ACP Entity Formation & Corporate Governance 3

Question 1

Which of the following best describes a 'professional corporation' (PC)?

Accepted Answer

A special corporate form available to licensed professionals such as doctors, lawyers, and accountants

Answer

Professional corporations allow licensed professionals to incorporate while maintaining personal liability for their own professional malpractice.

Question 2

In corporate law, what does 'piercing the corporate veil' mean?

Accepted Answer

Holding shareholders personally liable for corporate obligations by disregarding the entity's separate legal status

Answer

Courts pierce the corporate veil when the corporation is used as an alter ego or to perpetrate fraud, making shareholders personally liable.

Question 3

What is the role of the incorporator in forming a corporation?

Accepted Answer

To sign and file the articles of incorporation with the state

Answer

The incorporator's primary function is to execute and file the articles of incorporation; their role typically ends once the initial organizational meeting is held.

Question 4

A 'supermajority voting requirement' in a corporation's charter serves what purpose?

Accepted Answer

To protect minority shareholders by requiring more than a simple majority for significant transactions

Answer

Supermajority provisions (e.g., 66⅔% or 80%) require heightened approval for fundamental changes, giving minority shareholders greater influence.

Question 5

Under the Revised Model Business Corporation Act (RMBCA), what is 'authorized shares'?

Accepted Answer

The maximum number of shares a corporation is legally permitted to issue as specified in its articles

Answer

Authorized shares represent the ceiling on share issuance set in the articles of incorporation; the corporation may issue up to but not exceed this number.

(ACP) Advanced Certified Paralegal Practice Test

(ACP) Advanced Certified Paralegal Practice Test

ACP Entity Formation & Corporate Governance 3