is authorized to issue.
all of the choices.
the corporation’s registered agent.
Kit hires Lanie to manage Kit’s Cattle Ranch. Lanie agrees to act on Kit’s behalf, subject to Kit’s control, and Kit trusts Lanie to so act. Their relationship is
A principal and an agent.
Global Enterprises Inc. competes in many product, service, and geographic markets. Global’s board consists of a large number of directors. The firm faces myriad complex business issues. To avoid its governance from becoming unwieldy, the company can delegate some of its functions to
An executive committee.
For the sole proprietor, business profits are reported
As personal income.
Bread Company hires Craig to sell the company’s products in a certain area. Bread agrees to pay Craig a salary, plus commission, for a trial period. They also agree that he can sell using any methods and during any hours that seem appropriate. The key factor in whether Craig is Bread’s employee is
The degree of the employer’s control over the details of the work.
The members of an LLC can decide how to operate the various aspects of the business by forming
An operation agreement.
Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to the hosts of banquets and other events. In this capacity, Rosario is
An independent contractor.
The termination of a partnership is referred to as
Dissolution
Integrated Devices, Inc., is a private, for-profit corporation that is owned by seven shareholders who are members of the same family. Integrated is
A close corporation.
How can an LLC be managed?
It can be member-managed.
It can be manager managed.
The rule requiring that an agent’s authority must be in writing has a basis in the
Equal dignity rule.
A major advantage of the sole proprietorship is that the proprietor
Owns the entire business.
Roz, a director of Soy Inc., is specially trained in petroleum trading. Soy’s board approves several deals in which the company pays too much for soybeans. Roz approves all the deals without first reviewing them. Roz is most likely liable for breach of
The duty of care.
If the principal negotiates a contract but is called out of town the day it is to be signed and orally authorizes an assistant to act as agent to sign the contract, the oral authorization
Is sufficient.
Welding Corporation makes a good faith attempt to incorporate but there is a defect in its incorporation. Welding undertakes business as a corporation. In this circumstance, the firm’s existence may be challenged by
The state.
Ned and Olga are shareholders of Pizza Pies Inc. Ned’s written authorization to Olga to vote Ned’s shares at a shareholders’ meeting is
A proxy.
Compared to a partnership, a sole proprietorship allows more
Flexibility
What is required for decisions such as to admit a new partner or engage in a new business?
Unanimous consent.
Paper & Scissors Inc. wants to incorporate. The primary document needed to incorporate a business is
The articles of incorporation.
Romero employs Supply Procurement Service as an agent under a written agreement that describes the rights and duties of both parties. This is
Express authority.
Oil Industries Inc. is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Po, the majority shareholder, misappropriates company funds. The shareholders whose interests are injured by Po’s misconduct should
Have their shares appraised and be paid the fair market value for them.
Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. His best defense against liability for these mistakes is
The business judgment rule.
Gil is an officer for HVAC Corporation. Due to Gil’s choice of a certain supplier, HVAC’s costs are somewhat higher than they might have been if a different supplier had been chosen. Gil is most likely liable for
Nothing
Orin is a corporate officer for Pacific Trade Inc. In this capacity, Orin
Manages corporate day-to-day operations.
When the owner of a sole proprietorship dies,
So does the business.
Penny creates an exclusive agency by granting Andrew an exclusive territory within which Andrew may sell Penny’s organic skin care products. If Penny starts to sell the products herself within Andrew’s territory—or permits another agent to do so—Penny
Has failed to cooperate with the agent.
